What does the Heritage Foundation have to say about saving Healthcare:Study released May 10, 2011 (Part 1)

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“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by  Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beachis one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but I will start off with the section on Healthcare.

Health Care for


Health care costs are rising at an alarming rate, while individuals and
families have less control over their health care dollars or decisions. Worse
still, the recently enacted Patient Protection and Affordable Care Act (PPACA,
or Obamacare) is accelerating these problems. In sharp contrast to the
centralized government approach of the Obama legislation, the Heritage plan uses
a consumer-centered, market-based approach to reduce health care costs and give
patients and their families a greater say in health care spending and decisions
that affect their lives.

This begins by repealing Obamacare.

The Heritage Foundation has already proposed major health care reform to
create an affordable health care system in America. The reform is based on
consumer choice and ownership of coverage, together with an infrastructure for
competitive private plans and state-led innovation. The Heritage plan includes
key budget and tax components of the overall Heritage health care reform,
including reform of the tax treatment of health expenses and assistance for
health insurance for lower-income families. Other features of the health care
reform are developed in other studies and reports.

The Heritage Foundation health care proposal assumes numerous other policy
initiatives that accompany the budget design elements in the Heritage plan.
These include:

  • Removing consumer barriers to the purchase of health
    insurance, such as existing limits on interstate purchase;
  • Developing mechanisms, such as risk-adjustment and
    high-risk pools, to address access issues for the hard-to-insure;
  • Making available new pooling arrangements, such as
    individual association plans; and
  • Supporting strong state-led initiatives to promote
    innovation and experimentation with consumer-centered, market-based reforms.

These and other insurance reforms are intended to augment the Heritage plan,
to promote competition, drive down cost, and advance stability, portability, and
personal ownership.

In conjunction with the plan’s tax reforms, the current individual tax
exclusion for employer-sponsored health insurance and other tax mechanisms are
replaced with a nonrefundable fixed tax credit for households to purchase health
coverage. The credit is phased out as income rises and eliminated for
upper-income households. The switch from the exclusion to the credit system is
revenue-neutral to the federal government.

This change is needed because under today’s system, the tax code provides
unlimited tax breaks only to those workers who receive coverage through their
employers. Workers cannot use this tax break if no plan is offered through their
employers or if they simply prefer a plan other than their employer’s. Moreover,
while upper-income workers obtain a very large tax break, the exclusion provides
little or no help to lower-income workers who are struggling to afford coverage
for their families.

Through tax reform and other measures, the Heritage plan ensures that
everyone, regardless of job situation, is eligible for a tax credit or other
help in purchasing health insurance. This means that people can buy, own, and
keep the health care plans of their choice.

For poor Americans, the plan provides assistance for coverage, paid with
reductions in other federal spending. Under this reform, low-income able-bodied
adults and their children who are currently on Medicaid would no longer
participate in the costly and failing Medicaid program; instead, they would be
able to enroll in private coverage.

In addition, under the Heritage plan, low-income individuals who are not
currently eligible for Medicaid would receive financial assistance toward a
plan. This ensures that everyone who needs assistance receives assistance in
purchasing health insurance. Like those who receive the tax credit, individuals
and families receiving assistance have the same health care plan choices as
those with the tax credit and can buy, own, and keep their health insurance.

The Heritage plan transforms the remainder of today’s Medicaid program—for
the frail elderly and disabled—into a health care safety-net program rather than
today’s catch-all, patchwork program. In addition, the Heritage plan replaces
the open-ended federal–state financing arrangement that is crippling state and
federal budgets with a more consistent and sustainable capped allotment. In
exchange for the capped allotment, states are given much more flexibility to
redesign health services for the disabled and the elderly poor so that they can
provide better and more integrated services at lower cost. This new arrangement
enables states not only to provide better care for the neediest in our society,
but also to keep to their budgets without cutting other state priorities or
raising taxes.

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