What would replacing Obamacare look like?

Posted: July 02, 2012

Thursday was the easy part for conservatives — well, except for learning that the chief justice who once talked about calling balls and strikes also has a wicked curveball.

But cranking out the press releases from think tanks, candidates, House and Senate offices, and one presumptive presidential nominee obviously wasn't difficult. And two words shared top billing in almost all of them: Repeal and Replace.

Now comes the hard part, assuming opponents of the Affordable Care Act are ever actually in a position to pull off repeal. Replace Obamacare with what?

Strict constructionists might argue that there's no reason to go beyond repeal, that this is just a matter of getting the government out of the business of health care. But unless they also repeal Medicaid, Medicare, the Department of Veterans Affairs, and a host of other programs, government is in health care to stay. Therefore what needs addressing is the government's business model for health care, which is exacerbating the problems, especially the spiraling costs.

Reforms in the nation's health-care system have been desperately needed for a long time, but conservatives refused to recognize this and act, according to the article "How to Replace Obamacare" in the spring edition of the journal National Affairs.

"If the problems that are today obvious to the public had been addressed by market-oriented policies over the last few decades, there would have been no political opening through which to ram Obamacare," write James C. Capretta and Robert E. Moffit, fellows at, respectively, the American Enterprise Institute and the Heritage Foundation.

To do away with the costly, intrusive, tax-increasing Obamacare, now blessed by the Supreme Court, means dealing with the issues — among them costs, the uninsured, covering preexisting conditions — that inspired the push for reform.

The authors note that scores of plans offer a market-based approach to health care — the only way to control costs and make coverage both affordable and accessible — but they all share seven core "pillars." (I'll give highlights, but read the whole article at www.nationalaffairs.com; look under "archives" for either author's name.)

One, "move American health care away from open-ended government subsidies and tax breaks, and toward a defined-contribution system." Health coverage would come from competing insurance plans, and government would make a fixed contribution toward each person's insurance purchase — tax credits for most taxpayers, and more generous subsidies for those on Medicaid and Medicare. Pick a plan more expensive than the contribution, and you make up the difference. A cheaper one allows you to keep the savings. Though a new health-care tax break would go to individuals, employers would still be able to deduct their coverage costs.

Two, forget the coercive individual mandate. Instead, the government promises that individuals won't face the high premiums associated with costly illness providing they stay enrolled in health insurance. This would require a host of changes to federal law and insurance regulations to fill the current gaps, for example when people move from one job to another, and to ensure coverage for those with preexisting conditions.

Three, recognize the varied demographics and economic conditions in the states and give them leeway in implementing any new programs. Set guidelines, but allow as much flexibility as possible.

Four, move toward individual federal tax credits for health care and away from the current policy that exclusively favors employer-sponsored plans. Current law distorts the market, limits portability, undercuts cost transparency, and discriminates against lower-income workers.

Five, work with states to reform Medicaid so recipients no longer have to refuse jobs for fear of losing health insurance, or be discriminated against by care providers who won't accept Medicaid because reimbursement rates are too low. One option would be to offer subsidies of similar value or better to the credits that taxpayers would receive under a reformed system.

Six, gradually reform fee-for-service Medicare to a premium-support plan, leaving current and near-term recipients with no changes but phasing in a market approach similar to Medicare's prescription-drug program. This would ensure the system outlasts the baby boomers, who will boost Medicare enrollment from about 49 million to more than 80 million by 2030.

Seven, offset new costs — especially the subsidies and tax breaks — with spending cuts elsewhere. Even "replace" won't be cheap.

Any one of these proposals would be a heavy lift for a Congress or president, even if they all got along. But without such pro-market reforms, there is no way to get control of costs or give consumers more health-care choices. Conservatives who are serious about "replace" will recognize this, and be ready to move from press releases to policy changes.

Contact Kevin Ferris at kf@phillynews.com or 215-854-5305.

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