Obamacare Alternatives: The Paul Plan

Sen. Rand Paul, never one to be content to stay in the mainstream, released his own ACA repeal-and-replace plan on Wednesday.  The plan can be read here.

The plan has been far less discussed in public health policy circles than other Republican alternatives, and for good reason: it is by far the most radical plan proposed yet, and the least likely to pass Congress in its current form.

The core of his plan is as follows:

  • $5,000 tax credit per individual; this could be spent on either premiums or deposited in a health savings account;
  • Completely eliminates baseline regulations set up by Obamacare for minimum requirements of insurers, as well as the individual and employer mandates; in short, allows the complete return of pure catastrophic coverage.
  • Extends employee tax deduction to all individuals purchasing health plans;
  • Elimination of remaining regulations stopping sales of plans across state lines. Furthermore, to increase access to coverage, he would expand association health plans and allow individuals to purchase health insurance through non-traditional groups, such as churches and civic associations. Of specific note is that he would eliminate the consumer protections for pre-existing conditions;
  • Restores HIPAA’s pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

Paul has stated openly what his philosophy on health care reform is…and it isn’t about expanding coverage or reducing cost. It is about freedom:

As we repeal Obamacare, we would be wise to vote on its replacement at the same time.

What should we replace Obamacare with? Perhaps we should try freedom:

  1.  The freedom to choose inexpensive insurance free of government dictates.

  2.  The freedom to save unlimited amounts in a health savings account.

  3. The freedom to buy insurance across state lines.

  4.  The freedom for all individuals to join together in voluntary associations to gain the leverage of being part of a large insurance pool.

Paul also is one of the leading voices to push for both repeal AND replace at the same time. He argues that without both, too much of the Affordable Care Act would remain in place to make sufficient head way in reforming the system.

There is a lot in this plan to appeal to traditional conservatives.  Rand’s plan would essentially deregulate much of the health care system on the federal level, leaving minimal regulatory protections (for better and for worse).

Michael Tanner of the Cato Institute clearly voices the core conservative argument for Sen. Paul’s vision in an Op-Ed earlier this month:

Paul would eliminate the pre-existing-condition regulations altogether (after a transition period), while his other reforms would significantly reduce the number of people who genuinely cannot buy health insurance because of a pre-existing condition. For those who still need help, Paul envisions responsibility for covering them being shifted to the states, possibly in conjunction with proposals to block-grant Medicaid.

This would give states the freedom to experiment with ways to cover people who are unable to buy their own insurance for whatever reason, whether pre-existing conditions or low-income. Importantly, it prevents a small number of high-cost cases from distorting the rest of the insurance pool. It wouldn’t try to insure the uninsurable, but would provide their health care more directly. After all, it is health care that counts, not health insurance.

One can be forgiven for thinking that the last thing Republicans need right now is another health-care plan. And Senator Paul’s plan is certainly not perfect; there are numerous nits to be picked. But it may well offer Republicans the best road map they can find out of the wilderness they have been wandering in.

The problems with this are obvious, if you have evaluated prior GOP alternatives. First, straight forward tax credits such as this will certainly benefit the healthy and young, but will be a net negative for the elderly and for sicker patients. This is a tradeoff that can’t be ignored. This cost issue has been estimated in and of itself to likely cause 5-10 million people to lose coverage after repeal of the ACA.

Furthermore, Paul never specifically answers how he will take care of individuals that for one reason or another cannot buy plans in the group market, mostly because of costly pre-existing conditions. He largely argues that he will ‘give states flexibility’ to reform Medicaid by providing block grants,but provides no other real answer to the question.

Even if you are willing to completely pass the problem off to states (which in a federalism view of government isn’t unreasonable) there is a political price to pay: there is no chance any Democrats (and possibly even a few moderate Republicans) would accept such a plan. They would demand an answer to the question, and as far as I can tell, Paul lacks any specific answer.

Furthermore, because Paul’s plan would require a Senate vote on complete repeal of Obamacare, he requires eight Senate Democrats to join him, which seems very improbable in this environment. I also suspect that although Senator Paul has said President Trump has approved of his plan, that Trump may well change his mind once he understands all the repercussions of such a radical change. The President would be unlikely to keep his many promises on health care under the Senator’s vision, most notably his assurance of insurance for everyone.

Senator Paul’s plan is reasonable in an ideal world, but no such world exists. Today’s political environment simply makes it impossible to pass such a plan, unless the GOP somehow gets 60 votes in the Senate. It serves as an interesting position piece, but beyond a few elements being adopted, it is a non-starter as practical policy.

The full text of Senator Rand Paul’s bill can be found here.

 

Pradheep J. Shanker, M.D., M.S. is a practicing radiologist, and C.E.O. of Pharon Systems LLC. He is an active commentator on public health policy, as well as an activist on education reform. You can follow him on Twitter: @Neoavatara