The Anti-ObamaCare Recovery Plan


The Anti-ObamaCare Recovery Plan

The Anti-ObamaCare Recovery Plan:A Conservative Blueprint for a Healthier Future“If we’re going to destroy ObamaCare and save the American Dream,Republicans have to offer bold, conservative solutions.”-Ben SasseExecutive SummaryBen Sasse, called “ObamaCare’s Nebraska Nemesis” by National Review, is the onlycandidate offering a real plan to defeat ObamaCare and fix health care for Nebraskafamilies. The Anti-ObamaCare Recovery Plan: A Conservative Blueprint for a HealthierFuture is not a plan to fix ObamaCare; it is a plan to completely repeal ObamaCare andstart anew with real, conservative solutions.The American Dream is under attack. ObamaCare’s command-and-control regime ishurting families, killing medical innovation, and putting America on a path of debt anddecline. We cannot fix or tweak ObamaCare. We have to repeal ObamaCare.Four years ago this week when Democrats passed the Affordable Care Act, part of thereason Republicans lost was that too many refused to admit health insurance was alreadybroken. But it was not broken because of too little Government—it was broken preciselybecause there was too much Government.It is important to understand that ObamaCare is not just a failed law. It is also a deeplyflawed worldview that redefines the American experiment and undermines Nebraskavalues. It is time to fight back by articulating a conservative governing vision forAmerica.Republicans have been the “Party of No” for long enough. When our party is too lazy orlacks the political courage to offer real solutions, we lose. In a fight between Democrats’Big Government bad ideas and Republicans with no ideas, Americans have chosen thebad ideas every time. It is not enough to simply oppose President Obama.Republicans must oppose his agenda, and we must also put forward our ownconservative solutions. That is the only way we will ever repeal ObamaCare andjumpstart an American recovery.It is easy for any Nebraska Republican running for Senate to recite the same “RepealObamaCare” talking point. But Ben Sasse is the only candidate with a bold planfor how we repeal ObamaCare and who also has a conservative solution for what comesnext.Nebraskans deserve a plan that is comprehensive and comprehensible. That is what theAnti-ObamaCare Recovery Plan does. Here is how it works:

I. Patients and Families: Reject Big Government mandates and enable all families tosecure the lifelong health insurance plans of their choice.II. Physicians and Nurses: Dismantle the corporate insurance monopoly in health caredelivery and free doctors, nurses, and new market entrants to design higher quality,lower cost care for patients.III. States and the Safety Net: Admit Washington's safety net has failed and empowerstates to care for the sickest and poorest among us.IV. Seniors and the Next Generation: Expose Washington's entitlement over-promisingand protect Medicare for the next generation.ObamaCare is failing AmericansThe ObamaCare CrisisSupporters of the President’s health care law famously encouraged Congress to pass thebill so the American people could find out what was in it. Now, four years after thepassage of ObamaCare, millions of Americans and their families have personally felt thelaw’s impact, and most do not like what they are seeing. In fact, in a recent Gallup poll, amajority of Americans responding said they continue to oppose the law and believe it willworsen our nation’s health care system over the long run. 1The schemes used to pass ObamaCare are the epitome of all that is wrong withWashington—and why the law, along with its worldview, must be repealed. Despitepublic opposition to a Washington-controlled health care system, Nancy Pelosi and HarryReid used inside-the-beltway tricks to accomplish their liberal goals.• ObamaCare was sold with dishonest math. The law included six years of newspending but ten years of a combination of tax increases and reductions toMedicare’s rate of growth. 2 Yet President Obama still pretends that a $2.6 trillionnew entitlement will not add to the deficit. 3• ObamaCare was rammed through Congress with sweetheart deals and specialinterest payoffs. Earmarks, such as the Cornhusker Kickback and Gator Aid, wereincluded in efforts to convince politicians to vote for the law. 4 The law’s authorsalso struck special interest deals with lobbyists, such as the pharmaceutical andhospital industries, who would benefit from more Washington spending. The restof America has been left to face the law’s devastating effects.1 2.5, Posted March 30, 2014 2

ObamaCare raided Medicare to create another unsustainable Governmentprogram. According to the Congressional Budget Office, instead of re-investingin Medicare to save it from bankruptcy, ObamaCare raided it by $716 billion tocreate new Government programs. 5• ObamaCare includes tax increases that could affect every American. TheCongressional Joint Committee on Taxation reports that ObamaCare contains $1trillion in tax hikes; 6 and it imposes 20 separate new taxes. 7 Many are direct hitson the middle class. New taxes on pharmaceutical drugs, medical devices, healthinsurance, and other items will increase costs and reduce choices for consumers.• ObamaCare is driving up health care costs and reducing coverage. AsObamaCare was debated in Congress, the President and his supporters repeatedlyclaimed that the law would decrease costs and improve health coverage forAmericans. However, in recent months, millions of Americans have seen theirprices increase or their coverage canceled completely as a result of the law. 8 Infact, an estimated five million Americans may have lost their coverage due toObamaCare. 9 Despite the President’s repeated and unconstitutional “fixes anddelays,” several million Americans have lost the plan they liked and wanted tokeep. 10• ObamaCare is hurting economic growth. The Congressional Budget Officeestimates that ObamaCare will result in the loss of the equivalent of 2.5 millionjobs over a decade. 11 That is more jobs lost than the populations of Nebraska andWyoming combined. 12• ObamaCare is increasing premiums by 74 percent for many Nebraskans. As themarket contracts over time, Nebraskans will face the consequences of fewer planchoices, decreased provider access and increased premiums. A November 2013analysis of the individual market premiums found that Nebraskans could seeindividual market premiums increase by as much as 74 percent, 13 respectively—afar cry from the President’s campaign promise to decrease premiums by $2,500for families. 145 2.5, Posted March 30, 2014 3

