Obamacare Replace: What the Senate Should Fix

by Avik Roy

A big milestone yesterday as the House passes its Obamacare replacement, the American Health Care Act. Over at Forbes, I have a detailed writeup of the bill’s qualities and flaws. To summarize:

Regulations. Thanks to the efforts of the House Freedom Caucus and its Chairman, Mark Meadows, the bill does a nice job of repealing Obamacare’s costliest regulations, something that should help lower premiums over time. I think this is where the bill does some of its strongest work.

Tax credits. The flat tax credit approach is flawed, because it will price the low-income near-elderly out of the market. A more means-tested approach can cover those individuals while subsidizing high earners less. This is the most important feature of the bill for the Senate to fix.

Medicaid. The Medicaid reforms in this bill are historic and potentially transformational, ten times more significant than the welfare reform bill of 1996. If the AHCA was solely a bill about Medicaid reform, we’d be jumping for joy. The problem is that in the Senate, the Medicaid reforms are jeopardized by the clumsy tax credit structure, because those who currently get coverage through Obamacare’s Medicaid expansion will not get enough assistance under the flat tax credit to retain coverage. The temptation in the Senate will be to water down the Medicaid reforms, instead of fixing the tax credits. We need to encourage them to do the latter.

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