Thanks for the thoughtful response on this. I think this is a very healthy debate we should be having on this. Conservatives don’t talk enough about health care.

I like your list method (I use it a bunch myself), so I will keep to that order:

1. Tax treatment. You are correct that Heritage agreed to alter the refundable credit plan in 2007 after it was clear that conservative opposition to the older, tax-increasing version doomed that one. Until that time, Heritage never espoused the principle you state here; namely, that the refundable aspects of a credit should not be paid for with tax increases somewhere else. If Heritage continues to hold the very new position you state here (that reforming the tax treatment of health insurance should never result in a net, aggregate income tax increase), we’re in 100 percent agreement.

2. Portability. If you read my original post, it’s clear that I’m criticizing the new tax benefit for health insurance purchased through an exchange. I never said you would limit the benefit to those purchasing through the exchange. So, this one is just a misunderstanding.

3. Federalism. There’s a balance here. I remember with welfare reform, there was always a debate between a “clean” block grant and one with parameters. The concern I have is that if Democrat politicians in Washington are the ones setting the parameters, they will contain things like benefit mandates, coverage mandates, deductible limits, etc. The parameters could easily doom the reform.

4. FEHBP. Glad to see we (now) agree that community rating is a bad idea. I’m all for choice and competition, but the FEHBP does so in a connector/exchange/sandbox. When the government sets up the sandbox (as we saw in MA), price controls and mandates soon follow. Pursuing an FEHBP model is letting the tail (the exchange) wag the dog (choice and competition).

As far as the lower cost trends, what about the fact that DC’s Carefirst plan has grown 60% in the last six years? Shouldn’t the standard be a bit higher than that?

5. Bipartisanship. The Nickles bill was a mixed bag, to say the least. It’s S. 1743 for those who might want to look it up, and was introduced in 1993. It did create medical savings accounts, cap medical torts, do some incremental changes to Medicare and Medicaid, long-term care insurance incentives, and the principle of reform of the tax treatment of health insurance, on the good side. Now for the bad:

-It contained “guaranteed issue,” which most conservatives now oppose (this provision means that people can wait until they are sick to sign up for health insurance).

-Without seeing a revenue score, this bill probably was a net income tax increase (since it created a refundable income tax credit and paid for it by repealing the employer exclusion of health insurance). Heritage’s assertion that the refundable aspects of a credit must be paid for with spending cuts is, indeed, a new one.

-The bill has a form of community rating, which you now say Heritage opposes. S. 1743 would allow premium variation based only on age, sex, geography, and participation in a wellness program. Notably absent from that list is “health status.”

-It has restrictions on plan design that look very much like the restrictions imposed by the FEHBP. In particular, the out-of-pocket max is a bit onerous (10% of AGI or $5000, whichever is greater)

-There’s an employer mandate–employers must facilitate health insurance coverage or pay a tax (“pay-or-play”). This tax could reach as much as $18,250 per year/per employee. Employers are dictated that they must increase wages by the amount that they are relieved of premium payments.

In short, the Nickles bill is an example of Heritage health policy gone wrong. It has too much in there that’s bad. As a final piece of legislation out of a conference committee, it would still be bad. But as the opening salvo of the right? It’s not good.

And I didn’t get the history wrong. Back in 1994, thirty-seven conservative leaders signed a letter opposing the Nickles bill. These signatories included Cato president Ed Crane, Eagle Forum’s Phyllis Schlafly, Paul Weyrich, and (my boss) ATR’s Grover Norquist. Shortly thereafter, Nickles withdrew his support for his own bill. Reports at the time were that Nickles believed the Heritage draft to be a conservative consensus on health reform, and was disappointed to find that this was very much not the case after getting this joint letter. It was most assuredly not a “bulwark” against Clintoncare, by all accounts I’ve heard outside of Heritage.

Once again, it’s my position that Heritage would be better off walking away from an FEHBP/connector plan. I’m glad to see that Heritage has come around on community rating and opposition to an overall tax hike, but that’s relatively-new.

I’d be interested to see where Heritage is today on some of the other bad aspects of the Heritage/Nickles bill: guaranteed issue, an employer mandate, pay-or-play, and the plan design limits.