President Obama has sent a letter to his White House mailing list that warns against “an avalanche of misinformation and scare tactics from those seeking to perpetuate the status quo.”

I am not one of those people. I can’t stand the health policy status quo, and I think there is a better way to reform our health care system than the plans now moving through Congress.

I have written extensively about both what is wrong with the status quo, and with my concerns about the legislation supported by our President. I will continue to try to contribute verifiable information and analysis to raise the level of policy debate.

To demonstrate that I do not favor the status quo, here is version 2 of my desired health care reform. I’m adding a little more detail from v1, but want to keep this description high-level so we don’t get bogged down in second-order details. Without further ado, here is

Keith Hennessey’s health care reform plan (v2)


  1. Repeal the current law tax exclusion for employer provided health insurance, and replace it with a $7,500 (single) / $15K (family) flat deduction for buying health insurance.
    • The deduction is independent of the premium cost. If you buy a $5,000 individual policy, you get a $7,500 deduction. If you buy a $10,000 individual policy, you get the same $7,500 deduction.
    • The overwhelming majority of premiums fall under these threshholds, so 100m+ people would pay lower taxes.
    • The minority with premiums above these thresholds would pay higher taxes.
    • In total the government does not collect more revenue, although the tax burden shifts to those with high-cost policies.
    • Index the thresholds to inflation (CPI). This bites more tightly over time. I’d funnel the long-term increased revenues into some broad-based tax relief to stay revenue-neutral over time.
  2. Allow the purchase of health insurance sold anywhere in the U.S.
    • This would force States to compete for the right regulatory balance of consumer protection and premium cost.
    • Rep. John Shadegg has a bill that does this.
  3. Make health insurance portable
    • This requires relatively small tweaks to law, but insurers would need to develop new portable insurance plans that you could take with you from one job to the next. The policy change is easy. Getting employers and insurers to change their long-standing business models is hard.
  4. Expand Health Savings Accounts
    • Allow higher contribution limits, and allow financially equivalent coinsurance structures driven by market demand. Continue to mandate an initial deductible and catastrophic protection. No benefit-specific exemptions as advocated by some.
  5. Aggressively reform medical liability
    • aka “medical tort reform.” Details TBD.
  6. Aggressively slow Medicare and Medicaid spending growth, and use the savings for long-term deficit reduction
    • Details TBD.
    • Assume that my package would be significantly more aggressive (“deeper cuts,” in the language of opponents) than anything being discussed in Congress today.


  1. Raise taxes
  2. Create a new government health entitlement
  3. Mandate the purchase of health insurance
  4. Mandate that employers provide health insurance to their employees
  5. Have government set private premiums
  6. Create a government-run health plan option
  7. Have the government mandate benefits
  8. Expand Medicaid


  • Lower premiums, higher wages
  • Portable health insurance reduces “job lock”
  • +5 million insured (net)
  • 100 million people will pay lower taxes
  • 30m with expensive health plans pay higher taxes
  • No net tax increase overall
  • Reduces short-term and long-term deficit
  • Fair to small business employees & self-employed
  • Incentives and individual decisions “bend the cost curve down”
  • More individual control & responsibility for medical decisions