A GOP Vision of Health Reform From a Bush (but Not <I>That</I> Bush)

NEW YORK (TheStreet) -- When the Affordable Care Act passed in 2010, one of the best arguments for it was the lack of any serious Republican alternative.

Instead, we got Sarah Palin claiming Barack Obama's "death panels" could murder Palin's son (who has Down syndrome), and Tea Party members publicly calling Barney Frank, the openly gay congressman from  Massachusetts, a "faggot."

No wonder it's the law.

But what if a health-care obsessed Republican came along who actually knew what he was talking about? Say, a private-sector entrepreneur who has created 3,000 jobs and $5 billion of value building a cloud software company that runs electronic medical records and billing services for 50,000 doctors and other practitioners?

Or if he offered a more-coherent narrative of where the waste in the $3 trillion system actually is rather than blaming poor folks and contraception-seeking females? Or acknowledged that people should have a right to at least catastrophic health coverage and told his party to get over its obsession with malpractice litigation because that's not where the money really is?

In that case, the GOP might actually learn something from Athenahealth (ATHN) CEO Jonathan Bush's new book, Where Does It Hurt? An Entrepreneur's Guide to Fixing Health Care. (Disclosure: Bush's co-author, Steve Baker, worked with me at BusinessWeek until 2006).

Even investors will find some ideas worth thinking about. And it's sprinkled with enough antic stories from Bush -- who resembles his brother Billy, the Access Hollywood host, more than his uncle George H.W., or cousin George W., the presidents -- to make its 212 pages a plausible summer read for wonks.

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The core of the Bush prescription is radically more competition in health care. It's a big idea, that even the bureaucratic mess of health care can be fixed by more choice and deregulation that lets entrepreneurs (many of Bush's examples are also his customers) chop down incumbents who would no longer be protected by regulation and subsidized by Medicare.

And, yes, by asking people to bear more out-of-pocket costs when they use expensive therapies while cutting them in on the savings when they pick cheaper ones. "Profit will drive this process if alternatives are allowed to emerge," he writes.

"This market awakening represents the great hope for rescuing health care in America,'' Bush said. "The winners will innovate. They'll have no choice. And they'll be rewarded with heaping helpings of the fuel that drives markets: profits."

For patients, it means more care in outpatient settings and even drugstore clinics, and much less in hospitals. It also means paying for more services out of pocket, including having expensive benefits like coverage of in vitro fertilization broken out from your primary insurance policy, to make people think harder about whether they really want to spend the money.

The emphasis would be on covering universal catastrophic care and turning you looser, if not exactly loose, for the rest. If paying more for a basic case of strep throat will save you money overall, Bush is happy to have you choose a plan that makes you pay $129 for an urgent-care visit rather than having insurance pay more for a private doctor.

If making you pay much more for a $32,000 procedure that uses proton acceleration to radiate tumors will convince you to use the half-as-expensive therapy that works as well for most prostate cancers, he'd cap Medicare reimbursement at what the cheaper test costs. Or, he'd pay you $7,000 to take the cheaper test by having Medicare split the savings with patients who will do the rational thing, which is illegal now.

The most toxic words in Bush's view of American medicine are, "don't worry, insurance is paying."

"In a true market, this would not happen," he writes. "If you choose hospice care and save your insurer or Medicare $100,000, why shouldn't some of it come back to you?''

The parade of media horribles that could ensue is nearly endless.

Democrats would wail that hundreds of America's 5,000 hospitals would close under Bush's prescription. Everyone remembers the trouble AOL (AOL) Chief Executive Tim Armstrong got into for even suggesting last year that a handful of prematurely born "million-dollar babies" from in vitro fertilization forced him to cut other benefits.

Bush understands -- and accepts -- that his plan would price some couples out of the baby market. And paying the heirs to let Grandpa die sooner will spark a few YouTube-worthy holiday dinner conversations.

Republicans would be irritated by his proposal to have a government-backed financing plan, similar to Fannie Mae (FNMA) or Freddie Mac (FMCC), that would help finance companies pushing new, untested approaches to health insurance and absorb some early losses. Sarah Palin might be offended by Bush's dismissal of her "death panel" argument and his refusal to buy into "tort reform."

But the broad outlines of what Bush wants are similar to the future that former Obama Administration health care guru Ezekiel Emanuel sketched earlier this year in his own book, Reinventing American Health Care. (In a hospital-like cross-subsidy that would make Bush laugh, Amazon.com (AMZN) discounts his book and Emanuel's for customers who buy both.)

Both see a future where price pressures make consumers and employers get smarter. In Emanuel's telling, Obamacare's tax on more-expensive health plans, which takes effect in 2018, will force companies to shop harder for insurance and educate their employees more about their options and financial incentives, pushing them to lower-cost care. In Bush's telling, more-radical deregulation than Emanuel foresees does much the same thing.

Some companies will get hurt in transition while others make fortunes. Hospital utilization will likely fall, pointing to a tricky future for hospital chains like Tenet (THC) and HCA (HCA): They may adjust but with work, because hospitals are the system's highest-cost providers. (Their shares have both beaten the broader market since HCA's 2010 initial public offering).

The emphasis on tools for comparison shopping will help companies like Castlight Health (CSLT) -- Athenahealth was an initial investor and cashed out in Castlight's initial public offering this year -- and may also help UnitedHealth Group (UNH), whose Optum unit is in much the same business.

Naturally, Bush also hopes reform will benefit Athenahealth, already the top-performing electronic medical records stock since 2009.

But true to his libertarian leanings, Bush sees a better reason than money to make the change.

"We need shopping, I believe, not only to fix health care but also -- and I know this may sound strange -- to express our own humanity,'' Bush says. "In my vision, each of us will fashion the health care we want and deserve. We'll express ourselves."

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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