As we've highlighted, the dangerous effort to weaken critical patent protections for U.S. pharmaceutical…
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Image of the Day: Private Sector Pharmaceutical Investment Propels Innovation

As we've highlighted, the dangerous effort to weaken critical patent protections for U.S. pharmaceutical innovators often minimizes the role of private investment and exaggerates the role of public funding.  This offers a critical corrective at a moment when American drug and vaccine innovation is more important than ever:

[caption id="" align="aligncenter" width="530"] The Critical Role of Private Pharmaceutical Investment[/caption]…[more]

May 14, 2021 • 09:16 AM

Liberty Update

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A Conservative Alternative to ObamaCare Print
By Ashton Ellis
Thursday, August 29 2013
The key to Republicans winning the argument for repealing ObamaCare is having a workable, sustainable alternative to replace it with.

One of the reasons Republicans have had such a difficult time uniting around a single alternative to ObamaCare is that many of their reform proposals lack the comprehensiveness necessary to fully replace the controversial health law.

Consider these highlights from a litany written up by GOP strategist Karl Rove.

Tort reform advocates want to cap medical malpractice awards in order to remove a doctor’s incentive to order unnecessary tests and treatments as a shield against liability.

Free-market types want to pass federal legislation to allow health insurance companies to compete across state lines so that larger risk pools will lower prices.

Others want to increase the use and value of health-savings accounts to let families put more tax-free money back for medical expenses.

These and other ideas are worthy of being considered as the GOP deliberates on how to enhance what works in the health industry while improving what doesn’t.

But as good as those proposals are on their own merits, none of them alone meets and beats ObamaCare on its two most popular points: elimination of preexisting conditions as a barrier to affordable insurance, and the sizeable expansion of coverage to the uninsured.

In order to gain the political consensus necessary to replace ObamaCare, the public should be convinced that there is a better alternative.

This alternative would need to acknowledge the worthwhile elements of ObamaCare while showing how a series of market-based reforms would deliver the same benefits at less cost to taxpayers.

It would also be wise to put these market-based reforms in the broader context of the public good.

All this is precisely what James C. Capretta has done in a series of proposals developed over the last two years.

Capretta, a Senior Fellow with the Ethics and Public Policy Center and a Visiting Fellow at the American Enterprise Institute, proposes a new framework for regulating and paying for health insurance that is decentralized and market-driven.

At the heart of his proposal is the idea that health insurance is a personal and public good. Health insurance is a personal good because it protects an individual’s medical problems from causing a financial catastrophe. And it is a public good because it eliminates the free-rider problem of an uninsured person relying on emergency room care, but then leaving the bill for others.

It is therefore in the public interest to make sure as many people as possible carry health insurance.

But where ObamaCare achieves greater insurance coverage through a blizzard of mandates and penalties, Capretta creates an incentive: “Persons who stay in continuous insurance coverage status would be granted new protection regarding their insurance premiums. Specifically, these persons could move between insurance platforms (employer, individually-owned, public) without the fear of facing risk-rated premium increases.”

Moreover, this protection extends to preexisting conditions, meaning that so long as a person has at least catastrophic coverage she will not be subject to denial or costlier coverage simply for changing jobs.

For those not covered by an employer, Capretta’s plan creates a tax credit for buying private insurance. Initial amounts would be $5,000 for family coverage and $2,500 for individual coverage, each indexed to grow with inflation.

Using a tax credit instead of a subsidy is instructive. Subsidies – like the ones used to help enrollees pay for high-priced health insurance on an ObamaCare exchange – represent a form of public spending, and thus require more taxes to fund. (Some economists argue that tax credits are a form of subsidy, but that implicitly assumes that all money is the government’s such that it spends its money by letting you keep yours.)

Tax credits, on the other hand, are used to reduce a person’s tax liability because the money spent is seen as the kind of investment the government wants to encourage. In this case, purchasing health insurance reduces the free-rider problem, and with it the overall expense to taxpayers. Rewarding such a purchase with a tax credit acknowledges that reduction in spending by reducing a person’s tax liability.

Capretta’s proposal also does not overrun the states with federal policy demands. Instead, it requires only that “insurance plans eligible to be purchased with federal tax credits must have catastrophic insurance protection for enrollees (an out of pocket limit); otherwise, benefit design will be entirely up to insurers within the boundaries of state regulation.”

Thus states retain the power to make their decisions regarding the bulk of insurance regulation.

Medicaid would be reformed as a block grant to states to spend as a supplement to the tax credit, allowing poor families to buy insurance. The program’s formula would be adjusted to making federal spending on the tax credits and the supplements equal to current, pre-ObamaCare amounts.

Other components include putting non-enrollees into default insurance plans determined by each state so that everyone at least starts with coverage. (An opt-out provision is available.) Tax-free employer-based insurance would be capped to encourage spending discipline. Cost-cutting measures to Medicare – perhaps those envisioned by Representative Paul Ryan – would further drive down spending.

The key to Republicans winning the argument for repealing ObamaCare is having a workable, sustainable alternative to replace it with. James C. Capretta’s proposal lays out the foundations for one. Now some enterprising Republican in Congress needs to inject it into the legislative process.

Quiz Question   
What was the last year in which gold was used as the basis for valuing the U.S. dollar?
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Notable Quote   
"My colleague Casey Mulligan of the University of Chicago and I predicted in the Wall Street Journal three months ago that the $300 per week extra unemployment benefits would mean 5 to 6 million people not going back to work because the government was paying them more not to work. The Left laughed at this prediction. Now, we see record jobs going unfilled, 8.1 million, even when there are 9 million…[more]
—Stephen Moore, Co-Founder of the Committee to Unleash Prosperity and Former Member of President Trump’s Economic Recovery Task Force
— Stephen Moore, Co-Founder of the Committee to Unleash Prosperity and Former Member of President Trump’s Economic Recovery Task Force
Liberty Poll   

Which one of the following do you view as the greatest threat to the U.S. economy as we recover from the coronavirus disruption?