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Must-Read Memo on GOP Health Proposal

11:09 AM, Jan 27, 2014 • By WILLIAM KRISTOL
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The proposal is also well-conceived in what it wisely doesn’t contain. It doesn’t end, or replace, the tax break for employer-sponsored insurance (although, importantly, it does stop that tax break from being an open-ended invitation to spend ever-more money on health care, tax-free). And it doesn’t deal with Medicare reform. (An Obamacare alternative isn’t the place for that.)  

The president’s supporters will surely claim that this proposal wouldn’t result in as many people being insured as under Obamacare. Of course, the Congressional Budget Office had already projected that 31 million people would remain uninsured under Obamacare even before people started finding out firsthand that, just because they liked their health plan, that didn’t necessarily mean they’d get to keep their health plan (or their doctor). (Remember the CBO’s number when Obama brazenly, but predictably, claims again tomorrow that Obamacare provides “universal coverage.”) To be sure, when a president spearheads legislation that, for the first time in United States history, compels private American citizens to buy a product or service of the federal government’s choosing, one would expect that more people would buy that product.  But it seems safe to say that the Coburn-Burr-Hatch proposal would result in more people freely choosing to purchase insurance than would occur under Obamacare’s architecture of coercion.

That’s not to say that the senators’ proposal is without weaknesses. Indeed, it has two major ones. First, somewhat ignoring Americans’ backlash against Obamacare’s individual mandate, it calls for states to auto-enroll private citizens in insurance plans if they “fail to make an affirmative choice in choosing a plan” (to quote their language)—and to use federal (taxpayer) money to do so. Their proposal stipulates that those who were auto-enrolled could always opt out, but is this really a level of taxpayer-funded paternalism that Republicans want to endorse?

Second, the proposal’s tax credits follow the lead of Obamacare’s subsidies in ignoring the middle class, and thereby fail to take advantage of one of Obamacare’s prime political weaknesses. Under the senators’ proposal, if a single person makes $25,000 annually, he or she wouldn’t get the full tax credit. With an income over about $35,000, he or she wouldn’t get the tax credit at all. Means-testing the credit in this way hardly equalizes the tax code’s treatment of employer-based and individual-market plans.

But even here there is cause for optimism. Before this proposal, the last serious Republican alternative to Obamacare was the Republican Study Committee’s proposal, released last fall.  In addition to taking the politically perilous path of ending (and replacing) the employer-based tax break, the RSC proposal didn’t offer a tax credit but rather a deduction, which (despite the deduction’s rather clever design) would have given too much of a tax break to Americans in the upper half of the income spectrum and not enough to those in the lower half. As a result, the RSC’s proposal wouldn’t have led to enough people getting, or maintaining, insurance—even though a key element in bringing about the full repeal of Obamacare involves offering an alternative that would result in major increases in the number of people with insurance in relation to the pre-Obamacare status quo. So, the Coburn-Burr-Hatch tax credit would disproportionately benefit those with lower incomes. The RSC’s deduction would disproportionately benefits those with higher incomes. The sweet spot, which future proposals like the 2017 Project’s soon-to-be-released alternative will aim to hit, lies in between these two proposals. In other words, Republicans/conservatives are starting to zero in on the target. If they can hit it, Obamacare will fall.

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