In the latest Weekly Standard, James Capretta and Yuval Levin have written a devastating critique of the White House’s favored approach to premium subsidies.

At twice the poverty level, a family of four today makes $44,000. Such a family insured through an exchange would pay no more than $2,200 for a policy that could cost $12,000, so it would receive a federal subsidy totaling nearly $10,000. The family next door, meanwhile, with the same income but with health insurance provided through the workplace, would receive an implicit tax break for the $12,000 in employer paid premiums worth only $3,600. That’s a bonus of more than $6,000 for being in the exchange–or a penalty of $6,000 for having employer coverage. This disparate treatment would be widespread. The Census Bureau counts 102 million people under age 65 in households with incomes between 150 and 400 percent of the poverty level, but the Congressional Budget Office (CBO) estimates that only 20 million of them would receive insurance through the exchanges in 2014.

Such disparate treatment of lower income workers would create a powerful incentive to flee employer coverage for the exchanges. And there would at the same time be pressure to extend the subsidy to workers generally satisfied with the plans provided at work but displeased about paying so much more for them than other similarly situated people. This would vastly increase the cost of the plan, since Congress is not known for resisting constituent pressure.

Moreover, the House health bill includes an employer mandate that would impose stiff penalties on all firms with payrolls above $250,000 that don’t provide insurance. Suffice it to say, that will discourage at least some firms from expanding their hiring at a time when we’re introducing a wide range of powerful work disincentives. There’s something very unsound about this.

Politically, the Democrats have emphasized that their approach won’t endanger employer-provided coverage. As a number of conservatives and liberals have tried to explain, however, the existing employer-based system is beyond saving. A new report issued by the center-left Center for American Progress describes the relentless upward trajectory of private health insurance premiums. The author, highly-regarded Harvard health economist David Cutler, sees this as a case for the Democrats’ health reform. He co-authored another CAP report on how to shave cost growth. Yet the cost savings are speculative while the costs of premium subsidies are predictably enormous, as Capretta and Levin ably explain.

The authors conclude the article with the following:

The Democrats have some serious political muscle to flex, and they may still be able to force their plans through. Conservatives should not grow confident or careless at the sight of public opposition to liberal health care reform. Instead, they must use the August recess to clarify the problems with Obamacare to voters, and to make the case that America must not be rushed into a terrible mistake. There is time to find the right way to reform American health care, and there are good ideas out there for doing so–ideas that use competition and consumer choice to put downward pressure on prices rather than rationing care, displacing the currently happily insured, and bankrupting the government.

It is important to keep in mind that when Republicans defeated Clintoncare, they failed to then effectively advance an alternative agenda. Conservatives can’t afford to make that mistake again.