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A Big Step Toward Repealing and Replacing Obamacare

Jeff Anderson on the House GOP health care plan

 Speaker of the House Paul Ryan, R-Wis., and fellow Republicans at a signing ceremony for the 'Restoring Americans Healthcare Freedom Reconciliation Act of 2015' at the U.S. Capitol in Washington, Thursday, Jan. 7, 2016. (Al Drago/CQ Roll Call)
Speaker of the House Paul Ryan, R-Wis., and fellow Republicans at a signing ceremony for the 'Restoring Americans Healthcare Freedom Reconciliation Act of 2015' at the U.S. Capitol in Washington, Thursday, Jan. 7, 2016. (Al Drago/CQ Roll Call)

For six years, it has been abundantly clear that Americans want Obamacare to be repealed—but only if a well-conceived conservative alternative is positioned to take its place. That's why the recent release of the House GOP health care plan is a big deal. The new plan would of course repeal Obamacare. But it would also fix what the federal government had already broken even before the law was passed and made things so much worse.

The proposal pairs an Obamacare alternative with Medicaid reforms and the crucial Medicare reforms (amounting to a kind of "Medicare Advantage Plus") that Speaker Paul Ryan and House Republicans have long championed. As Ryan put it after the proposal's release, "The way I see it, if we don't like the direction the country is going in—and we do not—then we have an obligation to offer an alternative….And that's what this is." He called the plan not merely "a difference is policy" but "a difference in philosophy."

Like the Obamacare alternatives advanced by the 2017 Project, the Hudson Institute, Ed Gillespie, Tom Price, and Scott Walker, the House GOP plan would finally fix the tax inequality in health care—which favors job-based insurance over individually purchased insurance—by offering a simple, refundable, non-income-based tax credit to those who buy health insurance on their own. (Those who don't use their whole tax credit could put their savings in a health saving account.) Why should someone who has to buy health insurance on his own not get a tax break while his next-door-neighbor, who has job-based insurance, gets a tax break? Fixing this longstanding tax inequity, combined with repealing Obamacare, would allow the individual market—finally—to begin flourishing.

Meanwhile, the GOP plan wisely wouldn't touch the tax treatment of the typical American's job-based insurance—that wouldn't change one iota. At the same time, however, the proposal would close the tax loophole on high-end insurance—which says the more you spend (on insurance), the more you save (in taxes)—without resorting to a new, clunky, punitive tax like Obamacare does with its "Cadillac tax." The GOP proposal would merely cap the existing tax exclusion for job-based insurance, at a level well above the cost of the typical American's insurance plan, and let people get the whole tax break up to that amount.

Given that the CBO says that Obamacare has increased the number of people with private insurance by a mere 8 million (or 2.5 percent of the population), which is probably a generous estimate, it's hard to believe that the GOP plan wouldn't result in roughly as many (and perhaps far more) people having private insurance as under Obamacare—without compelling them to buy it. Indeed, as John Merline at Investor's Business Daily highlights, based on numbers from the Obama administration's own Department of Health and Human Services, a lower percentage of Americans below the age of 65 have private health insurance under Obamacare (65.6 percent in 2015) than had it a decade earlier (68.4 percent in 2005)—see the table on page A3—or in 2007 (66.8 percent), the year before Obama's election.

The Republican proposal would also provide needed protections for preexisting conditions without undermining the whole idea of insurance. Obamacare forces all insurers from coast-to-coast to cover people, at no additional cost, who wait until they are already sick or injured to buy "insurance." This is akin to having the federal government require all homeowners insurers from coast-to-coast to cover any house, at no additional cost, that is already on fire. Think prices would rise?

Under the House GOP plan, anyone could buy health insurance during a limited, one-time open-enrollment period without having to pay more for a preexisting condition. After that, no one who has been previously covered could be charged more for a preexisting condition if they were to switch insurance plans, even if they were to have a short break between plans. Similarly, no one could be dropped, or not be renewed, by their insurer on the basis of a preexisting condition. In other words, commonsense protections would be applied in a way that doesn't send premiums soaring and ruin the health insurance market.