ObamaCare’s mandates would crowd out Nebraska priorities. ObamaCareincluded the largest expansion of Medicaid in history, forcing nearly one in fourAmericans into an already struggling safety-net program. Although the ObamaAdministration originally intended to saddle states with this costly entitlementexpansion, the Supreme Court allowed states to avoid this unconstitutional dictateand decline ObamaCare’s Medicaid expansion. Had our state given in to thePresident’s intentions, Nebraskans could have faced hundreds of millions inadditional state costs that could crowd out our priorities such as education or localsolutions to health care coverage. 15We must fully repeal ObamaCare and fight its entire Big Government worldview. Ournation stands at a crossroads. Either the growth of Big Government will replace freedomwith dependency, or we will defend limited Government and preserve this nation as the“Last, best hope on earth.”The Crisis Before ObamaCareGiven the catastrophic failures of ObamaCare, it is easy to forget the challenges facingthe American health care system before 2010. It was a system growing increasinglyexpensive, with workers paying 47 percent more for their work-based health insurancethan they did in 2005. 16 It was a system in which a major illness too often resulted inbankruptcy, and which forced one out of every five Americans onto Medicaid for at leastone month. 17, 18 And yet for all this, our country was spending $2.5 trillion—17 percent ofour economy—to finance this broken system. 19 Our health care entitlement programs,Medicare and Medicaid, were facing unsustainable obligations. The bottom line: ourhealth care system was inaccessible, expensive, and unsustainable.The primary drivers of these problems are found in the haphazard actions ofWashington’s central planners during the 20 th century. During World War II, employersbegan offering health benefits to attract scarce labor during the era of wage controls. Thiseventually led to preferential tax treatment of health coverage obtained throughemployers. As a result, those who want to purchase lack the same tax breaks for healthcoverage. 20 So for millions of Americans, losing a job means more than losing apaycheck; it also means losing health insurance or the chance to pursue new ventures.Additionally, this policy hides the true cost of care and has given rise to the third-partypayer system that fuels much of the overutilization of services and high costs.15 2.5, Posted March 30, 2014 4

While many people think of the U.S. health care system as private, 44 percent of it is, infact, financed by the Government and the rest is highly regulated. 21 Since 1965, Medicareand Medicaid payment structures have created incentives for volume of services ratherthan value in services. Government price controls have discouraged new ways ofdelivering care that may lower costs and improve patient outcomes. Unfortunately,private insurers largely base their payment on exactly how Medicare pays. This hybridsystem destroys potential for value-driving innovation, creates inefficiencies, and deniesaccess to services because they are so expensive.Not only is the U.S. system littered with price controls, Government tax policies havelong favored corporate insurer control of health care delivery, removing incentives forproviders to create value in the system. Instead, Washington’s role in financing andengineering health care has inevitably increased the influence of lobbyists and specialinterest groups, whose inside-the-beltway tactics are far removed from the needs andpocketbooks of patients.However, in direct-to-consumer markets, individuals find ways innovate, like withTravelocity, Michael Dell’s PC, and Steve Jobs’ iPad. That is the entrepreneurial spirit ofAmerica; people invent; they improve; they create the next big thing, and when they donot add value for consumers, they are replaced by those who do. That is how the marketcreates lasting value. In a Government-price-setting scheme, there is little incentive forthat kind of innovation. In fact, that system actually stifles efficiency and innovationbecause more volume is the only way to make more money. Doing something moreefficiently means getting paid less.The health care system before ObamaCare was also unsustainable because we could notafford political promises made regarding Medicare and Medicaid. The skyrocketing costsof Medicare are fueled by the retiring baby boomer generation, which now adds 10,000new retirees to Medicare a day. 22 New estimates suggest that the part of the program thatlargely finances hospital services will go bankrupt in 2026—and the program costs willdouble over the next decade. 23 The Medicaid program costs federal taxpayers more than$499 billion a year, and consumes more than a quarter of state budgets. 24 These programsare not sustainable as they are currently designed.The problem with health care in America—even before ObamaCare passed—was toomuch government. Misguided tax policy created incentives for employer-based healthcoverage over individually-owned policies, Medicare and Medicaid’s price controls havestifled innovation across the entire system, and politicians have made benefit promisesthat Washington is not capable of keeping.21 2.5, Posted March 30, 2014 5

Democrats passed ObamaCare with its fundamentally flawed ideas, but collectively,Republicans failed to fight for good ideas. And bad ideas will beat the perception of noideas every time. What we need most today in Washington are leaders who are willing tostick to their core principles and articulate conservative solutions that continue to enablethe American Dream.Version 2.5, Posted March 30, 2014 6

