Neither of the two existing political parties understand that the crony “third party” organizations and insurance cartels, empowered by government programs and the tax code, are the parasites that have destroyed health care. That is why all their solutions, even the better ones, continue to exacerbate the existing problems and original sin of health care. Latest example? The GOP’s two health care bills coming to the House floor this week.
This week, the House is voting on two bills to expand Health Savings Accounts (HSAs). Generally speaking, conservatives like HSAs because they encourage individuals to take control over their own health care and help balance the existing bias in the tax code and subsidy regime toward third-party payers and the insurance cartel. However, these bills take some good ideas and mix them with the philosophy that HSAs were supposed to combat. And they accentuate the existing problems with Obamacare because Republicans are seeking to stabilize the inherently unstable program rather than greasing the skids for an off-ramp from the broken system and the crony third-party payers.
To begin with, it’s interesting how Republicans will vote today for the umpteenth time to repeal the 2.3 percent surtax on medical devices but won’t touch the core of Obamacare. We all agree that the tax is pernicious, but it’s clear that Republicans will only touch the elements of Obamacare most hated by K Street.
So how does the GOP manage to screw up HSAs?
Using the tax code for social engineering and distorting markets
The first bill, H.R. 6199, sponsored by Rep. Lynn Jenkins, R-Kan., would allow pre-tax-dollar health savings accounts – either HSAs, HRAs (employer-provided accounts), or Archer MSAs (small businesses) – to be used for feminine hygiene products as well as some over-the-counter medicines. The bill also adds a $1,000-per-family ($500 for individuals) tax deduction for gym memberships, fitness classes, and exercise equipment.
GOP leaders are trying to fool conservatives into thinking HSAs are categorically good in all places. The reality is that expanding HSAs is only sound policy within an area of health care that has already been taken over by the government/insurance cartel with direct subsidies. Allowing for pre-tax accounts to shop around for their own expenses is a much better way of subsidizing an expenditure with a much lighter imprint from government. But when it comes to things like feminine hygiene and over-the-counter medicine, there is no reason we should have any indirect tax subsidies, because under current law they are completely free market. The other bill they plan to pass rightfully expands the limit for contributions to HSAs, but that should be limited to prescription drugs, which are heavily subsidized through government and other third-party payers. We should be making more products over-the-counter, but let’s not distort the market of existing over-the counter products.
Adding a new tax subsidy for fitness is also recipe for inflating the prices in those industries for those products and services. That is the original lesson of health care – the more you subsidize something, the more you inflate the price. This bill is nothing but a giveaway for Planet Fitness and other large gym chains. Weren’t we supposed to clean up the tax code with the tax bill, not add more pork? It’s clear where this bill came from and why it’s being brought to the floor.
Smearing free-market policies with the taint of Obamacare
The second major bill the House will consider is H.R. 6311. Again, this bill has some good provisions, such as allowing the funds in FSAs (which, unlike HSAs, are set up by employers) to roll over and accumulate from year to year (up to a limit) and ending the ban HSAs for Medicare-eligible seniors who have private plans. It also roughly doubles the allowed annual contribution to accounts, from $3,450/$6,900 individual/family to $6,650/$13,300 for 2018.
If the bill stopped there, it would be meritorious, but it goes on to adulterate the HSA idea and mix it with the worst elements of Obamacare while ruining one of the avenues for relief from Obamacare. Sections 7 and 8 of the bill expand the eligibility for “catastrophic” copper plans on the exchanges and then allows HSAs to be used for those plans.
What does this mean, and why is it a problem?
Under current law, anyone over 30 years old seeking reasonable coverage for catastrophe is out of options. The core of Obamacare ensured that even the cheapest plans are now more expensive than the pre-Obamacare Cadillac plans. I can’t find a plan for my family that is cheaper than $1,800 a month, whereas before Obamacare I had a plan that cost $450 a month for a much lower deductible. Until and unless Obamacare – the regulations, subsidies, and Medicaid expansion – are repealed, people who don’t get insurance from work and are not on the dole are out of options. Which is why, like others in this situation, I joined a health-sharing ministry.
Those under 30 have the option of purchasing a cheaper catastrophic plan. But again, even those plans are way too expensive for the amount you would have to pay out of pocket if you incurred a worse-than-average health year for a healthy person. They are still more expensive than pre-Obamacare catastrophic plans, under which consumers were more than happy to pay out of pocket knowing that they had a cheap premium up front and were still covered in case of a true catastrophic cost.
Under the provisions of this bill, the catastrophic plans would be open to everyone, including older and sicker people. The idea is that all people need a “cheaper” option to cover only catastrophic costs. But this is where Republican ignorance on health care and the refusal to repeal Obamacare are getting them into trouble and contaminating even otherwise prudent solutions. They apply the Obamacare coverage mandates (e.g. covering three well-visits for free) and community rating to the catastrophic plans. By opening up these plans to sicker people, placing them in the same risk pool, and maintaining Obamacare’s requirement to charge everyone the same, this will now inflate the cost of the “catastrophic” plans to the catastrophic cost of the relatively non-catastrophic plans. In other words, it will ruin the escape hatch even for younger people.
Allowing HSAs for these plans will just help “stabilize” and perpetuate Obamacare while trapping people into the plans. A better choice would be to allow HSAs for all medical expenses, regardless of which plan a person holds. They should allow HSAs for short-term insurance plans that the Trump administration plans to re-institute as an end-run around the exchanges. They should expand HSAs to health-sharing ministry payments to equalize the tax treatment of alternatives to the insurance cartel. And if they want to tweak Obamacare, they have to get rid of the mandates.
This is all because Republicans have completely adopted the philosophy behind Obamacare as well as acquiesced to its existing structure. The only way to “bring relief” to consumers, as they claim to desire, is either by repealing Obamacare or offering multiple, effective off-ramps from the system, equalizing government treatment of alternatives. The worst thing to do is to mix conservative ideas into Obamacare to help validate and secure it while preventing all alternatives.
This is a shame because the first bill, H.R. 6199, does contain one good provision (Sec. 3): With some notable exception and with some limitations, it allows pre-tax HSA accounts to be used for direct primary care physicians who charge monthly fees as flat rates for unlimited service. Some conservatives might support the bill on account of this provision alone. That is for them to judge. But the broader point is that so long as we have a party that doesn’t understand health care and continues to serve K Street interests, even when they accept our gold-plated ideas, they will smear them in Obamacare copper.
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.