Indeed, in at least seven major ways, the House GOP health-care plan would make everyday Americans' lives a lot better than they are under Obamacare:

1. It would dramatically lower health-care premiums. Obamacare drives up premiums though its inept and arrogant way of addressing preexisting conditions, and by mandating coverage of things that people don't want. The GOP plan would drive down premiums by repealing Obamacare, putting people in control of their own health-care dollars, and letting them shop for value.

__2. It would restore liberty while stopping Obamacare's consolidation and centralization of power and money.__ Private American citizens would no longer be compelled (for the first time in all of United States history) to buy a product or service of the federal government's choosing. The flow, like a river, of money and power to Washington, D.C., would be reversed.

3. It would lower Americans' tax burdens. In addition to raising taxes, Obamacare raises spending—by about $2 trillion over a decade, per the CBO—at a time when the U.S. government is already almost $20 trillion in debt. The GOP plan would cut taxes even versus the pre-Obamacare status quo while saving hundreds of billions of dollars (and hopefully a trillion dollars or more) in spending versus Obamacare.

4. It would re-attract needed talent to the medical profession and thus improve the quality of care. Who, other than the truly committed few, would want to become a doctor under Obamacare's regime of bureaucratic control over "health-care providers"? (Obamacare, which effectively bans the building or expanding of doctor-owned hospitals, doesn't like to call such individuals "doctors.")

5. It would stop Obamacare from being a vehicle for executive lawlessness. At practically every turn, the Obama administration has tweaked, altered, and even funded parts of Obamacare without congressional involvement. Three major casualties of Obamacare have been the rule of law, the separation of powers, and the Constitution.

6. It would stop Obamacare's taxpayer funding of abortion. As the write-up for the GOP plan notes (citing the nonpartisan Government Accountability Office), insurance "plans that cover abortion are receiving federal taxpayer dollars under Obamacare." Indeed, "California now requires all health insurance plans to cover abortion services." Under the GOP plan, federal taxpayer dollars wouldn't be allowed to fund abortions.

__7. Even beyond these six ways, it would also lead to most Americans faring much better than under Obamacare.__ The exact dollar amounts of the GOP's non-income-tested tax credits aren't provided, but if they were to be the same as those called for by the 2017 Project, the Hudson Institute, Gillespie, Price, and Walker, most Americans of various incomes, ages, and family sizes would fare much better than under Obamacare. For example, the typical 36-year-old woman who makes $36,000 and buys her own insurance gets $0 under Obamacare, whereas she'd likely get something on the order of a $2,100 tax credit under the GOP plan (See the chart on page 9 of An Alternative to Obamacare for more detail on this point.) This overdue tax cut would be like $2,100 in her pocket.

To be sure, there are weaknesses in the GOP plan. Most notably, in calling for "advanceable" tax credits, paid out on the first of each month, it appears that Republicans want to follow Obamacare's lead in falsely labeling direct outlays to insurance companies "tax credits," even though such outlays don't actually cut anyone's taxes. As a recent WEEKLY STANDARD editorial highlights, and as this graphic depicts, this is Obamacare's novel way of hiding federal spending (some $104 billion worth of it over a decade, per the CBO) as "tax cuts," and Republicans shouldn't follow suit. It is possible to have advanceable tax credits function as genuine tax credits—here's how—but there's no indication that this is what Republicans have in mind. If Republicans want to send direct outlays to insurers, they should openly admit that such outlays are spending, not falsely label them as tax credits/cuts.

Beyond this, it's not clear whether the GOP plan envisions having Americans set up their own health savings accounts, or paternalistically having the federal government do so for them.

But these are easy fixes. Otherwise, the House GOP health-care plan looks like what Americans have been waiting for ever since they gave the Republicans control of the House in response to the Democrats' public-opinion-defying passage of Obamacare—that is, it looks like a plan that can (and should) lead to Obamacare's repeal.

Of course, that will require having a president who will sign such repeal-and-replacement legislation into law.