Reforms Toward a More Patient-Oriented Health Care SystemPatients and Families: Reject Big Government mandates and enable all families tosecure the lifelong health insurance plans of their choice.The ProblemFirst, we must reject Big Government mandates and enable all families to secure thelifelong health insurance plans of their choice. Today, approximately 160 millionAmericans are insured through their group employer plans. 25 While that group model hasserved most of us well, we need to ensure that it and the broader health insurancemarketplaces work well for all the works of the 21 st century.According to 2012 data from the Bureau of Labor Statistics, 26 the typical Americanworker stays at each of his or her jobs for less than five years. During job transitions,many individuals are most at risk for becoming uninsured, especially due to pre-existingconditions. Occasionally, families undergo major medical problems during that gap inhealth care coverage.The PrinciplesTo provide Nebraskans with peace of mind, we need to enable a stronger market wheremore health insurance products are portable across jobs, life events, and geographicboundaries. A similar model has already worked as pensions moved toward individualownership of retirement savings approximately 30 years ago. 27 Prior to such reforms,employees switched jobs less frequently out of fear of losing their pensions. To empowerAmerican workers, 401Ks were created as a way for individuals to plan for retirement.Today, we mostly take our pension plans with us from job to job. This model can enablepatients to keep their own health care plans.Additionally, consumers should be free to purchase more affordable health insurance thatprotects them from catastrophic medical expenses if they desire. If consumers want a planthat manages every aspect of their care, they can continue to select those kinds ofpolicies. But that choice should not limit others from selecting plans that more closelyresemble the traditional meaning of insurance. Car insurance does not pay for every tripto Jiffy Lube or routine maintenance, but it does protect policy-holders fromunanticipated costly events. Similarly, health insurance does not need to control everyinteraction with providers, but should continue to play an important role in protectingpatients from losing their life savings over an unanticipated medical event.25 Revenue Act of 1978, Pub. L. No. 95-600, 92 Stat. 2763, 2785 (Nov. 6, 1978)Version 2.5, Posted March 30, 2014 7

The Proposals• Level the playing field for farmers, ranchers, entrepreneurs, and the selfemployed.Americans should not be restricted to an employer-centered health caresystem that leaves them fearful of starting their own businesses because theydread losing their health coverage. At the core of the American spirit isentrepreneurship that takes risks and, through hard work and determination,achieves the dream of better and brighter opportunities for their children.We can do more to enable Nebraskans to succeed in entrepreneurship and jobcreation by eliminating taxes on health care costs for families and individuals,much like the tax benefit they could get through a corporation. A new taxdeduction for individually-owned health insurance could facilitate direct purchaseof health insurance coverage. Providing equal tax treatment would remove amajor obstacle that discourages Americans from not only owning their own healthinsurance, but also their own business.• End geographic mandates that increase costs, and allow Americans to purchasehealth insurance based in any state they choose. American markets have been theenvy of the world because of real competition and consumer choice. Yet, one ofthe biggest cost drivers in our health care system is a combination of increasingstate-based coverage mandates and outdated health care insurance markets. Thesearbitrary limitations prohibit Americans from shopping for coverage that meetstheir needs rather than the needs of state officials.Version 2.5, Posted March 30, 2014 8

When political lobbying trumps consumer needs, costly mandates stranglecompetition. By restricting the purchase of health insurance to within aconsumer’s home state boundaries, we have limited their choice and simplyincreased health care costs. A study by the Council for Affordable HealthInsurance estimated that the number of state benefit mandates is nearly 2,300. 28This is a significant reason that health insurance premiums have varied widelyacross states. In Utah, an individual paid an average of $2,076 a year in 2010;while in New Jersey, the average individual paid more than twice that at $4,368 in2010. 29Americans should have the opportunity to select health care coverage productsthat meet their needs and those of their families. Enabling the purchase ofcoverage across state lines will promote competition and innovative productdesign. States will still be responsible for the regulation of health insurance.• Build upon current employer-based coverage innovations, and enable individualownership of health policies. While the majority of Americans currently receivehealth insurance benefits through their employer-sponsored insurance (ESI) plans,employers are increasingly strained by the complexity and financial burden ofmanaging health insurance benefits annually. Under current law economics, aMcKinsey survey found that 30 percent of employers will definitely or probablystop offering ESI, in the years ahead. 30 Additionally, employers are looking forways to encourage their employees to shop for the coverage that meets their ownneeds with some level of financial contribution.Private marketplaces, commonly referred to as private exchanges, are increasinglyattractive to employers and employees. 31 In these marketplaces, employees havethe freedom to choose from a menu of carriers and benefit packages, which areoften more expansive than their employer’s traditional benefit options. Initialevidence demonstrates that individual choice can make a measurable impact oncost growth. 32 An Accenture study estimates that as many as 30 millionAmericans will be enrolled in a private, employer-based exchange by 2017. 33This is not only a significant market innovation—in a coverage segment witharguably the lowest level of micromanagement from Government, but it is anotherstep toward enabling direct-to-consumer purchasing of health care. To build onthis progress, tax and regulatory policies should enable consumers to take thepolicies they choose on a private employer exchange with them, if they changejobs or start their own business. In stark contrast to ObamaCare’s restrictive28 2.5, Posted March 30, 2014 9

