Politics & Policy

Conservatives Have a Plan for King v. Burwell

They can lay the ground for repeal.

Earlier today, NRO’​s Joel Gehrke reported on how Republicans are preparing for the Supreme Court case King v. Burwell, which will determine whether Obamacare subsidies can continue to flow in states that haven’t established their own health-insurance exchanges. Some conservatives, he reports, are starting to view GOP preparations for a ruling that halts such subsidies as a battle between two camps: those who would then “fix” Obamacare and those who would do nothing, with the latter camp being the more conservative. If those were truly the two camps fighting it out, that would be true. Doing nothing on Obamacare is better than “fixing” it.

The more important battle on Capitol Hill, however, is between two different camps: those who would effectively repeal and replace Obamacare in 36 states — thereby paving the way to full nationwide repeal in 2017 — and those who would “fix” or expand Obamacare. Anyone who cares about repealing the law should have an easy time deciding which of these two camps is preferable. (It is true that there’s a smattering of do-nothing sentiment alongside these two main camps, but that sentiment has no chance of prevailing.)

The real question, then, is whether Republicans in Congress are going to prepare for King v. Burwell by (a) uniting around a circumscribed tax-credit-based alternative to Obamacare that wipes out all of its insurance regulations, mandates, exchanges, and perhaps its Medicaid expansion, or (b) turning the Obamacare subsidies back on while getting nothing or — even worse — winning “free-market fixes” that improve Obamacare and help take the wind out of repeal’s sails.

The first option — effective repeal and replacement with a GOP alternative — would apply in the 36 states that would be affected by the ruling, as well as in any others that would like to jump ship from Obamacare. A variation on this option would be to let each state decide whether to embrace this alternative, thereby providing states with an exit ramp from Obamacare. Yuval Levin, Jim Capretta, and I have all written about this general approach, which would effectively repeal and replace Obamacare across a wide swath of the country while moving us firmly in the direction of full repeal.

Under such a tax-credit-based alternative, a longstanding inequality in the tax code would be fixed, as people buying insurance through the individual market would get a tax break much like the one enjoyed by their neighbors who have employer-based insurance. Meanwhile, not income-testing the tax credits would make them simpler, make them mostly a tax cut, let millions of Americans (most of whom get nothing under Obamacare) quickly and easily see what their tax credit would be, reduce the role of the IRS, avoid work disincentives, and move away from Obamacare’s rampant income redistribution — while paving the way to full repeal.

Gehrke writes that such an approach and the necessary transition “would be the first Republican policy initiative that could be construed by conservative activists as cooperating with Obamacare.” In reality, however, such a proposal would bulldoze Obamacare in those states — and it would be hard to be less “cooperative” than that.

#page#The other possibility is to “fix” or expand Obamacare. If the Supreme Court rules in King that President Obama has been illegally paying out taxpayer-funded Obamacare subsidies through federally run exchanges, millions of Americans would soon lose their subsidies. While the vast majority of Americans would be unaffected, those who get Obamacare subsidies — mostly the near-poor and near-elderly — would be big losers. For example, a 60-year-old married couple in Milwaukee, Wis., that makes $20,000 stands to lose — prepare yourself — a whopping $16,549 in Obamacare premium subsidies, plus further payments that help them with their out-of-pocket costs. Meanwhile, a 60-year-old married couple in Milwaukee that makes $67,000 doesn’t get a dime from Obamacare — they’re too middle class. And no benefits for a 60-year-old married couple in Fairfax County, Va., or Omaha, Neb., for they’re poor, and Obamacare’s subsidies go only to the near-poor.

Anyone who thinks that Republican senators, representatives, governors, and state legislators will stand by and do nothing while certain Americans lose $16,549 (plus out-of-pocket subsidies) — and even more in some cases — has an inordinately high opinion of Republican officeholders’ spines. 

That doing nothing is not really an option, however, is perhaps for the best. As Mike Lee put it recently in Iowa, “If a presidential candidate tells us that he wants to repeal Obamacare but doesn’t have a health-care reform proposal of his own, then maybe we should keep looking for another candidate.”

It is well past time for Republicans, both on the presidential and the congressional level, to advance an alternative that would finally end the unfairness in the tax code between individual insurance and employer-provided insurance. It would finally fix what the government broke long before the Democrats passed Obamacare and made everything worse.

Under non-income-tested tax credits such as those proposed in the 2017 Project’s Alternative to Obamacare, the couple in Milwaukee making $20,000 would get a $6,000 tax credit to buy insurance of the couple’s own choice on the open market, rather than having a $16,549 subsidy sent to an insurance company to help pay for Obamacare-compliant insurance acquired through a government-run exchange. The Milwaukee couple making $67,000 and getting nothing under Obamacare would get that same $6,000 tax credit — every penny of which (assuming they claim the standard deduction) would be in the form of a tax cut. The poor Virginia and Nebraska couples making $15,000 and inexplicably getting left high and dry by Obamacare would also get the same $6,000 tax credit to use to buy insurance of their choice. 

Putting forward a strong alternative would weaken Obama’s hand in the impending showdown and would provide Americans with a clear choice in 2016 — between Obamacare and a conservative alternative that would actually provide real reform, revitalize the individual market, and move us to a more conservative market than we had before Obamacare.

There is a third option being bandied about in Congress — in addition to effective repeal and replace, and “fixing” or expanding — which is just to send a bunch of money to the states and tell them to deal with the problem. For three major reasons, this would be unwise. One, it would perpetuate the widely held view that Republicans have no Obamacare alternative. Two, the federal government long ago broke our health-care system by putting its foot on the scale by favoring employer-based insurance over individual-market insurance. Only Congress can fix that. Three, genuine federalism involves having the states raise and spend their own money. It doesn’t involve sending federal money to the states in the form of a blank check.

If Congress fails to act in any of these ways, then many Republicans at the state level will set up state-based Obamacare exchanges, expanding Obama’s signature legislation while putting more Republican fingerprints on it and making repeal harder.

In short, the real choice leading up to King v. Burwell is between two options: proposing an alternative that would effectively repeal and replace Obamacare in 36 states; or having Republican congressional leaders negotiate fixes to Obamacare with the Obama White House while Republican states consider expanding Obamacare.

Which option prevails will go a long way toward determining whether Obamacare is repealed and replaced in 2017 — and conservative support will be crucial to making sure the right option wins.

— Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda, including “A Winning Alternative to Obamacare,” to re-limit government, secure liberty, and promote prosperity.

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