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Resuscitating Health-Care Reform With a Shell Game

In a simpler and more idealistic time of my life—2011—I heard tell of a rather odd program in Arizona. Legislators there had seemingly figured out a way to overcome political resistance to school vouchers. Instead of the government providing the money, the private sector would donate it.

Except these weren’t really … donations, per se. In exchange for funding the vouchers, the contributors got tax credits in the exact amounts of the sums they’d provided—in effect, a full reimbursement by the government. The entire “donation” mechanism was a sham, a shell game designed to disguise what was really happening. Its sole purpose was to launder public subsidies into something that looked like private charity, so as to skirt political opposition to the subsidies.

I found this quite offensive at the time, as can be seen in a piece I wrote for National Review [1]. School vouchers are good policy, my thinking went, but their supporters have to convince the public of that. They can’t just funnel the money through a private entity and call it a “donation.” I was also worried [2] that the idea opened the door to future liberal abuses: any time there was an objection to the government funding something—say, abortion—this setup could be trotted out to allay any concerns.

But what if, instead, the idea could grease the wheels for health-care reform this year by putting an end to intra-GOP squabbles? That’s the notion Stephen Beale floats in his piece [3] today.

House conservatives object to any bill that subsidizes health care through refundable tax credits (i.e., credits you can receive even if you don’t have any tax liability to offset). So why not have private donors fund health care for the low-income, and in return give them tax credits worth exactly what they spent?

It’s not a subsidy, it’s a donation followed by a tax cut! What’s not to like?

I still think this setup is fundamentally dishonest, as at the end of the day it’s economically indistinguishable from the straightforward subsidy it’s supposedly trying to avoid. But at this point I’m old, wise, and cynical enough that this solution doesn’t offend me so much. Maybe it’s best to see it as one of those routine lies we tell in Washington to keep things moving.

If Republicans create a functional post-Obamacare health-care market this way, and the House Freedom Caucus thinks it works by “cutting taxes” for “donors,” I’ll just roll my eyes and move on with my life.

Robert VerBruggen is managing editor of The American Conservative.
Follow @RAVerBruggen [4]

11 Comments (Open | Close)

11 Comments To "Resuscitating Health-Care Reform With a Shell Game"

#1 Comment By EliteCommInc. On April 19, 2017 @ 10:34 am

“It’s not a subsidy, it’s a donation followed by a tax cut! What’s not to like?”

It has no impact on the costs of healthcare now or on future increases. Which ultimately means one has the same problem, larger and larger tax credits to fund unrestrained rising costs.

Note: They cut funding the killing of children from any government subsidized program.

#2 Comment By EliteCommInc. On April 19, 2017 @ 10:35 am

Correction:

They need cut funding the killing of children from any government subsidized program.

#3 Comment By bkh On April 19, 2017 @ 11:11 am

The overall Big Healthcare syndicate that is making billions in profits should just come out and be honest by saying, “You can’t have any of our profits, so die already.”

Healthcare costs will not be “fixed” by politicians who are beholden to the Healthcare syndicate for donations. The system cannot be fixed: it has to be blown up. However, no one has the real desire to do what is necessary because of corporate greed and consumer/voter narcissism. This country is getting sicker and sicker in more than one way, but it would be nice for individuals to be able to have physical/mental ills taken care of without worrying about paying the rent/mortgage or every rising utility bills. Republicans are always ranting about being pro-family, but they are no better at fostering that belief than the left. That rant is just a sham and a ruse to get ignorant votes just as much as the left’s ranting about being inclusive.

#4 Comment By Lllurker On April 19, 2017 @ 1:11 pm

Another post about healthcare with no mention of the actual care of people’s health.

But no matter! Because this scheme would move more wealth away from the poor and middle classes, and up towards those who are already wealthy. It is assumed of course, and even goes without saying, that this is a good move for our citizens and the country in general.

