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Delay, Repeal, Replace

The Obamacare fight has just begun

Feb 4, 2013, Vol. 18, No. 20 • By JAMES C. CAPRETTA and JEFFREY H. ANDERSON
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Such reforms would also reinforce a third element of a credible replacement program: a move away from open-ended health care subsidization by the federal government. These open-ended commitments by the government are fiscally unsustainable, and they are a central factor in driving up health costs. Instead of today’s open-ended subsidies, Republicans should champion an approach that substitutes fixed financial support for insurance​—​a “defined-contribution” model, if you will. Importantly, this would mean providing a fixed amount of support for purchasing health insurance, not a fixed amount for care. No one would be cut off after the cost of their care passed a certain cost threshold. Instead, each person would receive a fixed amount of federal financial support, perhaps adjusted to reflect health status or income, for use toward the purchase of health insurance of his or her choice.

The primary problem in American health care is that it operates without the discipline of a properly functioning marketplace. The federal government’s subsidies in Medicare and Medicaid, and its tax subsidies to employer plans, are open-ended and increase when costs rise. This undercuts the incentive for price-shopping and for judicious use of resources. To inject market discipline into health care, consumers must be cost-conscious. For instance, with a fixed federal tax credit for insurance, consumers would have strong incentives to purchase low-premium plans because any premium above the credit amount would come out of their pockets and not from taxpayers. Similar reforms are necessary in Medicare and Medicaid.

Such reforms are the key to promoting a genuine health care market in America. Some of this would cost money, to be sure, but it would be a pittance compared with Obamacare​—​and thus would save extraordinary sums in comparison to the cost of keeping that colossally expensive overhaul on the books. Moreover, much of the cost of the tax credits could be offset by capping the tax preference for employer-paid insurance at a level where it would fully cover the cost of an average plan but not of an expensive one.

If Republicans were to advance a replacement along these lines​—​a plan that would provide stable insurance options, consumer choice, and high-quality health care without the heavy-handed mandates and regulations of Obamacare​—​the American people would be more than happy to throw Obamacare overboard.

The key to turning back the singular threat that Obamacare poses to our liberty and fiscal solvency is for the GOP to have a plan of attack that extends across the next four or five years. Opponents of Obamacare (which still includes most Americans) should be vigorous in their opposition in the coming weeks and months. But those efforts should be focused on the end game of replacing Obamacare with something different and far better​—​and that will require winning the presidency. Therefore, the closer the initial ill-effects of Obamacare can be pushed toward 2016, the better the chances for replacement. 

 Even those Republicans who might otherwise be inclined to capitulate on this issue should realize that the fight is far from over and must be won. As Yuval Levin wrote in these pages shortly after President Obama broke enough arms to push Obamacare through Congress on a strictly partisan basis:

[Obamacare] is not even a liberal approach to escalating costs but a ticking time bomb: a scheme that will build up pressure in our private insurance system while offering no escape. .  .  . Once implemented fully, it would fairly quickly force a crisis that would require another significant reform. Liberals would seek to use that crisis, or the prospect of it, to move the system toward the approach they wanted in the first place.

In other words, Obamacare is a way station, and there are two possible destinations: It will be replaced either with a freer system that will lower costs and increase the quality of care, or else with fully socialized medicine of the kind that liberals have long desired. Obama himself, when he first began campaigning for national office in 2003, declared, “I happen to be a proponent of a ‘single-payer,’ universal health care program.” The only thing now standing between Americans and Obama’s goal is a strategic, savvy, and determined commitment by Obamacare’s opponents to replace it with real reform.

The fight won’t be easy, but opponents of Obamacare have some big advantages. As Obamacare begins to require that insurers cover all comers at the same price (regardless of their health status and hence the actual cost of their care), insurance premiums will skyrocket for large numbers of currently insured Americans. Many millions of others will lose their employer-based insurance (with some of them being dumped into Medicaid at taxpayer expense), and many millions of seniors will lose their Medicare Advantage plans. In direct contradiction to what President Obama repeatedly promised, Americans will soon realize two things: Obamacare will cause health costs to rise, not fall; and just because they like their health plans, that doesn’t mean they’ll get to keep them.

Since Obamacare will mandate that businesses with at least 50 workers provide insurance to all “full-time” employees​—​defined under the overhaul as those who work at least 30 hours a week​—​the 49-employee business and the 29-hour week will both become commonplace. Thus, the overhaul’s drag on the economy will become all the more apparent and undeniable. Furthermore, many businesses and charitable organizations will continue to fight Obamacare’s requirement compelling them to offer only those health plans that provide “free” access to contraception, sterilization, and the abortion drug ella, while many of their employees won’t appreciate having their choices limited solely to such Obama-approved plans.

Federal spending on Obamacare will start to rise rapidly. Obamacare’s myriad taxes will begin to kick in. Medicare spending will be cut, or else (if that is averted) deficits will rise even further. The combination of millions of newly insured patients and a worsening primary-care shortage will cause emergency rooms to become swamped. And, of course, American citizens will, for the first time in our history, be forced to buy a product of the federal government’s choosing​—​or else pay a noncompliance tax.

As a result, Obamacare will likely become even less popular than it is already, and Americans will likely be even more open to a credible replacement. If opponents are ready to present and fight for such a plan over the coming years, then the cloud of Obamacare’s adoption may yet come with a very attractive silver lining: the eventual adoption of a market-based, patient-centered, decentralized reform plan that delivers better care at lower cost to the American people​—​in harmony with the country’s founding principles. The battle to replace Obamacare will not be easy. But it’s unavoidable, and the benefits of an ultimate victory will be well worth the price.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute. Jeffrey H. Anderson is a senior fellow at the Pacific Research Institute and a frequent contributor to The Weekly Standard.

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