Interview with Dr. Paul Howard, Director of Health Policy at the Manhattan Institute

By: Pedro Enamorado

This interview with Dr. Paul Howard was conducted before the Buckley Program’s Firing Line Debate on health care policy with Dr. Howard and Dr. Alice Rivlin on Wednesday, March 1st. This transcript has been condensed and lightly edited for clarity.

Dr. Howard is a senior fellow at the Manhattan Institute and director of health policy. Dr. Howard was a leading healthcare policy advisor to Mitt Romney’s 2012 presidential campaign. His work has appeared in such publications as Forbes, Bloomberg View, New York Times, Wall Street Journal, National Affairs, USA Today, RealClearPolitics, New York Post, Investor’s Business Daily, Health Affairs, and FoxNews.com.

The Manhattan Institute is a leading free-market think tank focusing on economic growth, education, energy and environment, health care, legal reform, public sector, race, & urban policy.

Pedro: Good to meet you, Dr. Paul Howard. The Manhattan Institute is a policy think tank that promotes individual responsibility and economic choice. What are the key provisions of a GOP health care plan that would have these ideals and help Americans get better access to healthcare?

Dr. Howard: I’m the Director of Health Policy at the Manhattan Institute and a couple of challenges which I think a lot of other healthcare policy folks see on the left and the right is that the cost of healthcare in the US is enormous. It’s a tremendous burden on state and federal government. And there’s too little competition at the level of innovative approaches to delivering a service that might be less expensive or more efficient- telemedicine instead of in-office visits, having nurse practitioners compete with physicians when they’re offering the same services- and I think that’s because a lot of the regulation in the US healthcare system really focuses on the supply side. We tell people how to deliver things, in what setting, and, oftentimes, at what price. And this really weakens market incentives to find ways to deliver a given good less expensively, more efficiently.

So, I think that the kinds of things that the Republicans in Congress are thinking about, and the Administration are thinking about, focus on, first of all, thinking about the individual market right now, where Obamacare- the Affordable Care Act- operates, in a different way. It’s a residual market. There are people there who need help, but a lot of them are going to be in that market for a little while and then move out. So, offer really, more attractive affordable plans that a young person might want to buy and hold for a few years before they move into a job that has employer-provided insurance. So, offer more affordable coverage, continue to offer tax credits to low-income Americans who are not going to be able to buy into the market without some kind of support. Help make it easier for people to set up Health Savings Accounts; make it clear what plans offer Health Savings Accounts; reform what health savings accounts are allowed to cover, so maybe they cover drugs for chronic diseases that prevent people from having a serious complication later. Work on transparency across the market in terms of what providers are high-cost but also high quality, some are going to be low-costs and high quality.

So, I think that reforming entitlements is the next necessary step that we’re talking about, which is Medicare and Medicaid, probably Medicaid first given the president’s priorities. You know Republicans are talking about shifting to a block grant system or a per capita cap system that would pay states basically a fixed amount of money depending on the category of the person they are insuring, a single able-bodied person versus someone who is older and/or disabled and therefore would need more support. So, I think those are the basic bulwarks: competition, choice, incentives to get and say covered, and looking broader on how we can promote competition on the supply side so that entrepreneurs and innovators can bring new services to patients and consumers that are more affordable, that have a greater focus on prevention and chronic disease management, rather than wait until disease gets expensive and serious that puts someone in the hospital.

But also, at the same time, give people the opportunity, and states the opportunity, to think about the best use of marginal dollars. Maybe, then, taking someone who is homeless and giving them a Medicaid card is not as good as taking someone who is homeless, putting them in supportive housing, and ensuring that they get job training and find a job. That means instead of just saying here is this money that has to go to healthcare per se, give the states more freedom for how they design programs for low-income and disabled residents through the Medicaid program, but maybe send it somewhere else, and have more of a neutral playing field for how those dollars are spent that encourages states to find innovate solutions that are better for low-income Americans in terms of health outcomes and economic opportunity. And, at the same time, save taxpayers money, or at least, give taxpayers the sense that these dollars are being spent well and wisely and it’s not eventually going to crowd out spending for everything else that we want to do.

