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Don’t Just Replace Obamacare—Replace the Great Society

7:45 AM, Sep 4, 2014 • By AVIK ROY
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Given that I’ve probably published more articles critical of Obamacare than anyone alive, I’m often asked to speak to conservative audiences about our new health law. Last month, I was at the big grassroots confab of Americans for Prosperity, the Defending the American Dream Summit. I asked the packed house, “How many of you are on Medicare?” More than half the audience raised their hands. “Guess what?” I responded. “You’re all on single-payer health care.”

The stunned looks on their faces reinforced one of the most important aspects of our present health care debate. While conservatives fret about the possibility that Obamacare may be a Trojan horse for single-payer government-run health care, we usually forget that more than 90 million Americans are already on single-payer health care: those who get coverage from Medicare, Medicaid, and the Veterans Health Administration.

And you don’t need to be a fan of dark conspiracy theories to believe that “Affordable Care Act” expands single-payer health care in America. It’s right there in Title II of the law, under which Obamacare substantially expands Medicaid.

Many conservatives believe that we had a free-market health care system in America, until Obamacare was signed into law. But that’s not true. The government takeover of our health care system didn’t happen in 2010. It happened in 1965, when LBJ shepherded through Congress the amendments to the Social Security Act that became known as Medicare and Medicaid.

If Obamacare had never been passed, we’d still be spending tens of trillions of dollars we don’t have on single-payer health care entitlements. In 2022, federal spending on our older health care entitlements will exceed $1.5 trillion. Obamacare will increase that total by about 16 percent. Indeed, in 2010, before Obamacare was enacted, U.S. per-capita government spending on health care was higher than all but three other countries in the entire world: $3,967 for every man, woman, and child in the country. That’s higher than Germany ($3,331), Canada ($3,158), France ($3,061) and Great Britain ($2,857).

Among wealthy nations, two of the best performers on per-capital public health care spending are Switzerland ($1,628 per person in 2010) and Singapore (just $813). It’s no accident that according to the Heritage Foundation’s 2014 Index of Economic Freedom, Switzerland ranked fourth-freest and Singapore ranked second. (The U.S. was a distant 12th.)

Why do Switzerland and Singapore do so well? Because they harness market forces to offer high-quality coverage at a low price. There are no government-run insurers in Switzerland; about two-fifths of the population qualifies for means-tested premium subsidies, while everyone else purchases unsubsidized private insurance. Singapore has a universal system of consumer-driven health savings accounts and high-deductible insurance. Neither are libertarian utopias, but both are considerably freer than the government-fueled disaster in the United States.

I draw from the lessons of Switzerland and Singapore in my new white paper published by the Manhattan Institute, Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency. The plan would replace the entire suite of government-run health care programs: not just Obamacare, but also Medicare, Medicaid, and the VA. Over thirty years, we estimate that it would reduce federal spending by $10.5 trillion, make the Medicare Trust Fund permanently solvent, and reduce the cost of single health insurance policies by 17 percent.

It would repeal nearly all of Obamacare’s tax hikes, its constitutionally injurious individual mandate, and a large swath of Obamacare’s federal insurance regulations. Over time, it would fully replace single-payer health care in the U.S. with what conservatives have long favored: tax credits for the purchase of high-deductible health insurance and health savings accounts. In other words, it would take the number of Americans on single-payer health care from over 100 million in 2017 to nearly zero.

Because the plan deregulates the delivery of health insurance, it makes coverage far more affordable; we estimate that 12 million more Americans would have health insurance under the plan than under Obamacare, despite the fact that the plan substantially reduces federal and state health spending.

Importantly, the plan doesn’t impose a drastic disruption on those who have gained coverage through Obamacare. Instead, it gradually migrates the Obamacare population into a new, fully privatized, tax credit-based system. Much like the replace plan proposed by senators Tom Coburn, Richard Burr, and Orrin Hatch, our plan would reduce the number of people eligible for subsidized coverage. And it would allow eligible individuals to use those tax credits to buy plans of their own choosing, instead of ones that the federal government has forced them to buy. One could repeal Obamacare and replace it with this system, or simply repeal the bulk of Obamacare—its mandates, regulations, tax hikes, and single-payer expansions—while deregulating and replacing the rest.

Jeff Anderson, writing here on the Weekly Standard blog, finds this approach intolerable, claiming that it is an attempt to “refine and enlarge Obamacare.” But how is a plan that repeals everything offensive about the ACA, and reduces federal spending by $10.5 trillion, an “enlargement” of Obamacare?

Anderson has proposed his own plan through the 2017 Project. It has many commendable aspects to it. Its core plank—to repeal Obamacare and replace it with a system of universally available tax credits for the purchase of private coverage—is strikingly reminiscent of the repeal-and-replace plan offered by Mitt Romney in the 2012 campaign.

But there’s one big difference between Romney’s 2012 platform and Anderson’s 2017 plan. Romney was the first—and still the only—major-party nominee for president to propose a plan for reducing the trajectory of Medicare spending. Not only did Romney campaign on Medicare reform, he doubled down on his plan, by picking as his vice presidential nominee Paul Ryan, the man most closely identified with Medicare reform today.

Anderson’s 2017 Project plan, by contrast, explicitly eschews Medicare reform. “A winning alternative [to Obamacare]…shouldn’t veer into important but nevertheless tangential issues like Medicare reform,” Anderson writes. Anderson thus protects the single-payer Medicare behemoth that is bankrupting America from reform, while simultaneously calling Obamacare “perhaps the worst piece of legislation in American history.”

I would agree that Obamacare is the worst new law in a generation. But it’s not worse than Medicare and Medicaid, which remain on the books today, and have imposed more than $100 trillion in unfunded liabilities on our grandchildren. And there are certainly stronger candidates for worst law in American history: The Sixteenth Amendment? Prohibition? The Alien and Sedition Acts? Jim Crow? The Three-Fifths Compromise? The Fugitive Slave Act?

As a political strategy in a Republican primary, Anderson’s plan is a plausible one. Protecting Medicare is popular with the older conservative base. But Anderson ought not dismiss the largest single-payer health care program in America as “tangential.” Medicare has done far more to distort the U.S. health care system than any other program in history, and its reform must be at the top of any serious agenda to tackle the fiscal crisis we all face.

According to the Congressional Budget Office’s Long Term Budget Outlook, nearly every dollar in the growth of federal spending as a share of GDP is driven by our health care entitlements: Medicare, Medicaid, and now Obamacare. We must reform them all, before it’s too late. If conservatives keep their sights set solely on Obamacare, then the left has already won.

Avik Roy is a senior fellow at the Manhattan Institute for Policy Research. In 2012, he served as a health care policy adviser to Mitt Romney.

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