schemes, the federal Government does not need to be involved in the design orfinancing of these private marketplaces. It should get out of the way.Physicians and nurses: Dismantle the corporate insurance monopoly in health caredelivery and free doctors, nurses, and new market entrants to design higher quality,lower cost care for patients.The ProblemAmericans rate the cost of health care as the number one problem with the system, 34 andthe data supports that concern. Now consuming one-sixth of the economy, health care percapita spending in the United States is twice that of the average of other OECD countries.Premium increases have far outpaced wage growth over the last 10 years. And the costsof providing services vary substantially across geography. 35 Health care has been heldback from experiencing the level of innovation and productivity gains that Americaningenuity drives in every other sector of the economy.This high cost can be attributed largely to the fact that health care has long been heldback from experiencing the level of innovation and productivity gains that Americaningenuity drives in every other sector of the economy. By creating incentives for volumeof services, rather than value in services, Medicare and Medicaid payment structures—widely followed by private insurers—have stifled innovation and discouraged new waysof delivering care. The third-party payer system also removes incentives for providers tocreate value because consumers are not directly connected to payment decisions.ObamaCare compounded these problems by expanding Government price controlsthrough the largest expansion of Medicaid in history and pretending that federalbureaucrats can engineer Medicare delivery innovations. The mandate furtherconsolidates power in the insurance industry by dictating that corporate intermediariescontrol essentially all benefits. Increasing Washington’s role in financing and engineeringhealth care is a static approach that inevitably decreases the role of American ingenuityand innovation, stifling the opportunity for entrepreneurs to dynamically transform theindustry.The PrinciplesBusiness professor and globally renowned thinker on innovation, Clayton Christensen,coined the term “disruptive innovation” to describe the way entrepreneurs can broadenvarious markets including healthcare, by offering cheaper, more accessible alternatives tothe established value chain in an industry. He shows how these disruptive innovationsultimately unseat established players as basic products improve over time and demand forthem displaces more expensive products. 36, 3734 2.5, Posted March 30, 2014 10

Disruptive innovations (in the green part of the chart) enter the market less feature-richthan existing offerings, but are much more affordable and accessible, so those formerlyexcluded from the market have an opportunity to be served by the new technology.However, this is always a simplifying technology that increased affordability, not adramatic breakthrough that made things more complicated.One of Professors Christensen’s powerful examples is computing. In the 1970s, the useof computers was limited to the academic elite who could afford multi-million dollarmainframe that took up the size of a gymnasium. In the 1980s, disruptive innovations incomputing revolutionized the engineer’s workflow. Instead of having to take theirproblems to the centralized solution (mainframe), simple calculations could be completedlocally on less powerful, but much more accessible, computers. 39 Over time, that simpleinnovation was developed into desktops, then laptops, then iPhones, and today, mostAmericans carry around smart phones in their pockets that are more powerful than thecomputers NASA used to send the first astronauts to the moon. The disruptiveinnovations in computing overtook and replaced the original centralized solution, andtoday Steve Jobs’ iPad continues to change the world.The U.S. health care system needs disruptive innovation—landmark transformation offinancing and delivery to make care more affordable and accessible for Americans. 40Because our current system stifles disruptive innovation in health care, we need to get theGovernment out of the way of entrepreneurs who would proactively encourage andenable that progress. Dan Currell of the Corporate Executive Board has discussed how3837 2.5, Posted March 30, 2014 11

disruptive innovation can work in higher education, 41 and similar principles will enable itin health care: modernize the health care system with digital technology, reduce the roleof the middle man, and enable new ways to deliver health care value.First, modernize the health care system with digital technology.Unfortunately, when it comes to health care, many physicians are still filling out paperrecords, patients cannot access to a comprehensive view of their medical history, andmany billing systems are still based on 1980s technology. Bringing data to health carecould unlock $300 billion worth of value every year—with approximately two-thirds ofthat realized through lower spending. 42Analyzing large sets of data has become the basis for competition, innovation, and higherproductivity across the U.S. economy. In the private sector, so-called “big data” canunlock value in five primary ways. 43 First, as in the above example, consumers canaccess user-friendly information more quickly to inform their decision-making. Second,provider organizations also can detect performance variation and design incentives toenhance it. Third, services and products can be customized precisely to fit consumerneeds—even needs consumers have not yet anticipated. Fourth, analytics can inform anddrive decision-making for companies and individuals. And finally, data can driveimprovement of current products, as well as disruptive innovation with the nextgeneration of products and services.There are many examples of how modern technology can enhance value across the healthcare system–and that does not take into account the undiscovered value of innovation.Analytics can be used to detect individuals at risk for acute and chronic conditions, andthen quickly implement treatment programs to improve patient outcomes and avert costlyevents. Advances in technology can develop customized treatment plans for individualswith chronic conditions, and then deploy technology to make it easier to follow evidencebasedguidelines. For example, individuals suffering from congestive heart failure canbenefit from remote monitoring and reminders texted to them when it is time to take theirmedications. Consumers should also be given access to transparent information about thecosts and quality of services offered to them. It is outrageous that consumers can findConsumer Reports evaluations of a Toyota vs. a Ford SUV, but do not have access tobasic data when it comes to personal decisions about which surgeon can deliver the bestresults from a hip replacement.Enabling data and analytics, health information technology (HIT) can create a betterexperience and higher efficiency for both patients and providers in the private sector.According to a landmark Institute of Medicine study, as many as 98,000 deaths happenevery year from preventable medical errors. 44 Enabling HIT holds the potential to reducethose errors, as providers would know about medication contra-indications before41 2.5, Posted March 30, 2014 12

