The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill

Posted by Michael F. Cannon

Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill.  If my reading of the bill summary is correct, their bill would:

• Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
• Mandate that all plans offered through those exchanges meet federal regulatory standards,
• Mandate “guaranteed issue” in those exchanges,
• Mandate “uniform and reliable measures by which to report quality and price information,”
• Impose price controls on those plans by prohibiting risk-rating,
• Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
• Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory.  On the one hand, it lists “No Tax Increases” as a core concept.  Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers?  And where do they think the money for “risk-adjustment” payments will come from?  Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level — when they’re not encouraging Congress to take over that function.  Have they abandoned their colleague Rep. John  Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care — so much so that The Washington Post‘s Ezra Klein is salivating:

The word of the day is “convergence.” That — and that alone — is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act — which I’ve uploaded here — would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms — which it calls a “well-known, bi-partisan achievement of universal health care” — in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea — present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan — would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.