Are the GOP's Ideas on Health Care Reform Any Good?

As President Obama seeks to court GOP members to attend a bipartisan summit on health care reform, Republicans are sharing their own ideas about what reform should look like. Newt Gingrich lays out his ten GOP ideas for Obama in the Wall Street Journal today. I want to focus on three in particular: Eliminating the employer subsidy, strengthening the individual market for insurance and sparing Medicare from cuts.*


Gingrich writes:

The current taxation of health insurance is arbitrary and unfair, giving lavish subsidies to some, like those who get Cadillac coverage from their employers, and almost no relief to people who have to buy their own. More equitable tax treatment would lower costs for individuals and families. Many health economists conclude that tax relief for health insurance should be a fixed-dollar amount

He doesn't come right out and say it, but Gingrich is essentially calling for an end to tax subsidies for employer provided insurance. That could take a couple forms. We could eliminate the employer tax subsidy entirely (which would make health insurance more expensive immediately for many companies, especially small businesses), cap the subsidy, or tax expensive insurance plans above a certain level and index the tax below medical inflation so that the it hits more companies over time (which I support). In any case, it's a new tax. It's a tax increase. But Gingrich can't explicitly call for a tax increase because he's selling "GOP health ideas," and the "GOP health ideas" website explicitly rejects any plan that "raises tax on small businesses."

The GOP website's position is untenable. It's impossible to strengthen the individual market for health care if employer provided plans are tax-exempt. If you want individuals and families to control their own health insurance, you want them picking their own plans in the marketplace so that they know what they're paying for and how much they're paying. But there's no incentive to leave your employer-provided insurance plan if it has preferential tax treatment.

Finally let's look at Gingrich's plan to cut Medicare:

Don't cut Medicare. The reform bills passed by the House and Senate cut Medicare by approximately $500 billion. This is wrong. There is no question that Medicare is on an unsustainable course; the government has promised far more than it can deliver. But this problem will not be solved by cutting Medicare in order to create new unfunded liabilities for young people.

Gingrich's doesn't support extending health insurance to 30 million Americans. He also recognizes that Medicare cuts, while eventually necessary, would be presently unpopular. So he justifying rejecting Medicare cuts because the money saved would be used to extend health insurance to 30 million Americans. Well -- personal politics coming in here, folks! -- I just hate that. Extending health insurance is a moral necessity and Medicare cuts are a fiscal necessity, and the conservative argument that two rights make a wrong is just another reason why I think bipartisanship on health care is all but impossible.
_______

*Ezra Klein wrote a great piece explaining how all of the four major tenants of the health care reform plan on the GOP's "Solutions for America" homepage make cameos in the Senate bill.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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