The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Walker and Rubio: First Out of the Gate

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Presidential candidates Wisconsin Governor Scott Walker (R) and Senator Marco Rubio (R-Fla) offered their ideas for reforming healthcare on Tuesday, August 18.  Gov. Walker’s is a relatively detailed 13-page document and while Sen. Rubio’s is an op-ed with three major components for reform, both advocate for policies that would empower the individual and create a consumer-driven healthcare system.

  • Both would repeal and replace the Affordable Care Act, better known as ObamaCare, along with its onerous regulations and mandates.
  • Both look to tax credits that would enable individuals to purchase health insurance and encourage the use of health savings accounts, or HSAs, that have been proven to lower healthcare costs.
  • Both offer solutions to protect and help those with pre-existing conditions.
  • Both would get the regulatory power out of Washington and send it back to the states.

Many health policy experts that promote a consumer-driven healthcare system believe tax credits would be a good way to empower individuals and allow them to purchase the health insurance they want at a price they could afford.  By putting the purchasing power in the hands of consumers, it will increase transparency in pricing, encourage competition, and drive down costs.

Rubio says “he will work with Congress to create an advanceable, refundable tax credit that all Americans can use to purchase health insurance.”  The tax credit would increase every year and he would “set the tax preference for employer-sponsored insurance on a glide path to ensure that it will equal the level of the credits within a decade.”  In other words, Rubio wants to change the tax treatment of healthcare so that everyone gets the same credit or tax subsidy for health insurance, whether one is self-employed or gets their insurance via their employer, which is a tax-free benefit.

Walker also provides tax credits but only focuses on those people that do not get their insurance through their employer and the amount would vary depending upon a person’s age.  If people are between 0 and 17 years, the credit value would be $900.  Someone who is between the ages of 50-64, would get a credit of $3,000.

I strongly like the idea of tax credits but not sure how I feel about Walker’s graduated amounts depending on a person’s age but I am willing to learn more about his thought process on this.  (Conversely some policy experts call for a tax credit based on income.)  Although he does not say so, I assume Rubio is calling for a fixed sum tax credit for everyone and that he would eventually equalize the tax subsidy in employer insurance.  According to healthcare policy expert John Goodman, employer-sponsored health insurance has driven up costs because of its tax treatment; it encourages the purchase of more expensive health insurance plans.  He lays out this informative argument in his column “The Right Way To Subsidize Health Insurance.”

Both Walker and Rubio encourage the use and expansion of HSAs, tax-advantaged medical savings accounts, which are similar to IRAs.  In fact, Walker would "allow anyone who signs up for an HSA to receive a $1,000 refundable tax credit."

The funds in HSAs can accumulate tax free and are rolled over year after year.  A person does not have to forfeit any leftover funds such as they do in a Flexible Spending Account (FSA.)  HSAs are used to purchase qualified medical expenses at any time, such as for a doctor’s visit or prescription drugs, and because they are owned by the individual, they are portable.  HSAs are accompanied by a catastrophic health insurance plan to cover emergencies or serious illnesses such as cancer.

As for Medicare and Medicaid reforms, again Rubio and Walker look to market-driven initiatives to put them on fiscally-sustainable paths.  Rubio wants to move Medicaid into a “per-capita block grant system” and give the power to manage the program to the states.  As for Medicare, Rubio wants to utilize a premium support system, similar to the Medicare Part D program or Medicare Advantage, to reform Medicare Parts A and B.  Doing so would give seniors choices in the kind of plans they would like and encourage competition that will help to drive down costs.  This change would be for future beneficiaries only, not those currently in the system.

Walker only addresses reforms to Medicaid and points out that the program represents many different constituencies. He notes that the more a state spends on Medicaid, the more it receives from the federal government, creating a perverse, wasteful system that really does not help people in need but instead state bureaucracies.  He states if Medicaid is not reformed, it will cost the nation “a staggering $786 billion (3.1 percent of GDP) in 2022 – up from $25 billion (0.9 percent of GDP) in 1980.” He proposes to allow the states to run Medicaid and reorganize it into smaller, more focused parts that would include Medical Assistance for Needy Families, acute care for people with disabilities and low-income seniors, and long-term services for people with disabilities and low-income seniors.

Many health experts are weighing in on Walker’s and Rubio’s plans, in some instances offering suggestions to make them even be better.  I would encourage you to read their analyses, as well. But, the bottom line is these plans will help point the country toward creating a better healthcare system.

 

For additional reading:

John Goodman analysis on the Walker and Rubio plan

Ryan Ellis (Americans for Tax Reform) says Walker and Rubio’s plans, as well as other conservatives, are also large tax cuts.

Yuval Levin, editor National Affairs, on the Walker plan.

James Capretta, senior fellow at the Ethics and Public Policy Center on the Walker and Rubio plans.

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