Politics & Policy

Getting beyond Obamacare

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It’s time to make the case for replacing it, not fixing it.

Obamacare took a beating in the elections, but it is pretty safe from legislative attack over the next two years. Republicans should spend those years making it less safe during the next presidency.

Many, many Republicans who oppose Obamacare won their elections. And they ran on that opposition: No issue featured in more Republican ads. Democrats, meanwhile, were rarely vocal in support of the law, which has never had the approval of the majority of Americans. The next Senate will have nine more Republicans who would probably vote to repeal the law and nine fewer Democrats who would probably not.

The exit polls rendered a mixed, but mostly unfavorable, verdict on Obamacare. Those voters who listed health care as their top issue favored the Democrats. That has long been the case: Indeed, it is another way of saying that liberal voters have traditionally cared more about health policy than conservative ones. But the group of voters who care a lot about the issue now is much larger and less liberal than it was before Obamacare.

When all voters in the poll were asked whether the law “went too far,” was “just right,” or “did not go far enough” — a format that one would expect to inflate the results for the middle option — 49 percent said too far, more than the 46 percent for the other two options combined. That’s almost the same as the results in the exit polls from 2010, the Republican wave that happened the year Obamacare became law.

Two influential Republican pollsters, Elizabeth Harrington and Bill McInturff, did an Election Night poll that they said showed that the law “was not a significant factor” for voters. Their evidence: Significantly fewer voters than in 2010 recalled ads on the issue, and significantly fewer said they were voting on the basis of it. Their numbers show, however, that 28 percent of voters, including 28 percent of independent voters, meant their votes to send a message against Obamacare — which are pretty big numbers for any policy issue. By contrast, 12 percent of all voters and 4 percent of independents meant to send a pro-Obamacare message. Four years after its passage, then, the law remains unpopular, and its unpopularity remains a problem for the Democrats.

The public is right to dislike Obamacare. It has achieved, at great expense, an expansion of health-insurance coverage, but much of this coverage is of a very low quality. The most committed defenders of the law try to credit it with lowering the rate of growth in health-care spending. The attempt is risible: The trend toward lower inflation long predates Obamacare. The law has a poor cost-benefit ratio even before we consider all the coercion and disruption it has entailed.

For all Obamacare’s justified unpopularity, however, the political branches of the government are not going to repeal it so long as someone committed to it is in the Oval Office. It is not even going to be meaningfully reformed. What Republicans can and should do is to prepare the ground for the law’s repeal and replacement by increasing the likelihood that a president committed to a credible plan to achieve that goal will be elected in 2016 and have a congressional majority to support him.

Many Republicans — including most of the party’s senators — have been vague about how they would replace Obamacare. The party has reached a consensus on a few points, such as the idea that it should be possible for individuals to buy insurance across state lines. But these ideas would not by themselves do much to make insurance more affordable.

The Republicans who have refrained from setting forth their own plans have done so for many reasons, among them the desire to avoid creating a target for the other side. But the lack of a replacement plan, or of replacement plans, has had several harmful consequences for them. It has caused many voters, and not just those within the Democratic party’s liberal base, to worry that repealing Obamacare means taking away health insurance from millions of people now getting it through the law and means leaving people with preexisting health conditions facing the same problems they had before the law was passed. This fear probably helps explain a gap that polls have persistently found: More people oppose Obamacare than favor repeal. This fear induces a derivative fear among Republican politicians: It leads them to signal a lack of resolve to repeal the law, which in turn inspires anger and depression among conservatives.

Republicans, then, need to reassure conservatives that they really will repeal Obamacare if given the chance and reassure the public at large that they will replace it in a way that does not leave millions of beneficiaries bereft. They could accomplish both of these tasks at once if they devised a conservative health-care plan that replaces Obamacare without threatening people’s coverage. Then they could commit themselves to that plan without making swing voters anxious, and thereby begin showing conservatives that they have a real plan to get rid of the law.

This course of action does not amount to searching for a unicorn. Several plans that meet these criteria have been put forward, such as the CARE Act, proposed by Senators Orrin Hatch, Richard Burr, and Tom Coburn, and a plan put forth by the 2017 Project, a conservative nonprofit. The key step would be to change the tax treatment of health insurance. We now have a tax break for employer-provided health insurance, including fairly expensive employer-provided insurance. That break should be flattened — so that it no longer rewards people for choosing the most expensive insurance options, and so that people who do not have access to employer-provided plans can use an equivalent tax break to buy insurance on the individual market.

A replacement plan should also make existing entitlement programs more market-friendly. Most of Medicaid should be converted into subsidies that help beneficiaries buy into this enlarged individual market. Ideally, Medicare, too, would be converted into a system in which private plans compete for the business of empowered consumers, as almost all Republicans have already endorsed.

