Briton Daniel Hannan, a member of the European Parliament, gained international noteriety when he challenged Prime Minister Gordon Brown after the latter spoke to the European Parliament. Hannan also has been warning Americans not to follow Britain in socializing its health care system.

In a previous post, I offered my impressions on the Coburn-Burr-Ryan-Nunes health care reform bill, based on my reading of the bill summary prepared by their staff. The very next day, I had a friendly discussion with those staffers about the legislation. (They were most gracious; many thanks to them.) It turns out some of the things I wrote were inaccurate. So I’d like to make the following corrections.

Based on my reading of the bill summary and my discussions with staff, my previous post ought to have read that the Coburn et al. bill would:

• Mandate that Offer federal subsidies to states that create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
• Mandate Require that all plans offered through those exchanges meet federal regulatory standards,
• Mandate Require “guaranteed issue” in those exchanges,
• Mandate Create “uniform and reliable measures by which to report quality and price information,”
• Impose price controls on those plans by prohibiting risk-rating,
• Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and Require that states creating an exchange also create some mechanism for providing coverage to people with high-cost illnesses, including but not limited to risk-adjustment, risk pools, or reinsurance, and
• Fall just short of an individual mandate by setting up (mandating?) Require that states creating an exchange take steps to facilitate enrollment, which may include automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans their residents to death.

My description of the legislation as a “Mandate-Price-Control Bill”? Not accurate. My claim that the bill involves tax increases? Based on my erroneous impression that the bill would impose price controls on insurance premiums. The bill may lead to some tax increases (it proposes new categories of federal spending after all), but for the moment I take staff at their word that on net the bill would not increase taxes or government spending.

Why the errors? Suppose a bill summary says that federal legislation would “ensure” the creation of state-based exchanges and that individuals “would get” access to an exchange. Does that mean the bill would mandate the creation of exchanges, or that states could choose to create them or not? What if that’s the only language, and there is no mention of states having an option? (What does this guy think?) Suppose the bill summary promises, “Guaranteed access to care…regardless of patient age or health history,” by virtue of the rules it would impose on insurers within the exchange. Does that spell rating restrictions (i.e., price controls)? What if the bill summary then promotes a tool (i.e., risk-adjustment) commonly used by European systems to cope with the adverse consequences of price controls? Reasonable people can disagree, I suppose.

Rather than spend any more time on what I don’t like about the bill and the bill summary (and there is more), let me emphasize what I do like. The authors understand the need to reform the tax treatment of health insurance. And they understand that leveling the playing field between job-based and “individual-market” insurance amounts to a huge tax cut — even when revenue-neutral. They propose to block-grant part of Medicaid, and would further means-test Medicare premiums.

Not my ideal bill, or even the best I can hope for under the circumstances. But it would do much good and is a far cry better than anything we’re likely to see from the other side of the aisle.

President Obama has made it clear that reforming the American health care system will be one of his top priorities, and congressional leaders have promised to introduce legislation by this summer.

In a new study, Cato scholar Michael D. Tanner breaks down the key components of any plan likely to emerge from Congress, and explains how those proposals would “dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.”

At National Review online, Tanner explains the different aspects to Obama’s plan, all of which could be coming to a hospital near you. In today’s Cato Daily Podcast, he expands on his paper, describing what health care will look like in years to come.

Earlier this morning, my colleague, Michael Cannon, blogged a devastating critique of the Coburn-Burr-Ryan-Nunez alternative to the Obama health plan. As he shows, while the bill has some good features (changing the tax treatment of health insurance, expanding HSAs), the good is swamped by a bizarre collection of regulation, mandates, and hidden taxes.

In fact, the bill appears to be based, in large part, on what its sponsors call “the well-known, bi-partisan achievement of universal health care through a private system in Massachusetts.” But the Massachusetts model has failed to either achieve universal coverage or control health care costs. Rather, as I noted in this recent blog, it has led to more regulation, less consumer choice, and increased insurance premiums, while running huge budget deficits that have already led to one tax increase and are now causing the state to consider premium caps and global budgets. One wonders why congressional Republicans would want to head down that road.

Notably, Coburn-Burr-Ryan-Nunez abandons Rep. John Shadegg’s proposal to allow Americans to buy insurance across state lines in favor of a requirement that states establish Massachusetts-style connectors. But the Massachusetts Connector has been one of the worst aspects of that state’s reform, acting as a super-regulatory body, adding new mandated benefits, restricting consumer’s choice of plans, and adding both regulatory and administrative costs to insurance. (In fact, the Connector adds its own administrative costs, estimated at 4 percent of premium costs, for plans that are sold through it.) What the Connector has not done is live up to its promise of breaking the link between employment and insurance, giving workers personal, portable insurance that they could take with them from job to job, and which they would not lose when they lost their jobs. Unfortunately, the Connector has not lived up to its promise in the latter regard. In fact, as of May 2008, only 18,122 people had purchased insurance through the Connector. That’s very little gain for so much pain.

Since there is virtually no chance that the Coburn-Burr-Ryan-Nunez will actually be enacted, perhaps one shouldn’t get too excised about its failings. No doubt it is far superior to Obamacare. And, it is understandable that congressional Republicans want to appear as more than the “party of no.” Still, this looks like a sadly missed opportunity.

Today, Senators Tom Coburn (R‑OK) and Richard Burr (R‑NC), along with Reps. Paul Ryan (R‑WI) and Devin Nunes (R‑CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:

• Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
• Mandate that all plans offered through those exchanges meet federal regulatory standards,
• Mandate “guaranteed issue” in those exchanges,
• Mandate “uniform and reliable measures by which to report quality and price information,”
• Impose price controls on those plans by prohibiting risk-rating,
• Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
• Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level — when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R‑AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care — so much so that The Washington Post’s Ezra Klein is salivating:

The word of the day is “convergence.” That — and that alone — is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act — which I’ve uploaded here — would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms — which it calls a “well-known, bi-partisan achievement of universal health care” — in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea — present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan — would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.

UPDATE: After discussions with Sen. Coburn’s staff, I happily issued a few corrections. Still, concerns remain.

Sen. Jay Rockefeller (D‑WV) admits that Congress is not competent to set medical prices and payment systems for America’s seniors:

It’s not pretty; it’s not quality; it’s not American medicine the way it should be.

His solution: give that power to an unaccountable government board.

Democrats in Congress are reportedly considering taxing employer-provided health insurance benefits as a way to pay for their health care reform plan. And, even though he brutally attacked John McCain for something similar (see below) during the campaign, President Obama may now go along with the idea.

Much of the media coverage around the idea has equated this tax hike with the McCain plan and other proposals by advocates of market-based health reform over the years that would shift the tax break from employer-provided insurance to individual insurance. However, there is an important distinction. The market-based proposals would have taxed employer-provided health benefits (treating them as taxable compensation), but would have provided workers with a deduction or credit for purchasing insurance regardless of whether they receive it through work or pay it on their own. The result, for all but a handful of workers with the most expensive gold-plated employer plans, would have been tax neutral. In fact, many workers would receive a net tax cut. The shift in tax treatment was simply part of a larger strategy to move from a system of employer-provided insurance to one where health insurance was personal, portable, and owned by workers.

The plan being discussed by Congress, on the hand, is simply a tax hike. It is not revenue neutral—it is a $1 trillion tax increase that will fall heavily on the middle-class. It is designed not to change the system, but simply to raise revenue. 

That’s a very different thing!