Never Forget: Conservatives Invented “Obamacare.” Where They Want to Take Us Next Should Scare You Even More

Priceless: Curing the Healthcare Crisis
John C. Goodman
Oakland: Independent Institute, 2012, 370 PP


This week “Obamacare” (the Affordable Care Act, or ACA) enrollment begins.  Briefly, how did we get here?[amazon asin=B008B946EI&template=*lrc ad (right)]

The core of “Obamacare,” the requirement that individuals purchase health insurance, traces back to Stuart Butler at the conservative Heritage Foundation in the late 1980s.  This can be seen in a 1989  Heritage monograph (p. 51).  Ezra Klein points to University of Pennsylvania economics professor and conservative Mark Pauly as the father of the individual mandate based on Pauly’s co-authored 1991 Health Affairs paper (p. 8, item 3) supporting the idea.

Two years after Pauly’s paper, and using the same argument Pauly made about mandatory auto insurance, conservative Republican Newt Gingrich appeared on NBC’s Meet the Press enthusiastically supporting the mandate.  (Gingrich re-endorsed the mandate on the same program on May 15, 2011, then recanted the next day after a firestorm of criticism and ridicule.)

A Republican governor, Mitt Romney, signed the mandate into law in Massachusetts in April of 2006.  Barack Obama, as a presidential primary candidate in 2008, firmly opposed the mandate but as president signed it into U.S. law on March 23, 2010.

In danger of being overturned, in June of 2012 conservative Republican Chief Justice of the U.S. Supreme Court, John Roberts, came to the mandate’s rescue, providing the critical fifth vote to the court’s progressive judges in National Federation of Independent Business v. Sebelius to cement the mandate in place as supposedly constitutional statute.

Why review this torturous history?  Because if you think a requirement to purchase health insurance is the worst health-care related mandate that could be inflicted on you and your children in your lifetimes, you are in for a rude awakening.  And what is so amazing (or maybe not) is that some of the same players  seem to be at it again.

Mark Pauly is back, this time in the form of his Health Affairs co-author John Goodman, president and CEO of the National Center for Policy Analysis (NCPA) and the current leading light among conservatives on health-care reform.

Goodman’s latest book, Priceless: Curing the Healthcare Crisis, was published in June of last year to uniform fanfare across the right political spectrum.

It was no surprise to see glowing reviews in The Washington Times, The American Spectator, The Weekly Standard, and a favorable plug at the Heritage Foundation.  Libertarian reviews were just about as glowing.  Even the publisher is libertarian.  Google around and you’ll be amazed.

Let’s take a look at some of the “free-market” proposals in Priceless:

1. Goodman, the “father of health savings accounts (HSAs)” is disappointed with them.  Now he has a new idea: Roth HSAs (RHSAs).  The Mark Pauly-inspired plan would combine the RHSAs (holding after-tax dollars and allowing tax-free withdrawals) with fixed-sum tax credits (p. 152).

[Never mind the implausibility of RHSAs, given the limitations that Goodman concedes exist on current HSAs, and never mind that there would be no role for HSAs in a real free market anyway.]

2. Resurrecting fee schedules (p. 181).

[In other words, returning prices to medicine to fix them.  Never mind that “fees” replaced prices in the U.S. as one of a number of anti-competitive actions by organized medicine to significantly boost revenues and physician incomes.]

3. Health insurance retirement accounts (HIRAs) funded by a new 4-percent payroll tax split between workers (2 percent) and employers (2 percent).  With the Chilean social security system as a model, the revenue would be invested by “private security agencies” [read: Wall Street] (p. 242).

[The crony capitalist tax-supported Chilean social security mirage will not seem to die.  It was a Cato Institute favorite in the 1990s.  Returns have been good for some participants, just as they were in the late 1990s U.S. stock bubble.  (One trader in the fever of the 1990s bubble told me just months before the crash, that 77% NASDAQ returns would never end.)  It’s a mystery what so many analysts think they see in still-developing Chile.  Its 2012 population was about 17 million compared to the U.S.’s 300 million.  Recent real GDP has been about $341 billion vs. the U.S.’s $15 trillion.  A 4% payroll tax to be sent to Wall Street sounds as if the lessons of 2008 have been very quickly forgotten.  Yes, what could possibly go wrong with the crony capitalist likes of Goldman Sachs, Merrill Lynch, and Lehman Brothers investing billions of HIRA money?  Hint: Lehman is gone.  Research the others.]

HIRA holders would “own” their accounts, but if they die before becoming Medicare-eligible, their HIRA gets redistributed to other HIRA holders.  HIRAs with high account balances would be taxed to pay risk-adjusted premiums for HIRA holders with low account balances (pp. 242-243).

At retirement, HIRA holders would have to choose one of three options: surrender their HIRA to the government in return for Medicare, exchange their HIRA for an annuity, or keep their HIRA but be subject to an annual withdrawal limit set by the government (p. 243).

4. Goodman has three options for Medicaid (p. 244).  The first one is to abolish it and the Children’s Health Insurance Program (CHIP, a.k.a., children’s Medicaid) and place their members into private plans with tax credits/government vouchers of $2,000 per person.

[This seems to be Goodman channeling Stuart Butler.  Butler proposed health-insurance vouchers in the 1989 Heritage monograph linked above (p. 51).]

What is Goodman’s response to critics who object that $2,000 is arbitrary or too low?  Gotcha.  Goodman would not abolish Medicaid after all!  He would keep it around as a “stopgap” (p. 253).

The second alternative for Medicaid is a “public option” that would open the program up to all households regardless of income.  The $2,000-per-person tax credits/government vouchers would apply (pp. 254-255).

Goodman, incredibly, is a fan of food stamps, calling them “a highly successful poverty program that now reaches 60 million people” (p. 256).  Hence his third and last solution to replace Medicaid with “health stamps,” which would operate like food stamps in the Supplemental Nutrition Assistance Program (SNAP) but be used for primary-care purchases (pp. 255-256).

[Unlike some food, primary health care is not cheap, especially as it adds up.  Imagine the expense of the current food stamp explosion, but in a new health-stamp program.  You can also imagine the new windows and levels of fraud opening up in such a program.]

John Goodman seems like a nice and well-intentioned guy, who even took the trouble to come down to PaulFest to share his ideas.  The problem with good intentions, though, is that they can open up a freeway to Hades.