Plans along these lines have been estimated to be competitive with Obamacare on the number of people insured, and superior to it in cost and choice of doctors. A higher proportion of the insured would have protection from large medical expenses, and coverage would generally be of higher quality than Medicaid (which is responsible for most of Obamacare’s expansion of coverage). The resulting system would feature lower premiums and taxes than Obamacare. It would lack the law’s centralizing Medicare board and essential-benefits package, its employer mandate, and its individual mandate. It could be structured to avoid discouraging work, as Obamacare’s subsidies do.

#page#All of this should be attractive to most people, and especially to conservatives, since it would mean that the government, through its taxes, spending, and regulation, would be doing much less than it has done for the last several decades to distort people’s economic choices concerning health care.

At the same time, this type of reform should quiet the fears people may have about Republican health policy. It would not simply tell people now on an expanded Medicaid to make their way through the dysfunctional, government-distorted market that was failing them before Obamacare. While the most expensive insurance plans in the employer market would have to change, the reform would not destabilize employer-based coverage in general, as some Republican proposals (such as the one John McCain endorsed in his 2008 presidential campaign) would. And it would offer transitional help while a new market-driven system was built.

The problem of people with preexisting conditions having trouble getting insurance, though often exaggerated in scope, is a real one. It is also one that has emerged almost entirely because federal policy has prevented the emergence of a robust individual market in which people have the incentive and the ability to buy renewable policies. Conservative alternatives allow that market to develop while providing generous subsidies for people whom the government has locked out of insurance markets in this way. (It is possible to be generous while substantially cutting federal spending compared with Obamacare.)

This sort of plan has some influential supporters, including Hatch, who will chair the Senate Finance Committee in the new Congress. The party should make replacing Obamacare its main health-care goal. And over the next two years that goal ought to structure Republican tactics, which should be chosen on the basis of whether they advance it.

These conclusions assume that Obamacare is so flawed that it cannot meaningfully be reformed. There are, however, well-meaning conservatives who reject that assumption. Avik Roy of the Manhattan Institute is the most prominent exponent of the view that Obamacare should be amended along free-market lines. He would deregulate the law’s exchanges, put most Medicaid beneficiaries on them, and over time have them replace Medicare by raising the retirement age. The exchanges would then be a vehicle for making American health care more competitive rather than more prescriptively regulated.

These changes are sufficiently sweeping that they would really amount to the replacement of Obamacare by something quite different, even if Republicans marketed them as a reform of the law. That marketing would run the risk of losing conservatives — who would require a lot of convincing that expanding the exchanges that are a central feature of the law they hate would really be a great triumph for them. Republicans would at the same time be taking on the unpopular task of raising the retirement age.

It is not clear that any liberals would find the marketing sufficiently attractive to overcome their substantive objections to a less centralized health-care system. They tend to favor a comprehensive model of health insurance that markets do not naturally tend to generate, which is why they put so much regulation into the law in the first place. A few moderate Democrats might be open to it; but then they might be open to a replacement plan that is competitive with Obamacare on coverage.

To make this very uncertain net political gain, Republicans would have to give up some significant policy ground. A market-based health-care reform does not require government-run exchanges: The 2017 Project and Coburn-Burr-Hatch plans do not feature them. Keeping them would increase the chances that they would revert to being used as engines of prescriptive regulation. And Republicans would also have to give up on using the competitive model of premium support to transform Medicare. On balance, then, replacement seems to be a more promising path than reform, and something along the lines of Coburn-Burr-Hatch or the 2017 plan makes more sense than an exchange-based reform.

The next Congress should take steps that simultaneously bring the health-care system closer to where we want it to be and improve our prospects of getting to that destination — and should take no steps that subvert either goal.

Early on, it should hold a vote to repeal Obamacare. It would be much better if the Republicans were able to hold an early vote on a replacement plan, since a repeal vote without it will carry some political costs. But the party is not yet where it needs to be on replacement, and it needs to make it as clear as possible to conservatives that it has not abandoned the goal of repeal.

There has already been a lot of controversy among Republicans about whether to pursue repeal of Obamacare in a reconciliation bill. This dispute probably matters less than its participants imagine. “Reconciliation” is a procedure by which the Senate can pass bills on a simple-majority vote, which is to say without filibusters. It can be used once to set tax policy and once to set spending policy per legislative session. While the details are the subject of incredibly tedious parliamentary rules, it appears likely that some large fraction of repeal could pass through the Senate that way, but not all of it could.

There may be one or two health-care measures favored by Republicans that could be passed through reconciliation and signed by the president. The repeal of Obamacare’s medical-device tax might be one. But such measures would probably not be sufficiently controversial to draw a filibuster — a vote to repeal that tax drew 79 votes in last year’s Democratic Senate — and thus would not need to go through reconciliation to become law.

