Chait adds, "You can cover poor people by giving them money. And you can cover sick people by requiring insurers to sell plans to people regardless of age or preexisting conditions. Obamacare uses both of these methods. But Republicans…don't want to do either of them."
Chait's statement reflects the liberal conceit that there are really only two choices in this world: Have the government take care of everyone, or do nothing. In truth, there is third way: Fix what the government has broken.
The problems with our health-care system date back 70 years. Before the passage of Obamacare's 2,400 pages of coercive mandates and profligate spending, the federal government had already largely wrecked the market for individually purchased insurance, in three interconnected ways. First, it had effectively established two different health insurance markets—employer-based and individually purchased—by treating them differently in the tax code. Second, it had given an attractive tax break for employer-based insurance while denying it for individually purchased insurance (except for the self-employed). Third, having effectively split the market in two while favoring the employer-based side, it had made it hard for people to move from the employer-based market to the individual market, as it had allowed insurers to treat previously covered conditions as "preexisting."
A popular conservative alternative, then, would repeal every word of Obamacare while fixing this longstanding inequity in the tax code. Indeed, the order is somewhat reversed: With a popular conservative alternative in play—one designed to fix the longstanding inequity in the tax code—Obamacare is ripe for full repeal.
So, what would a popular conservative alternative look like? It would follow these ten guidelines:
One, it would not change the tax treatment of the typical employer-based plan. The notion of changing the tax treatment of the typical American's employer-based plan is an idea without a constituency. A popular conservative alternative would avoid this obvious political pitfall.
Two, it would close the tax loophole in the employer-based market—which says the more you spend (on insurance), the more you save (in taxes). It would do so by capping the employer-based exclusion at something like $20,000 for a family plan and $8,000 for an individual plan. (Those with, say, a $22,000 family plan would still get the full tax break on the first $20,000, just not on the last $2,000.) There's no way to justify an open-ended tax break in the employer-based market without having an open-ended—or any—tax break in the individual market. (At the same time, closing a tax loophole is a very different thing from imposing a new tax, like Obamacare's "Cadillac tax." Under that punitive tax, a janitor with, say, a 10 percent marginal income-tax rate would get hit with the same 40 percent tax on expensive health insurance as the company's CEO.)
Three, it would provide a long-overdue tax break to everyone in the individual market—in the form of a tax credit. A refundable income-tax credit (rather than a deduction) is necessary to pave the way to Obamacare's repeal. Otherwise (to give just one example), a family of five in Milwaukee, with 57-year-old parents and an income of $30,000, would lose more than $20,000 annually in Obamacare subsidies and get nothing in return (because they pay no income tax).
Four, this tax credit would really be a tax credit, not a direct subsidy to insurance companies.Obamacare's direct subsidies to insurance companies are not tax credits—for when the federal government pays money to an insurer on someone's behalf, that doesn't lower anyone's taxes. People should pay their own bills, not have the government pay their bills for them, "single payer"-style. Imagine if instead of having a mortgage interest deduction, the government simply paid (some portion of) people's mortgage payments for them. That's how Obamacare operates. A genuine tax credit, in contrast, would provide a tax cut for most and a tax refund for others.
Five, this tax credit wouldn't be income-tested and hence wouldn't pick winners and losers.Obamacare is all about picking winners and losers, whereas a conservative alternative would focus on fixing the inequity in the tax code for all Americans. The employer-based tax break isn't income-tested, so if an alternative is going to fix the inequity in the tax code, the individual-market tax break cannot be income-tested either. Moreover, income-testing a tax credit is plainly overkill. Because it is a flat amount—and hence is far more valuable to those who are poorer than those who are better-off—a tax credit is already quite progressive, while income-testing it would make it hyper-progressive. Income-testing it would also provide work-disincentives, increase the role of the IRS, needlessly complicate matters, impose marriage penalties, and make it play on Obamacare's turf. In marked contrast, a non-income-tested alternative would give millions of middle-class Americans, including upper-middle-class Americans, the long-overdue tax break they deserve.
Six, this alternative would provide a one-time, $1,000-per-person tax credit to anyone who has, or opens, a health savings account. This would help jump-start the use of HSAs, thereby putting more people in control of their own health-care dollars and encouraging them to shop for value, while making it easier for them to cover the out-of-pocket costs of care.
Seven, it would provide commonsense consumer protections that don't undermine the whole notion of insurance. For example, someone who is insured by an employer and then shifts to individually purchased insurance couldn't be charged more for a condition that he or she had covered under the prior plan. And those who turn 18 and/or move off of their parents' insurance would have a one-time buy-in period during which time they couldn't be charged more for a preexisting condition that may or may not have been covered under their parents' policy. At the same time, people couldn't just wait around until they're sick and then buy "insurance" (except through state-run high-risk pools), any more than someone can wait until his or her house burns down and then buy homeowners insurance to cover the existing damage.
Eight, this alternative would save roughly $1 trillion in federal spending versus Obamacare.Given Obamacare's ten-year gross cost of $1.9 trillion (per the Congressional Budget Office—see table 3), almost all of which is in the form of spending (not tax cuts), this goal should be achievable. Scoring by the nonpartisan Center for Health and Economy (H&E) finds that it would be.
Nine, this alternative would result in roughly the same number of people being covered byprivate health insurance as under Obamacare—without compelling them to buy it. Given that Obamacare has increase the number of people on private health insurance by only 8 million (per the CBO—see table 4), this goal is quite achievable—a claim corroborated by H&E's scoring.
Ten, this alternative would provide a huge tax cut. In addition to repealing Obamacare's roughly $1 trillion (over ten years) in tax hikes, this alternative would also provide a net tax cut versus the pre-Obamacare status quo (a claim that an alternative based on an income-tested tax credit likely couldn't make).
In short, instead of focusing on paying for people's health care, such an alternative would focus on bringing down costs. Instead of ordering private citizens to buy a product or service of the federal government's choosing for the first time in all of United States history, it would free up the American people to shop for value. Instead of consolidating and centralizing power, it would restore liberty.
Fortunately, such an alternative already exists. Ed Gillespie ran on it in the 2014 Virginia Senate race and—as a 10-point underdog in the polls—almost pulled off the upset of the night. House Budget Committee chairman Tom Price released a similar alternative in the House, which now has 84 cosponsors—including Jeb Hensarling, Bill Flores, and Marsha Blackburn. (Gillespie's and Price's plans are both based on "An Alternative to Obamacare," originally released by the 2017 Project(which I ran) and now published by the Hudson Institute.)
The American people never wanted Obamacare and still don't. Indeed, has any president's signature legislation ever been so unpopular for so long? Thus, when Chait talks about how "a health-care plan that is…consistent with conservative ideology" cannot be "acceptable to the broader public," he has things exactly flipped around. It is Obamacare that is unacceptable to the American public—and with a popular conservative alternative in play, it will be repealed.
Jeffrey H. Anderson, the author of "An Alternative to Obamacare," is a Hudson Institute senior fellow.