prescribing an inappropriate drug. Additionally, HIT could reduce inefficiency in thedelivery of care. Patients must all too often repeat the same information to different setsof clinicians during the same episode of care, and a personal medical record wouldeliminate that duplication. HIT could also increase convenience for patients andproviders. Technology is already emerging to allow physicians to remotely access patientmedical records, as well as remotely monitor their medical progress. For example,physicians are able to monitor fetal heart rates remotely on iPad applications, increasingthe quality of care for mother and baby, as well as access to medical expertise forobstetrical patients.Second, reduce the role of the middle man, and enable direct-to-consumer health careservices.The third-party payment mechanism has created enormous inefficiency and misalignmentof incentives in the health care system. Patients want to know the answer to the mostbasic questions: “where should I go to have the best outcome, at a price I can afford?”This system makes answers to both those questions shockingly elusive.Instead of accessing reviews from other patients about doctor quality and cost, patientshave to log on to their insurance company’s website to find out which doctors their planallows them to see, where geography is the only differentiator. After selecting a provider,patients must navigate a massive bureaucracy of coverages, prior authorizations, andultimately endless billings from all the sources of care involved in the procedure, fromthe hospital, to the surgeon, to the anesthesiologist, to the follow up office visits.Ultimately, the patient does not get the information they hoped for about outcomes. Nordo they have the opportunity to adjust their costs by making choices among the optionsthey find.People respond to incentives. Consider the direct-to-consumer markets all around us,such as air travel. When customers fly, they typically check several web sites and chooseamong the many flights offered by various airlines. Flights are then selected based onprice, arrival and departure times, extra fees for baggage, and other factors like previousexperiences with the airlines or frequent traveler incentives. If air travel were like healthcare, customers would have to log onto the FAA’s website to be approved for their trip,see which airlines were “covered” and pay the same price no matter which flight theytake.The less extreme version of that world existed when consumers had to shop for flightsthrough travel agents. Before consumers had direct access to information, airlinesmarketed to travel agents and negotiated kickbacks for sales with agents and consumerchoice was limited to a dozen or so options the travel agent presented to them. Then theinternet allowed consumers to see all the options for themselves and book tickets directly.The travel triangle of flight providers, travelers, and travel agents was dismantled becausethe system no longer had to support the middleman.Version 2.5, Posted March 30, 2014 13

To get to a health care system that creates the right kinds of incentives, we need toharness the power of the market by putting patients at the center, rather than Governmentand insurance company bureaucrats. We need fair competition, which has worked in somany other complex industries, like stock brokerage or online shopping. We cannotafford to neglect the market mechanisms that spawn this kind of innovation.In such a system, patients become wise consumers, and providers become entrepreneurs.The new incentives are for doctors to innovate to cure patients as quickly as they can andfor patients to support the best doctors with their business. In this world, insurancecompanies do not need to be a combination escrow account for pre-paid medicalexpenses and insurance for unanticipated major medical expenses. Insurance can becomea series of products that financially protect Americans from catastrophic health events,and routine health spending can happen through tax-advantaged savings accounts(HSAs).When we create a world where providers compete for consumer business, we unleash theentrepreneur within our providers. They now have license to find better ways to do thingsbecause the market will reward them for doing it. They will want to make their inventionsand outcomes known to potential patients because it will attract business fromconsumers. In that world, consumers will seek out these effective doctors because peoplecan get the answers to the question: “where should I go to have the best outcome, at aprice I can afford?”The same is true for insurance. If we treated car insurance like we treat health insurancetoday, we would be submitting bills to GEICO when we get an oil change. This wouldadd tremendous premium and administrative costs to the system without advancing anyconsumer goal. Certainly health insurance is more complicated, but separating types ofpayment needs will bring real savings to consumers. When insurance is no longer theonly way to pay for all health care services regardless of type, plans will innovate toremain relevant to consumers, which will mean offering more attractive products withcompetitive pricing.Third, enable new ways to deliver higher quality, lower cost care designed by physiciansand nurses.Not only has the status quo compromised quality for patients, it means the health caresystem has missed out on thousands of job creators who could add value to the systemAmerican healthcare system. With insurers playing a more limited role in the system,providers and entrepreneurs will be free to design better ways to deliver sections of thehealth care value chain. Too often, doctors and nurses find themselves pushing paperinstead of practicing medicine.Rather than success based on who has the biggest team of lobbyists to navigate the mazeof Government rules and mandates, providers should be free to compete on costs, quality,and outcomes.Version 2.5, Posted March 30, 2014 14