It’s just a sort of lucky coincidence that implementing this approach would also fatten the wallets of those folks who already need for nothing. But that is just a fortunate side effect — just a minor detail really — that has absolutely nothing to do with the real goals of healthcare reform…

#5 Comment By grumpy realist On April 19, 2017 @ 1:49 pm

Robert–thank you for your noticing that yeah, this is just the same as a subsidy; we’re just going around the back side of the barn to pretend we aren’t going to end up in the same place. I read Beale’s piece in the WSJ today and thought “who is he trying to fool?”

A lot of WSJ readers, apparently.

#6 Comment By JonF On April 19, 2017 @ 4:14 pm

Re: They need cut funding the killing of children from any government subsidized program.

Ever hear of the Hyde Amendment? There is no taxpayer funding of abortion except in cases of medical necessity (and most states have very strict rules as what qualifies).

#7 Comment By Kurt Gayle On April 19, 2017 @ 4:35 pm

My first observation about the plan is that it’s not a universal, single payer system. (I know most Americans either roll their eyes, or laugh out loud, when they hear “single-payer.” But that’s still the system that the US desperately needs!)

My second observation – prefaced by the compliment that you, Robert Verbruggen, have some serious, serious cojones to recommend this – is that this “sham, [this] shell game designed to disguise what was really happening” might just work. It just might bring about universal coverage while at the same time skirting the Freedom Caucus/Rand Paul objections and getting enough votes in the House and Senate to pass.

My third observation is that this is the type of workable shell-game scheme that – with the exception of those of you who have serious, serious cojones – few people want to get out in front of. Most people will want to wait until certain public figures have given the scheme their OK, so then they can say, “Oh, sure that would work, that’s fine with me.”

How close do you think we are to the critical mass of yesses that could push the scheme forward?

#8 Comment By Hassan On April 19, 2017 @ 4:45 pm

BKH: “The system cannot be fixed: it has to be blown up. However, no one has the real desire to do what is necessary because of corporate greed and consumer/voter narcissism.”

This is the best summary that I have seen. America has an expensive healthcare because:

1-Doctors’ pays are too high- Monopolized institutions don’t allow sufficient new workforce.
2-The HC bureaucracy is too big due to the minimization of risk in order to allow lawyers and uncapped litigations- over regulation does not allow affordable and cheap care to take place. In other words, without being flexible (about risks, and also standards), the healthcare will remain expensive. Voters cannot digest this simple fact.
3-Overinflated drug prices.
4-The whole system provides such huge monetary gains to its agents, from doctors to administrates to insurance companies to pharmaceutical industry, that nobody has a real interest to take it down, or create an alternative.

Without addressing the above problem, it makes little sense to look for a magic solution.

#9 Comment By Kevin On April 19, 2017 @ 8:16 pm

Let me point out the obvious flaws here:
– The AHCA tax credits are inadequate to the poorest, oldest, consumers, and still cost something like 100 billion per year. Total charitable donation in this country is around 250 billion. What makes you think that it will explode in reaction to your plan?
– There are obvious ideological incentives for people to provide donations for vouchers that, most times, are going to be used in religious schools. Voucher programs are also relatively tiny. Where are you going to find the donors for this plan?
– If there is an economic downturn, and donations run out, public schools are still going to be there, legally obligated to take all comers, free of charge. That’s not true for insurance companies.

No offense, but this reads like some Soviet document trying to create market mechanisms forbidden by the general party line…

#10 Comment By EliteCommInc. On April 19, 2017 @ 9:23 pm

Just a reminder,

[5]

#11 Comment By archer crosley On April 19, 2017 @ 11:34 pm

Why is it a shell game? I proposed a similar scheme years ago, and you can read about it in my health care plan at [6]. Why not allow any citizen to get a tax credit to purchase health care for someone who can’t afford it? It’s the perfect way to allow competition into the marketplace while removing government from the equation. In a way it allows conservatives to out-liberal the liberals by giving them free healthcare and choice. The liberals would deny them choice.