The GOP Healthcare Plan – “Race To The Bottom”

Publius writing at the blog The Fourth Branch has an excellent post describing the differences between the Republican and Democratic visions for health care reform. Publius is right, the GOP plan is more than a return to the old status quo, it’s a race to the bottom.

The Republican alternative, as articulated by Republican leaders over the past two years, consists heavily of two components: 1) allow consumers to purchase health insurance across state lines; and 2) implement tort reform. There’s more to it than that, obviously, but speaking in broad strokes those are the high points on which most all Republican leaders agree.

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Take credit cards, for example. In theory, Americans can obtain a credit card from any state in the nation. There is no restriction on consumer choice and all credit cards are free to compete against each other across state lines. In practice, the major credit card companies exist in only a handful of states, and they are always the states which provide limited or no consumer protections in key areas. Many states have adopted usury laws which limit the amount of interest a company can charge a consumer. A few states have no limitations on interest charges. Care to guess where the major credit card companies are located?

It’s called the “race to the bottom.” In order to attract the business of major companies (and their corresponding tax revenue), many states “compete” with each other to offer the least regulatory intrusion on such companies, often at the expense of consumers. The phenomenon is hardly unique to credit card companies. Delaware imposes the least requirements on corporate governance, and, unsurprisingly, most major corporations are headquartered in Delaware.

This means in actuality that states would compete to see who can offer the cheapest, crappiest health insurance policies. Not only would it mean that the worst of the insurance company abuses would return in practice but insurance policies would be even less comprehensive. As Publius explains the Democratic health care bill imposed standards on what is offered with an insurance plan.

The whole post is worth reading. It explains what the Democrats likely moves would be and details the other part of the Republican plan, toying with the 1% of spending from medical torts. Go read the whole thing!