Despite the current system’s disincentives, some innovations are emerging—but fromSilicon Valley, not from bureaucrats in Baltimore.When given the chance, health care providers have proven that they can be both excellentclinicians, as well as savvy entrepreneurs. With increasing sophistication of tele-healthand remote monitoring, Nebraska Heart Hospital, for example, could serve a broadergeographic area, extending higher quality care to those who may have otherwise lackedaccess to a specialist.Health insurers may also choose to offer more innovative products designed forindividuals with certain chronic or acute conditions. Rather than their traditional model ofone-size-fits-all plans, they may choose to offer plans with care designs for individualswith certain acute or chronic conditions. Insurance companies may realize that managingdiabetes is a different enough thing from providing care for every type of disease, andthey can increase performance by focusing on expertise in a specific line of services—lowering costs and increasing patient outcomes. For example, individuals concernedabout a family history of cancer could buy an insurance plan that specializes inpersonalized genomics, preventive care, and treatment, if ultimately needed.The Proposals• Increase attractiveness of HSAs for consumers. Dedicated savings accounts forhealth spending create financial security for citizens and help dismantle routinethird-party payment for health expenses by making the market directly responsiveto consumers as the masters of their own health spending.In 2013, more than 15 million Americans had an HSA and enrollment has beenincreasing at 15 percent annually. 45 To encourage greater HSA adoption and use,we should do three things: First, raise the limit of allowable contributions toHSAs; second, expand allowable expenses to include over-the-counter healthspending, premiums for high deductible plans, and long-term care insurance; andthird, increase access to tax-advantaged health saving accounts by eliminatingstatutory limitations for Government health program participants, such asveterans, service members, and Indian Health Service beneficiaries.• Enable health information technology. In order for consumers to access thebenefits of health information technology, standards are needed that allowappropriate information to flow freely when authorized. Unfortunately, progresstoward interoperability was stunted when President Obama’s stimulus packagehad an HHS “czar” try to develop standards. 46 The federal Government shouldremove itself from the standards creating business and should encourage privatesectorhealth provider and technology stakeholders to convene and craft solutionsthat they will adopt.45 2.5, Posted March 30, 2014 15

• Unlock the value of information technology for consumers by providing them withaccess to price and quality information. Consumers cannot make better healthpurchasing decisions without access to information about provider cost andquality. Private-sector “Consumer Reports” for health care services, likeCastlight, could enable greater transparency more value-based decisions abouthealth services. Additionally, in a direct-to-consumer purchasing system,providers would have incentives to publish price data that can be used byconsumers.• Enforce contracts to protect consumers. Although Government will never succeedat engineering the many intricate details of the health system, it can effectivelyenforce contracts made between private parties and ensure consumers are givenclear and transparent information about what they purchase. The Governmentshould require health plans to make standardized disclosures of plan details, suchas what items and services are covered, plan limitations, cost sharing, the claimsappeal process, and a summary of providers participating in the plan.• Medical liability reform. While incentives to reduce medical errors are a criticalpart of patient safety, the current system is plagued by junk lawsuits that drive upprovider costs through medical liability insurance, and of the system as a whole asproviders are incentivized to practice defensive medicine to satisfy trial lawyers.Price Waterhouse Coopers estimates the cost of defensive medicine at $210billion annually, 47 and a 2011 study by Thomson Reuters estimated it could costthe system more than three times that amount each year. 48 To reduce these costs,states can implement a variety of strategies, such as caps on non-economicdamages or a “loser pays” policy to reduce junk lawsuits and defensive medicine.States and the safety net: Admit Washington's safety net has failed and empower statesto care for the sickest and poorest among us.The ProblemThe federal Government was not designed to solve every problem and is inevitablyfailing the poorest and sickest among us. In the past five decades of the so-called “Waron Poverty,” Government has spent trillions of dollars with terrible results. 49 Recent datashows that economic mobility in the United States lags behind that of many Europeancountries. 50 The worldview that Government can solve social problems through centralplanning and collectivized taxpayer resources is creating a culture of dependency that47 2.5, Posted March 30, 2014 16

uns counter to the fundamental American ideals of ingenuity, entrepreneurship, and hardwork.Not only is Big Government pushing the American dream out of reach for manyAmericans, the welfare state is saddling the next generation with trillions in debt.Politicians have already put $17 trillion on the nation’s credit card. 51 And over the longterm, Medicare and Social Security have $84 trillion 52 in unfunded liabilities—benefitspromised by politicians without a plan to pay for them. That is approximately $600,000for every American household today. 53It is not surprising that a December Gallup poll found that 72 percent of Americansbelieve that Big Government is a larger threat to our future than Big Business or BigLabor. 54 The federal Government has simply grown too large—not only its regulatoryregime, but also its litany of programs. The Government Accountability Office (thefederal Government’s independent watchdog agency) cannot even keep track of thenumber of Government programs, let alone tell us if they are working. 55 GAO says thatthere are billions of dollars in duplicative programs, 56 as well as “challenges in achievingprogram goals and assuring the proper and effective use of federal funds.” 57Medicaid was a centerpiece of liberal tactics in the War on Poverty. Today it has grownso large that its mission is often compromised. It was sold as a health care safety net forthe most vulnerable in our society, serving four million Americans in its first year ofexistence. 58 In 2014, it covers nearly one in four Americans. 59 As a result, the coremission of the program has been compromised. It is failing the very people it wasintended to serve. One academic study of the Oregon Medicaid program found that itfailed to improve basic health outcomes for its beneficiaries, relative to the uninsured. 60In addition, Government bureaucracy has wasted nearly 10 percent of Medicaid’s $499billion budget—funding that could have been reinvested in patient care or returned to thetaxpayers. 6151 2.5, Posted March 30, 2014 17

