Republicans’ Obamacare replacement legislation tries to do two things at once but fails at both. In forlorn hope of placating Democrats and liberal activists, the proposed bill retains a big federal role in healthcare. By doing so, it sacrifices the lower prices and improved choices real market-based reforms could deliver.
These half-measures need to be scrapped and in their place should be a bold reform reflecting the principles conservatives profess.
The legislation from which the wraps were pulled off on Monday achieves almost the worst of both worlds. It has too much government jury rigging to yield the fruits of free-market reforms, but nonetheless triggered furious attacks from left-wingers, who accuse Republicans of sacrificing the lives of the poor to pay for tax cuts for the rich.
“Late last night, House Republicans released their official, TERRIFYING bill to repeal Obamacare,” Democrats wrote in an email Tuesday. All day similar attacks came in from liberal groups, newspaper editorial boards and Democratic members of Congress.
Republicans are going to keep taking it on the chin either way, so by far their best bet is to produce a bill that will actually work, by getting government out of healthcare as much as possible and simplifying all safety-net provisions.
The new GOP bill has some positive provisions. It vastly expands Health Savings Accounts, for example, which are an essential vehicle for a future market-based insurance system to which conservatives can subscribe. It funds state high-risk pools so the costs of newly insuring those with pre-existing conditions will not all fall, by the arbitrary choice of policymakers, upon the mere 9 percent of Americans who buy insurance in the individual market.
Perhaps most importantly, the bill reforms Medicaid, with significant cost savings, in a way conservatives have wanted for many years. Beyond just phasing out that low-income healthcare program’s expansion, albeit on an extended timeline, this bill sets new limits on federal contributions while giving states more control.
But, probably in an effort to lessen the political costs, the bill stops short of really repealing Obamacare. Most glaringly, it accepts a new entitlement that didn’t exist three years ago, merely adapting it into a new refundable tax credit for everyone buying insurance on the individual market.
The bill also keeps the federal role in setting insurance industry prices, imposing age-based price controls on insurers, although these are, admittedly, better than the ones in Obamacare.
Third, it imposes a surcharge on those who go without insurance when they try to enroll. This is not exactly the same as the individual mandate, but the resemblance is obvious. One main difference is that the penalty, instead of being folded into federal taxes, is now paid to insurance companies.
The bill keeps all of the regulations on insurance plans that drive up prices by forcing people to buy more coverage than they want.
It also omits some of the more ambitious reforms that could have been accomplished. For example, it fails to end the preferential tax treatment of employer-based health insurance, a long-term goal that underpins a free market in health insurance. Enabling insurance purchases across state lines is another free-market reform not included.
Free-market reforms could bring better competition to the insurance industry and price transparency in the provision of healthcare, driving down costs and increasing quality. The Republican bill keeps in place too much government meddling, and so it won’t unleash market forces.
Instead of reforming a system, this bill would simply check a box. It is a bill intended to fulfill, on paper, the campaign promise of repealing and replacing Obamacare.
But because it is bad policy, it is also bad politics. It won’t improve much in the sector, and it will lead voters to blame Republicans instead of Democrats for all the costs and confusion of the healthcare system.
The prudent course, instead, is to pass a reform that gets government out of the average person’s insurance and healthcare, and consigns Uncle Sam’s role to basic regulatory guardrails and a safety net. Half a reform will garner all the condemnation of full reform, but will be scorned as the Potemkin reform that it is.
