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John C. Goodman / Feb. 20, 2013

Conservative Think Tanks on Health Care

Why have the Republicans been unable to propose an alternative to ObamaCare? Anyone can criticize. Where is the Republican alternative? Okay, I'll grant some exceptions. Newt Gingrich had a comprehensive health plan in last year's Republican primary. It was my plan. Four years ago John McCain had a comprehensive health reform. That was also basically my plan. Mitt Romney oversaw health reform in Massachusetts. That was a Heritage Foundation plan. Yet none of these ideas has garnered the support of the Republican rank and file. Why not?

Why have the Republicans been unable to propose an alternative to ObamaCare? Anyone can criticize. Where is the Republican alternative?

Okay, I’ll grant some exceptions. Newt Gingrich had a comprehensive health plan in last year’s Republican primary. It was my plan. Four years ago John McCain had a comprehensive health reform. That was also basically my plan. Mitt Romney oversaw health reform in Massachusetts. That was a Heritage Foundation plan.

Yet none of these ideas has garnered the support of the Republican rank and file. Why not?

Think about the special interests Republican politicians are likely to talk to. Doctors, hospitals, insurance companies, drug companies, device manufacturers, employers, etc. Their interests are all different. I doubt if you can come up with any significant health reform that won’t be vigorously opposed by at least one of these. Since heath care is a $2.6 trillion industry, special interests are willing to spend megabucks to oppose reforms they don’t like.

Then there are the conservative/libertarian think tanks. You would think they would at least share a common vision of health reform that many Republican officeholders would find appealing. But they don’t. The messages from the think tanks have been almost as diverse as the views of the special interests. Did you know that each of the major right-of-center think tanks has its own reform plan? And they are all different!

Oh, I get by with a little help from my friends

Mm, Gonna try with a little help from my friends

What brings this to mind are two American Enterprise Institute (AEI) publications – one by Joe Antos on Medicare reform and the other by Tom Miller on more general health reform. Both are quite good. They are informative. There is little that I saw that I disagreed with. (I plan to write more about them in the future.) Then I begin thinking about the short-term Medicare reforms that Tom Saving and I proposed in Health Affairs and the long-term Medicare reforms Tom and his colleagues at Texas A&M developed for the National Center for Policy Analysis (NCPA). I suspect that there is not much in the NCPA proposals that Tom and Joe would disagree with. But in terms of the written text, I would guest there is only about a 10% overlap between our work and theirs.

A politician following the AEI publications would miss out on about 90% of what the NCPA proposes. A politician following the NCPA publications would miss out on about 90% of what the AEI scholars think is important.

Overall, think tanks on the right have a habit of ignoring each other. Often, they don’t even footnote each other. We proposed the idea of Health Savings Accounts (HSAs) in the early 1990s. The proposal was quickly endorsed by the Cato Institute and other more libertarian organizations. Today, HSA plans are the fastest growing products in the health insurance marketplace and I think it’s safe to say that the idea is no longer even controversial. But I believe it was at least a decade before the idea was embraced in any publication produced by the Heritage Foundation, the American Enterprise Institute or the Hoover Institution.

Is this state of affairs the result of being overly competitive? Of seeking product differentiation? Of each organization trying to develop its own market niche? Possibly. A more likely explanation, I suspect, is that the folks on the right really do have very different visions of health care.

About two decades ago, I wrote Patient Power with Gerry Musgrave. More recently, I wrote Priceless. If you skim the introductions to both books, you will quickly see the idea that the doctor-patient relationship lies at the core of everything that is important in health care. However, I can’t recall any other major, right-of-center think tank ever writing about the doctor-patient relationship.

The NCPA web site is about the only place on the Internet where you will find a continuing, ongoing interest in how we can create a genuine market for medical care in which providers compete for patients based on price, quality and convenience. This is the entire focus of the Medicare reforms I proposed with Tom Saving. By contrast, most of our friends in other organizations are inordinately focused on third-party payers and see the activities of these entities as being central to health reform. In my ideal world, health insurance companies would have a shrinking role – eventually becoming no more active than a garden variety life insurance company. (The social function of a life insurance company, by the way, is to do nothing more than verify deaths and pay claims.)

Another difference: the NCPA and the Cato Institute seem to be the only organizations with an interest in creating a real market for health insurance in which risk is priced accurately. Only in such a world will health plans compete aggressively to take care of the problems of the sick. Failure to understand this point is why AEI scholar J. D. Kleinke thinks that ObamaCare is market-based reform.

The news is not all bad. More thinkers on the right are openly advocating the fixed sum tax credit (defined contribution) subsidy that Mark Pauly and I proposed years ago as the ideal way to subsidize private health insurance. In addition to Joe Antos and Tom Miller, see the Weekly Standard piece by James Capretta (AEI and Ethics and Public Policy Center) and Jeff Anderson (Pacific Research Institute).

Even so, there are differences among the think tanks that are real and ongoing.

At the time of the debate over HillaryCare, there was a major clash among the right-of-center think tanks over the direction health reform should take. Peter Ferrara recounts some of the history here. Partly in response, Grace-Marie Turner (Galen Institute) established the Consensus Group – to try to forge…well…a consensus. In the early years, we actually did find some common ground. We even published a book.

Yet with the passage of time, the consensus seemed to dissolve and the organizations drifted apart. The Heritage Foundation continued to push ahead with the idea of managed competition, modeled on the Federal Employee’s Health Benefits program. Hoover Institution scholars published their proposal for tax subsidies – completely ignoring the Goodman-Pauly analysis and provoking a backlash from others in the conservative health policy community.

In the six months leading up to the passage of the Medicare Modernization Act (which created the prescription drug benefit under Medicare), I believe the Consensus Group never met. At the time of its passage, the right-of-center think tank community was deeply divided. The group did meet occasionally leading up to the passage of ObamaCare. But it was never able to agree on principled opposition – such as the NCPA’s Health Contract with America.

Josh Barro, writing at Bloomberg on the Republican failure to develop a credible health agenda, agrees with my point about the special interests. But he goes on to fault the conservative think tanks for putting too much faith in free markets – regurgitating arguments that I thought I demolished some weeks aback. The conservative think tank problem is not their belief in free markets. It is that each think tank seems to have a different idea about how markets can solve problems.

Bottom line: there is no common health policy vision on the right. Come to think of it, there is none on the left either. But I’ll save those guys for another day.

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