Unfortunately, rather than trying to fix the problems, President Obama has doubled downon these failed policies of the past. He has enacted an even greater role for Washington inthe health care safety net. Rather than fixing Medicaid, ObamaCare included the largestexpansion of the program in history, as well as a new middle class entitlement. Not onlywill ObamaCare take trillions taxpayer dollars over the next decade, Washingtonbureaucrats have already written more than 22,000 pages of new rules for doctors,patients, states, and small businesses. Rather than admit this centralized control is notworking now and will not work in the future, President Obama has tried to patch afundamentally flawed law on his own. He has used executive fiat and ignored theFounding Fathers’ system of checks and balances on power in Washington.The PrinciplesIt is time for reformers to take back power from Washington. It is time to restoresovereignty to the states. The best Government is the one that functions closest to thepeople. That is what the Founders envisioned in the 9 th and 10 th Amendment to theConstitution. According to a recent Gallup poll, most Americans lacked trust inWashington to solve domestic problems, but nearly two-thirds of Americans expressedconfidence that problems could be solved at the state level. 62Perhaps the most important victory in the War on Poverty was the historic welfare reformof 1996. 63 It worked because it took control from Washington and gave it back to thestates. Rather than an open-ended entitlement that fostered Government dependency,62 2.5, Posted March 30, 2014 18

welfare reform gave states a defined budget and the tools to help Americans get back towork. Within five years of enactment, welfare caseloads dropped by 50 percent, andemployment for single mothers increased by 50 percent. 64States have shown a far greater ability to solve problems and live within their means thatWashington ever has. While Washington ran up a half trillion dollars budget deficit in2014, 65 49 of 50 states have balanced budget requirements 66 and many are runningsurpluses. 67 Just like American families, states understand what it means to set spendingpriorities.When given the opportunity in health care, states have demonstrated that they can andwill solve problems for their people. States have implemented major improvements totheir Medicaid programs after obtaining special waivers exempting them from federalmicromanagement. For example:In Florida, former Governor Jeb Bush enacted a solution that improved quality andlowered spending. Patients were given a defined contribution and counseling to choose ahealth plan that fit their needs from a competing set of options, or patients could chooseto enroll in private insurance offered by their employer. The approach also includedincentives for preventive care and healthy lifestyles. 68In other case, Kansas gave patients a choice among three or four competing insurancecompanies. The state held back a portion of the reimbursements to those companies untilthey proved that they met objective quality improvement benchmarks, such as patientsatisfaction, access to care, and health outcomes.The ProposalsStates should be empowered with the incentives and the freedom to solve problems fortheir own citizens. Reforms to return power to the states include:• Streamline all federal funding to the states. The federal Government spendshundreds of billions each year on grants to state and local Governments. 69 Thisconsumes nearly a fifth of the federal budget, and comprises approximately aquarter of state budget revenues. A comprehensive review should be done toassess the effectiveness of each program, whether duplication is occurring acrossthe federal Government, and whether each program should be designed andfunded at the state level without interference from Washington.• Give states the freedom to make Medicaid work for the most vulnerable. Statesshould be given a toolkit to improve benefit designs, strengthen program integrity,64 2.5, Posted March 30, 2014 19

align provider incentives, and target scarce resources for their most vulnerablebeneficiaries. Within this flexibility, states should be given defined budgets andbe accountable for meeting transparent goals on coverage and quality. Rather thanbeing forced to comply with micromanagement from Washington, states shouldbe free to reform their programs with local solutions, such as the 31 innovativeideas recently released by a majority of the country’s governors. 70• Enable states to meet the needs of Americans with pre-existing conditions.According to research published in Health Affairs, there are five to seven millionuninsured Americans with a pre-existing condition. 71 Addressing this problem didnot require Washington to spend trillions on a new middle class entitlement.Rather, states should be empowered to create targeted solutions, such asappropriately funded high-risk pools, for these individuals. States could integratetheir solutions with the tax deduction and insurance reforms proposed above.Seniors and the next generation: Expose Washington's entitlement over-promising andprotect Medicare for the next generation.The ProblemFor too long, Washington has been making promises to Americans it cannot keep.Nowhere is this more evident than with Medicare. More than 50 million people rely onthis program for access to health care, yet its finances can no longer keep up with thecosts. 72 Rather than tackle these challenging realities head on, politicians keep acting likeeverything is fine and pushing the crisis off for future generations to solve.Washington’s spending on health care in the early 1960s was just one percent of theentire federal budget, while defense was prioritized at 49 percent. Today, investments innational defense comprise just 18 percent of the budget while spending on health careentitlements alone consume 1 out of every 4 dollars spent by the federal Government. 73In 2014, Medicare is expected to have spent $597 billion 74 —more than twice the size ofthe entire economy of Greece—and will nearly double in spending by 2024. 75 Thismassive increase in spending and political promises, means that parts of the program willgo bankrupt by 2026, leaving seniors to face dramatic cuts in services. Absent structuralreform, politicians will be left with a damaging set of options: a 38 percent tax hike or a22 percent reduction in benefits. 7670 2.5, Posted March 30, 2014 20