Which Republican health-care measures to include in a reconciliation bill is therefore largely a question of which measures Republicans would prefer to die to filibusters as opposed to dying to a veto. A fight over a presidential veto is in the nature of things more high-profile than a fight over a filibuster, so the question boils down to: Which fight would it be most helpful, to Republicans and to the cause of replacing Obamacare, to publicize? My own tentative judgment is that it would be best to send Obama legislation to advance popular, Obamacare-undermining legislation that ends the individual mandate and the potential “risk corridor” bailouts for insurance companies. But it may be that conservative doubts about Republican resolve are so deep that Republicans will have to repeal as much as they can in a reconciliation bill. Which is also fine.

#page#That leaves the question of what other legislation Republicans should advance. If they decide to use reconciliation to advance a larger repeal bill, they should certainly also advance standalone legislation against the individual mandate, the coercive and unpopular heart of the law, and put Senate Democrats, who have not had to vote on it since the law passed, on record about it. They should take their first shot at the risk corridors, even though the insurance companies would rather they didn’t. (After all, those companies also don’t want Obamacare replaced.) And they should move legislation to protect existing insurance plans from the creeping effects of Obamacare’s regulations, holding Obama to his broken promises about letting people keep their plans if they like them.

They should also hold a vote on the employer mandate. Some Republicans want to move forward with a bill that would merely modify the mandate. That would be a mistake. The employer mandate requires large companies either to offer insurance to people who work 30 hours or more a week or to pay a fine. Republicans and some Democrats fear that the mandate leads companies to cut people’s hours to avoid that choice. Hence the desire to move the cutoff to 40 hours. But research suggests that changing the mandate that way would actually lead to more hours’ being cut. (There are more people working 40–44 hours than 30–34 hours a week for large companies.) The whole problem disappears if the employer mandate goes away.

A lot of Republicans are eager to send Obama a repeal of the medical-device tax in order to “prove they can govern.” The tax should indeed go. But several Senate Democrats with medical-device makers in their states want it to go too, while not many voters care about it directly. It should therefore be paired with something that matters more and that Senate Democrats want less — such as an end to taxpayer exposure to insurer bailouts.

Trying in various ways to deregulate the exchanges, on the other hand, seems like a blind alley. There is not much reason to think that deregulating the exchanges, in isolation, would be very popular or gain much Democratic support. More important, trying would muddy what ought to be the Republican party’s messages, primarily that the law should be repealed and secondarily that the federal government shouldn’t be in the business of supporting exchanges.

This approach to Obamacare would try to build a center-right coalition by starting from the right and allaying centrist fears. That means that the rhetoric Republicans use should remain firmly grounded in the goal of repealing Obamacare. Ending the medical-device tax, or any other targeted measure, should be presented in terms of beginning the repeal of Obamacare rather than “fixing” or “reforming” it.

And none of these targeted measures matters as much as getting Republicans to flesh out an attractive alternative to Obamacare for their presidential candidate to use in the 2016 campaign.

The Supreme Court may make an alternative a matter of urgency even before that campaign. The Obama administration has gone beyond the text of the Obamacare law to offer tax credits for use on the federally run exchanges that cover 36 states. The Court is being asked to end these unauthorized tax credits, which would be the right result legally, but would also leave several million Americans facing large spikes in their premiums or having their insurance canceled altogether. Without an alternative, Republicans in Washington, D.C., will face a politically treacherous choice between restoring these tax credits — that is, dramatically expanding Obamacare when the Court has just shrunk it — or doing nothing to ease a government-imposed hardship. With an alternative plan, Republicans can sidestep that choice and put themselves in a strong position to get their way against Obama.

State-level Republican politicians will at the same time be under pressure to set up state-run exchanges to keep the tax credits flowing. Republicans in Congress could relieve some of that pressure by giving their state-level counterparts something more constructive to do. The D.C. Republicans, that is, should propose letting state governments opt out of large portions of Obamacare and into a new market-driven system with some of the elements of the Republican replacement. If such a measure passed — and it’s hard to predict exactly what health-care politics would look like after such a dramatic ruling — Republicans in the states could safely stand for this opt out. If Democrats balked giving the states this freedom, Republicans could blame them for first passing a badly designed law and then leaving its victims high and dry.

There is no reason for Republicans to give up on replacing Obamacare. It is a bad law and remains an unpopular one. And for all the talk of its entrenchment, it is in fact still very much in the process of formation. The law is a moving target, and not just because the administration keeps fiddling with its terms. Under the statute as written, a lot will change during the next few years — and most of the changes involve making Obamacare more unpleasant. The individual mandate will kick in when people file their taxes next spring, and fines will grow higher in following years. The employer mandate is supposed to start in 2015 too. The Medicare board will gain power during the next presidency. The risk corridors that have kept the insurers happy are scheduled to go away. Obamacare will not have the power of inertia on its side in the same way other laws do.

If Republicans who are thinking the right way about health care are elected in sufficient numbers in the next few years, they can accomplish a lot — maybe even including the replacement of Obamacare with health policies that are much better suited to our country’s needs and desires.

— Ramesh Ponnuru is a senior editor of National Review. This article is adapted from one that appeared in the December 8, 2014, issue of National Review.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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