How to Repeal Obamacare

National Review Online

Friday, January 06, 2017

On health care, congressional Republicans should listen to Donald Trump. The president-elect may not be chock-full of ideas about health-care policy, but he has the right political instincts. He has said that Obamacare should be replaced, that its beneficiaries should not simply be stripped of coverage, and that people with pre-existing conditions should be protected. It is possible and desirable to devise legislation that meets these objectives. Trump has also warned congressional Republicans to be careful — and he is right about that, too, because their current course does not look likely to accomplish the repeal of Obamacare or its replacement by something better.

Senate Republicans want to pass a bill that repeals the taxes and spending in Obamacare, but not its regulations. That’s because they think that they can use a legislative process to avoid Democratic filibusters only if they leave the regulations alone. They think that this partial repeal of Obamacare will set the stage for later legislation that repeals the rest of the law and creates a replacement.

This seems highly unlikely. Leaving Obamacare’s regulations in place while getting rid of its individual mandate — a tax measure, which Republicans would eliminate in their first bill — would further destabilize health-insurance markets. No one would cheer the Republicans for producing that outcome: not conservatives, who would know that Republican boasts of having repealed the law were false; not the many voters of all kinds who would see their insurance disappear or grow still more expensive; not the Democrats, who would be happy to blame Republicans for this mistake and everything else that goes wrong with health care afterward.

A better course would begin with the recognition that Obamacare’s regulations are the heart of what is wrong with it. The federal government had been subsidizing the purchase of health insurance for scores of millions of people for decades before Obamacare came along, in ways that created some serious problems. But it was not until Obamacare that the federal government became the chief regulator of health insurance. President Obama and his allies believed that the solution to the problems with health insurance — the large number of people who lacked it, its rising price — was to impose rationality on it from Washington, D.C. It is these regulations that are responsible for most of the complaints about Obamacare: the plans that have had to be discontinued, the rising premiums, the difficulty insurers have had in making a viable business on the exchanges.

Obamacare also creates tax credits that people who don’t have health insurance from their employers can use to buy coverage. There is nothing wrong in principle with allowing people who get coverage themselves to have tax breaks equivalent to the ones that benefit people who have employer coverage: Conservatives have argued for that approach for years. But Obamacare’s credits are complicated, are structured in a way that discourages work, and can be used only for the purchase of insurance policies that comply with Obamacare’s regulations.

The core of a conservative replacement of Obamacare — a replacement that is simultaneously a repeal — would be the end of the federal government’s role as chief regulator of health insurance and the restoration of the states to that position. Simplify the tax credits, pare them back if possible, and allow them to be used for any insurance policy that meets these two conditions: The policy meets the approval of state regulators, and people who maintain coverage can continue to buy such coverage at the same price if they get sick. People would have much more freedom to buy the coverage that meets their specifications rather than those of Washington regulators; they would have the means to buy basic coverage; and they would have the incentive to do it as well (since maintaining coverage would protect them in the event they got sick).

The mandate to buy insurance — a mandate that came into existence in order to counter the side effects of Obamacare’s onerous regulations — should simultaneously be abolished. And most people on Medicaid should be given the option to cash out their benefits and buy insurance on the regular, private market.

Too many congressional Republicans think that conservatives will take a quick but phony win on health care. We disagree. A real win is worth the time and effort.