The program is in crisis because it operates like a Ponzi scheme. According to researchby the Urban Institute, Medicare beneficiaries receive three dollars in benefits for everydollar they have paid into the system. And for single-earner couples that ratio is six toone. 77 This is not sustainable over the long term.In addition to Medicare’s unsustainable financing, 72 percent of the program stilloperates under fee-for-service rules. 78 This system of price controls encourages volumesof services over value provided to the patient. To make annual budgets work, the systemoften results in arbitrary cuts to providers, harming their ability to plan for the future andinvest in new technologies. The fact that physicians worry about whether or not they willsee a 24 percent pay cut at the end of the year is a classic example of what plaguesGovernment-run health care. 79 This system robs taxpayers, harms patients, and frustratesproviders.The PrinciplesThere is a better way. Seniors should not have to face a future of uncertainty. Ourchildren should not be shackled with massive debt because Washington cannot comeclean about these realities, and lacks the courage to solve them. For too long, politicianshave been more concerned their own political careers rather than the future of the next77 2.5, Posted March 30, 2014 21

generation of Americans. It is imperative that we protect the security of current seniorswho have planned their retirement around Government promises. But our safety net mustnow begin making honest, sustainable promises to the next generation, and ourGovernment must live under the same accounting rules as the rest of us.The Proposals• Gradually adjust Medicare’s eligibility age. When the Medicare eligibility agewas set, life expectancy was just over 70 years. 80 The program covered themajority of seniors’ health care costs in their final years of life. Thanks toadvances in public health and medical technology, life expectancy today is almost80 years and many Americans are able to extend their working years. 81 PuttingMedicare on a sustainable path involves revisiting the eligibility age in light ofthese advances in productivity. The Government cannot change the eligibilityrules for current retirees and those approaching retirement should have peace ofmind that Washington will not pull the rug out from under them. As a startingplace where there has been consensus, we should consider adjusting Medicare’sretirement age by two months a year, just like the way President Reagan reformedSocial Security. The Congressional Budget Office has estimated that one versionof this reform could reduce the rate of Medicare spending growth by $63 billionover the next 10 years. 82• Transition Medicare to a defined contribution system that offers more choice andhigher quality coverage to seniors. Seniors should be empowered to choose ahealth care plan that fits their needs. Both fee-for-service Medicare and privateinsurance companies should have to work harder for seniors’ business. A modelfor reform, such as proposed by House Budget Chairman Paul Ryan and SenateFinance Committee Chairman Ron Wyden, should contain elements utilizingcompetition and enhancing transparency:o Foster Competition. Insurance companies should have to rigorouslycompete on price and quality, not simply lobby politicians for higherreimbursements. A premium support proposal would do just that. Buildingon bipartisan reforms of the past, health plans would submit bidsdemonstrating how they intend to cover guaranteed health services forseniors. Risk-adjusted contributions would be determined based onrigorous competition among the health plans, to ensure that both theamounts are adequate to cover benefits and that taxpayers and seniors aregetting the highest value for their investments. The traditional Medicareprogram would still be available, but would have to compete just likeevery other insurance plan.80 2.5, Posted March 30, 2014 22

o Increase Transparency. Today, health care prices are hidden. Too often,patients are faced with bills they cannot understand and charges that werenever disclosed. This needs to change, and there should be no more hiddencharges or fees. Seniors should have certainty about what prices they willbe charged and what their particular insurance coverage provides.• Adjust Medicare premiums for wealthier Americans. With the program facingbankruptcy, wealthier Americans should be asked to assume a greater investmentin their Medicare benefits. Increasing premium contributions for Medicare Parts Band D alone would reduce the rate of growth in Medicare spending by as much as$287 billion over the next decade, according to CBO. 83• Protect seniors from identify theft by removing Social Security numbers fromMedicare cards. Medicare cards currently include components of thebeneficiary’s Social Security number printed along with the beneficiary’s nameand other personal identifying information. The Government AccountabilityOffice has recommended that these numbers be removed to prevent identity theftand Medicare fraud. 84 The Department of Defense and the VeteransAdministration have already removed Social Security numbers from member’scards, yet the Medicare program continues this practice. Instead of continuing toimplement ObamaCare, Medicare administrators should immediately take actionto protect seniors by developing a new identification system.ConclusionThe American health care system will never provide lasting security for families unless itreflects the dynamism, creativity, and individuality of the American people. ObamaCaremust be fully repealed. We should not attempt to fix, tweak, or improve it. We should ripit out of the ground, root and branch. But we should not stop there.For too long, Republicans have failed to articulate a societal goal where every one of ourfriends and neighbors has access to healthcare. But we must also reject the idea that realsolutions can ever come through the mandates and coercion of Washington centralplanners.We believe states and local governments, churches, charities and voluntary associationscan solve problems and care for the poorest and sickest among us in community together.That is where real compassion is found in our country: not in far away Governmentoffice buildings where our kids and grandparents are treated like numbers on a page, butin small towns across America where citizens come together to serve their neighbor outof a heart of gratitude. This is the very essence of what it means to be a conservative: wesimultaneously reject the role of a supposedly benevolent Big Government while alsoassuming responsibility for ourselves and caring for those closest to us. We can choose to83 2.5, Posted March 30, 2014 23

ise together—but that goal will never succeed via the compulsory powers of BigGovernment.As long as we fail to communicate these ideas with empathy, we will continue to lose themeaning of the America that we love. It does not have to be this way. We can articulate aconservative governing vision for the American people. We can show them that wedeserve to be allowed to lead again.Only then can we begin the real work of an American Constitutional recovery and giveour grandchildren a nation that is as great and free and opportunity filled as the one ourgrandparents gave us.# # # #Version 2.5, Posted March 30, 2014 24

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