Learning from Reagan on Healthcare

Henry Olsen’s brilliant, revisionist intellectual biography of Ronald Reagan should transform how we think of our fortieth president. Reagan was less of a small-government radical than ideologues of either the left or the right would prefer to remember. He believed that people who work hard should have a modicum of security, and that lower taxes on the rich should not always be the highest priority. As conservatives and Republicans continue to stumble on the healthcare issue, we should take a few moments to learn from Reagan’s virtues—and his failures.

Olsen argues that Reagan “cared more about saving lives than saving money” and supported government help to people who could not pay for their own care (provided that those people were genuinely in need and were contributing to society to the best of their ability). Reagan’s partisan critics like to point out that Reagan had opposed Medicare. Olsen reminds us that Reagan supported the Kerr-Mills Act, which would have helped fund a series of state-level programs to assist the indigent elderly with their healthcare expenses.

That brings us to the limitations of using Reagan in the healthcare debate. It is true that Reagan supported an alternative to Medicare. It is also true that he lost and stayed beaten on that issue. It is arguable that changes in Medicare’s centralized, bureaucratic healthcare system helped spur inflation in health care costs that have been impinging on worker take-home pay for the last thirty years. Those changes happened during Reagan’s presidency. There is a reason why conservatives prefer to remember Reagan’s political fights over cutting taxes and strengthening the military. He mostly won those fights.

But we also shouldn’t put too much blame on Reagan. He was rather busy helping to defeat inflation, revive the American economy, and win the Cold War. You can’t win them all, and as the late (and dearly missed) political scientist Peter Lawler liked to say, things are always simultaneously getting better and worse. All things considered, Reagan did very well with the time he was given. Now it is up to us to make the most of our time.

We could start with Reagan’s support for what Olsen calls “programs that actually helped people who truly needed help to live decent, dignified lives.” Reagan supported Social Security and didn’t mind welfare, except for its tendency to create perverse incentives. We should apply his principles to healthcare policy.

We should start with the premise that able-bodied people who work hard should have access to health insurance without the risk of ruinous expenses in the case of an emergency or a severe disease. Most Americans are happy with the quality (if not always the cost) of their employer-provided health insurance plans, and any attempt to unwind this system will likely prove economically ruinous.

Within those constraints, we should also have a supplement for working-age adults (and their children) who are either outside the employer-provided system or who fear that they are one layoff away from losing their access to insurance.

This would require high-risk pools for people who are uninsurable due to preexisting conditions. It should also involve a refundable (meaning it might be larger than your tax liability) tax credit toward insurance for catastrophic healthcare expenses for those without employer-provided plans.

For years, conservatives have loved to talk about health savings accounts. These are tax-advantaged accounts where people put money aside to pay for their routine health care expenses. If they shop around a little, and are more careful in their use of medical care, they might save some money and have lower premiums.

HSAs might eventually be useful in transforming the health care market. If they are coupled with regulations that force medical providers to be open about their pricing and allow new medical providers to enter the market (as along as they meet quality standards), the creation of a vast new class of healthcare consumers could help slow medical inflation and increase the wages of workers.

The problem is that, as Ross Douthat has pointed out, these consumer-oriented health insurance plans are going to cost money. The working poor and lower-middle class don’t just have thousands of dollars lying around to put into HSAs. In practice, the price of market reforms of health care will include somewhat more spending on the the working-poor and those just above.

The bigger problem is that the current Republican Party doesn’t want to do this. The congressional Republicans seem determined to produce a plan for health insurance in which as few as possible are covered for as little as possible, so that there will be the most possible room for a tax cut for the wealthy.

This is short-sighted—even for the wealthy. The Democrats are slowly moving to the left on size-of-government issues. If Republicans insist on making sure that the tax burden on the affluent stays at the levels of the George W. Bush presidency, then we are eventually going to get single-payer, centrally rationed health care. The highest earners will be lucky to escape with effective tax rates in the 60s, and the rest of us will be enjoy a shiny new value-added tax on everything we buy. The choice is between market reforms and slightly higher taxes, or democratic socialism and much higher taxes. It shouldn’t be a hard choice, but conventional Republicans seemed determined to get it wrong.

Henry Olsen likes to talk about the “truckers and cashiers” test. How does a proposed policy sound to these usually non-college-educated wage-earners? Ronald Reagan’s rhetoric usually passed this test. Since Reagan, most Republicans running for president have failed it. Democrats have won the popular vote in six of the last seven presidential elections.

I would also add what I would call the “roofers and kitchen workers” test. These folks work long hours at difficult jobs, but they might work for several employers over the course of the year. How would conservative economic plans affect them? If they work hard, do they have a decent assurance of health insurance and the money to raise their children?

How conservatives answer that question will go a long way in determining whether the heirs of Ronald Reagan or the heirs of Barack Obama shape America in the coming decades.

Pete Spiliakos is a columnist for First Things.

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