A Disappointing Start

National Review Online

Tuesday, March 07, 2017

We believe that Obamacare should be repealed and replaced with policies that enable Americans to make their own decisions about what sort of health insurance to buy, and that their options should include low-premium coverage that protects them against the risk of major financial setbacks resulting from health care. The legislation released last night by House Republicans is, even on the most charitable reading, only a first step toward that goal.

It does not repeal all of Obamacare, leaving many of its regulations in place. The apparent rationale for this omission is that eliminating the regulations would subject the legislation to a fatal Senate filibuster. We have recommended that Republicans defang the regulations by replacing Obamacare’s subsidies with a simple new tax credit that people could use to buy insurance governed by a new, lighter regulatory regime. That way Obamacare’s regulations would stay on the books but no longer hinder consumer choice. But Republicans shrank from this option, too.

We disagree with this tactical decision, which places Senate parliamentary rules — or, rather, places guesses about how those rules would operate — ahead of good health policy and making good on longstanding party promises. It also seems to us that Republicans would be better off rallying behind a bill in which they really believe, even if Democrats kill it with a filibuster, than trying and failing to enact a bill that they support only tepidly. That second outcome may now take place.

Moreover, the legislation has some serious flaws even as a first step toward full repeal and replacement. It eliminates Obamacare’s fines on people who go without insurance, but in their place creates a new surcharge for people who let their insurance lapse and then try to purchase a new policy. The goal is to keep healthy people from leaving the insurance rolls and thus destabilizing insurance markets.

The surcharge is a heavy-handed instrument: Insurers would be obligated to impose it regardless of their preferences. Yet the surcharge might not achieve its goal. A lot of healthy people might well decide to go without insurance and run the risk of paying a surcharge if they get sick later. The surcharge even undermines its own goal, since it would discourage healthy people who had already left the insurance rolls from getting back on them.

The bill has its good points. If the surcharge works, the deregulation in the bill would lower premiums. Many of Obamacare’s taxes would be repealed. Obamacare’s tax credits create high effective marginal tax rates for people in the lower middle class; the bill’s replacement tax credits would avoid this problem. Permissible contributions to and limits on health savings accounts would be loosened. Federal contributions to Medicaid would be capped, ending the perverse incentives that have for decades enabled the growth of the program.

All in all, though, the bill is a disappointment. And it is not too late to get a second opinion.