Eight Priorities for Any Republican Plan to Replace Obamacare

By Pascal-Emmanuel Gobry
Wednesday, December 14, 2016

For nearly seven years now, Republican officials have vowed to “repeal and replace” Obamacare. And for nearly seven years now, they have promised that just as soon as there is a Republican majority in Congress they will pass a repeal-and-replace bill, and just as soon as there is a Republican president to sign the bill, they will repeal and replace Obamacare. Stop me if you’ve never heard the words “repeal and replace Obamacare,” please.

And now, of course, the Republican party is being its predictable self. There is a Republican Congress, and there is a Republican president-elect. So of course Republican office-holders are . . . hemming and hawing and shuffling and looking at the tips of their shoes. Some people are talking about “partial repeal” plans, or about “transition” plans that would leave Obamacare mostly intact until some later date when Congress will finally replace it, you know, right after it gets around to balancing the budget and paying down the debt.

This is nonsense, and conservatives shouldn’t let it happen. That being said, in all the mountain of political cowardice, there is a grain of comprehensibility to this sudden GOP pusillanimity. And it’s the following: For understandable political reasons, Republicans and conservatives have been so invested in the idea of repealing Obamacare that they haven’t had a real debate about what replacement should look like and how, exactly, to deal with the mess that Obamacare has left.

Here are the priorities an Obamacare replace plan should have:

1. It should get 60 votes in the Senate. This is the way the system works, and when in opposition, conservatives talk a good game about the importance of the filibuster in moderating democratic impulses and of the importance of constitutional and political norms. Republicans have a majority in the Senate, but it’s a narrow majority. A good Obamacare repeal-and-replace plan is a plan that can get passed.

2. It should repeal and replace in one go. None of this “put off the hard choices to never-never” stuff. Come on. This is Washington. If it doesn’t get done in the first 100 days of this administration, it will never get done.

3. Cover at least as many people as Obamacare. This is one of the few topics on which there has been debate among conservatives. Some conservatives, particularly those of a libertarian bent, argue even against the principle that an Obamacare replace plan should try to expand coverage, beyond eliminating regulations that restrict it. While I respect those who hold this view, I have to say that I strongly disagree with them, for a number of reasons. The first is my point (1) above. The second is political reality more generally. A replace plan that causes millions of people to lose coverage is an electoral killer for Republicans — and, frankly, for good reason. People, especially lower-middle-class and economically insecure people, feel that the government doesn’t have their interests at heart, and nothing would convince them more of this than an “I got mine” health-care plan from the GOP. Because let’s face it, under whatever plan the GOP comes up with, people who work in professional politics will still have health-care coverage. And finally, yes, there is a moral point. I’m a conservative not because I believe that helping those less fortunate isn’t important; I’m a conservative because I believe that helping those less fortunate is extremely important — so important that we can’t leave it up to discredited big-government solutions. America is the richest country in the history of the world, and it can afford to ensure that everyone has coverage. The question is how to do it without a government takeover that would make everyone worse off.

4. Don’t leave poor people out in the cold. This should be easy, because this is what Obamacare does. Obamacare expands coverage among low earners by expanding Medicaid, a failed government program that has been shown in all randomized field trials, the evidentiary gold standard in social science, to be just as bad for health outcomes as having no insurance at all. The poor deserve better — they deserve conservative solutions.

5. Fight provider cartels. One of the most pernicious effects of Obamacare has been, by expanding centralized control over health care, to encourage the formation of health-care provider cartels. Since Obamacare has passed, hospitals and hospital chains have been merging in order to keep up with government regulations. These mega providers are able to survive the onslaught of regulation and the associated rising costs, while smaller providers are driven out of business. This is a prime example of crony capitalism, and a key driver of increases in health-care costs, without a doubt the most underrated one. Conservatives can and should oppose crony-capitalist cartels.

6. Enable technology-driven innovation. Misguided regulations are holding back health-care innovation. This is a big driver of cost increases, but worse, it’s also in some cases literally costing lives. Innovation held back means diseases undiagnosed and untreated. With information technology and artificial intelligence, it’s possible to get an app that would do most of what most doctor visits will do. But is it legal?

7. Nudge people away from employer-provided insurance. The major driver of cost increases in the American health-care system, the thing about it that everyone hates, is also the thing about it that everyone loves: employer-provided insurance. Reforming the American health-care system — one way or another — has been political murder, because health insurance plans are like Congressmen: While people hate them in general, they tend to like the one they have, and they will fight to death to keep it. The problem is that providing health care through employers is a major distortion to the market, shielding insurers and providers from consumers, price transparency, the disciplining effects of competition, and the innovations that markets promote. Since it’s politically impossible to simply get rid of employer-provided insurance with a stroke of a pen, a good plan should still try to nudge us away from that system in the least disruptive way possible.

8. Put decisions in patients’ hands. I saved the most important for last. This is the single most important thing about American health care, and health care generally. It’s a Hayekian point. Markets and competition foster low prices and innovation not through magic but because by decentralizing decision-making, they enable those with the most information to make the most decisions, leading to discovery of prices and new innovations. The reason why the American health-care system is so dysfunctional is because it works extremely hard to take decisions away from patients and to put them in the hands of middlemen, whether the government, licensure-protected doctors, or crony-capitalist insurers and hospital chains. Just imagine what cars would look like if the way people bought them was to get a job so that their company would get a tax break for letting you rent a car. Major companies, not consumers, would decide what the cars should look like and how much they cost. All American cars would look like something out of the Soviet Union and cost a million dollars each. (If you wanted to get a good Japanese or German car, you’d have to fly over there and bring it back. And online comparison shopping would be illegal.) If you wanted to fill up the tank, you wouldn’t go to a gas station, you’d have to buy “car insurance,” which wouldn’t just cover crashes, but fill-ups. This means that to fill ’er up you’d have to make an appointment weeks in advance and fill out a dozen forms in triplicate. The oil company would negotiate prices with the insurance company. For a tank full of gas, you’d get a bill for $11,047.32, even though you’d only be charged $5, and the price on the bill would be the sticker price anyway, not the actual price negotiated between your insurer and the oil company (but even that price would be nowhere near a real market price). You get the idea. This is the major problem we face in health care. This is why conservatives have promoted health savings accounts for decades as a way to empower patients in making health-care decisions.

As far as I can tell, the plan that gets closest to those objectives is the one put out by the Foundation for Research on Equal Opportunity (FREOPP). FREOPP was founded by Avik Roy, who was a health-care adviser to Mitt Romney’s 2012 presidential campaign, as well as to Marco Rubio and Rick Perry. The FREOPP plan creates a universal tax credit, which is deposited in a health savings account, enabling anyone to buy health care, including those people currently enrolled in Obamacare’s Medicaid expansion. It gets rid of most of the most-onerous regulations holding back innovation (and dramatically expanding the cost of health care under Obamacare). It repeals Obamacare’s “Cadillac Tax” on health-care plans and replaces the employer-coverage tax break with a capped standard deduction. And it covers more people than Obamacare. It looks pretty close to a perfect Obamacare replacement. But if not this plan, then another plan that embodies those same priorities is the one conservatives should get behind.