Pedro: A follow up question is, you mentioned promoting high-deductible, low-cost plans and the tax credits that were proposed. How would these particular elements help the economically disadvantaged?

Dr. Howard: They need to be refundable. The way that the House’s Better Way plan, which I think is what you’re thinking of right now, is structured, the credits scale with age. And that makes some institutive sense because your risk of developing illness or chronic ailments go up as you get older, unfortunately. But, at the same time, a lot of people at the lower income end of the spectrum for whom a tax credit that might seem reasonable to someone who makes forty to fifty-thousand a year is not going to be enough to get that person a policy. So, there are a few options that are being debated around that, one of which is automatic contributions into an HSA for that person, to say here’s money to get a high-deductible plan plus automatic funding of a Health Savings Account so that the out of pocket burden on that person is not serious. And then, also, something like high-risk pools which can bring down premiums further by allowing the opportunity to take the very highest costs, put them in dedicated plans, have dedicated funding for them which brings down the costs in the rest of the market. So, I think the strategy is really focus on targeted solutions for some of the highest-cost patients while at the same time bringing down costs for affordability, But, I think the real challenge is going to be ensuring that the people at the low end of the spectrum have enough purchasing power to move into the market.

Pedro: Now, a lot of people how got health care after the Obamacare Medicaid expansions and the market exchanges- they are concerned about repealing Obamacare would mean losing their coverage. What would be a solution to make sure that they can somehow grandfather their plans when all the regulations are repealed?

Dr. Howard: Right, so you could have a longer transition period of a couple of years. You can say, we’re going to be shifting to these lower cost, more affordable plans but you can stay in your plan for a certain period of time and them move into something else when there will be new options available for you. So, having a good transition period that allows insurers to reprice their plans is really important. When you look at the Medicaid program, there’s a debate going on right now between states that are high costs but have also expanded their programs that are getting a bigger match for new enrollees- basically from 100% to 90%, there’s a slight step down in the program for expansion states but still a lot of money- and states who haven’t expanded. So, what’s a way to economic mobility and health outcomes that is more fair? So, just because New York spends more on its program and has a bigger program in terms of the services it offers because it’s a wealthy state and can afford such a program versus a state like Mississippi or Louisiana that don’t have as much money and, therefore, their programs are not as large or generous. Shifting to an approach where we are sending federal support to the states based on the number of people in poverty in each state might be a better approach that would be fairer for all, but it would require higher spending states to find a way step down their spending over time.

Pedro: And I would make this my last question. I know that you were advising Mitt Romney on his health care policy when he was running. If Mitt Romney were running today after the law has been enacted, how would he sell a repeal and replace plan to the American people?

Dr. Howard: Well I think the really interesting thing about this particular moment in time is that Donald Trump, President Trump, is not your typical free market conservative. He has, I think, a more expansive view of the role of government that was on display last night in his address to Congress, where the government is more of an activist in favor of market ends or social ends. So, I think that a lot of the challenges are going to be the same regardless of who’s president but that, for Trump to sell some of the aspects of a plan- like tax credits or high-risk pools, or other mechanisms for helping the uninsured transfer into a new system- ironically, most of the splits are going to be on the Right because that’s where most of the ideological divisions have been on this big debate. I don’t know if you’ve heard, but, “Do we have deductions or do we have tax credits?” That’s a huge ideological debate on the Right. Well, President Trump, as you saw last night, can come in and say, “It’s going to be tax credits; this is the way forward.” So, he’s not especially wedded to the right flank of the Republican Party or a particular conservative manifesto. He can help redefine the debate in a way that other people might not have been able to because they were thinking within their traditional conservative box.

Pedro: Wonderful. Thank you very much.

Pedro Enamorado is a senior in Ezra Stiles College. 

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