On August 18, Wisconsin governor Scott Walker became the first leading Republican presidential candidate to release a full-fledged Obamacare alternative. Walker’s alternative would fully repeal Obamacare and provide the sort of real reform for which Americans have long been waiting. But there has been a fair amount of misreporting in the wake of Walker’s announcement, and it’s worth setting the record straight.
It’s not Burr-Coburn-Hatch (or Burr-Hatch-Upton).
A couple of outlets, most notably the Wall Street Journal’s editorial page, have erroneously suggested that Walker’s proposal is pretty much the same as the one released last year by senators Richard Burr, Tom Coburn, and Orrin Hatch. For better or worse, that claim is false—Walker’s alternative is not Burr-Coburn-Hatch.
To be sure, the Burr-Coburn-Hatch proposal, now updated as the Burr-Hatch-Upton proposal (with House Energy and Commerce chairman Fred Upton as the third member), has much to commend it. Like Walker’s alternative, it would not change the tax treatment of the typical person’s employer-based insurance and therefore wouldn’t needlessly disrupt the employer-based market. (In contrast, the approach that Marco Rubio recently outlined in an op-ed would change the tax treatment of the typical employer-based plan and thus would be vulnerable to the politically potent charge that it would jeopardize the insurance of millions of middle-class Americans.) Moreover, like Walker’s alternative (as well as Rubio’s approach), Burr-Hatch-Upton wouldn’t neglect to deal with the poor and near-poor who have become newly insured under Obamacare—an important element of any alternative that wouldn’t be politically dead-on-arrival.
However, Walker’s alternative is strikingly different from Burr-Hatch-Upton in other ways. Burr-Hatch-Upton would not repeal all of Obamacare; Walker’s alternative would. Burr-Hatch-Upton would allow states to “auto-enroll” Americans in insurance plans they didn’t pick and didn’t indicate they wanted to be enrolled in, sending taxpayers the bill; Walker’s alternative wouldn’t. Burr-Hatch-Upton would income-test its tax credits, thereby playing on Obamacare’s redistribution-centered turf; Walker’s alternative would not.
In addition, Burr-Hatch-Upton’s tax credits would cost half a trillion dollars more than Walker’s would cost, based on scoring of identical tax credits proposed by the 2017 Project. Scoring by the nonpartisan Center for Health and Economy (H&E) found that Burr-Hatch-Upton’s tax credits would save only $43 billion versus Obamacare’s premium subsidies (from 2017-24), while the 2017 Project/Walker tax credits would save a whopping $572 billion (from 2016-23)—more than ten times as much.
This is despite the fact that Walker’s tax credits would do much more to help the middle class. The typical 35-year-old single person making $37,000 a year, or 35-year-old married couple making a joint income of $65,000, would get the following:
Under Obamacare: $0
Under Burr-Hatch-Upton: $0
Under Walker: a tax credit of $2,100 per person
Assuming that these 35-year-olds don’t itemize their taxes (and likely even if they do), their tax credits would come entirely in the form of tax cuts. The single person would simply pay $2,100 less in income taxes, while the couple would pay $4,200 less. There would be no federal spending involved.
It would dramatically reduce federal spending and taxes.
As noted, Walker’s alternative would repeal Obamacare in its entirety. The Congressional Budget Office (CBO) estimates that this happy result would cut taxes by more than $1.1 trillion from 2017 through 2025. In addition to that $1.1 trillion over nine years (which would likely be $1.3 trillion over a decade), Walker’s plan would cut taxes even more, as it would cut them even versus the pre-Obamacare status quo.
Walker’s alternative would close a tax loophole on the employer side (whereby those with very expensive insurance don’t have to count that coverage as income but instead get it entirely tax-free). But the revenue gained from closing this tax loophole would be dwarfed by the tax cut that Walker’s alternative would provide in the individual market. Millions of middle-class Americans have long had to buy insurance on their own without a tax break, while their neighbors with employer-based insurance have gotten a tax break. Walker’s alternative would fix this unfairness in the tax code (without touching the tax treatment of most people’s employer-based insurance), in the process revitalizing an individual market that the federal government broke.
In addition to cutting taxes by well over $1 trillion, Walker’s alternative would cut federal spending by roughly $1.1 trillion—based on H&E’s scoring of the very similar 2017 Project alternative. And that’s even counting tax cuts as “spending”—which, of course, they aren’t.
It would provide protection for those who lose continuous coverage.
“No individual should fear being denied coverage, or face huge premium spikes when they get sick and then try to change jobs or insurance plans….Provided individuals maintain continuous, creditable coverage, no one would see their premiums jump because of a health issue or be shut out of access to affordable health insurance because of a new diagnosis or a pre-existing medical condition. Newborns, as well as young adults leaving their parents’ insurance plans and buying their own, would have these same protections.”
Bloomberg’s Paula Dwyer seizes on the word “continuous” and runs with it, concluding that, under Walker’s alternative, “a single day’s lapse of employer-based or individual insurance coverage” would mean that “insurers can reassess your health status” and “require you to pay dearly” for a preexisting condition. But this is hardly a convincing reading of Walker’s proposal.
The 2017 Project’s alternative, on which Walker’s alternative is modeled, specifies that people who have maintained “continuous” employer-based insurance would have “a two-month grace-period” during which, if they were to buy insurance on their own, they couldn’t be charged “higher premiums because of a preexisting condition.” That alternative also specifies that there would be a full-year grace-period for newborns and for young adults who either turn 18 or first leave their parents’ insurance (whichever comes later), two groups that Walker explicitly mentions in the same passage that Dwyer cites. Ed Gillespie ran for the Senate in Virginia on the same basic proposal and offered a 2-month grace-period for those moving from employer-based to individually purchased insurance and a 6-month grace-period for newborns and young adults buying insurance for the first time. In other words, Walker surely has in mind these same sorts of protections and isn’t contriving to make people pay a fortune for preexisting conditions after “a single day’s lapse” in insurance coverage (although he’d be well-served to spell this out).
In short, Walker’s alternative would provide overdue tax-relief for the middle class, cut federal spending and taxes by 13 figures apiece, and provide commonsense protections for those with preexisting conditions. It’s a political and policy winner.
Obamacare is the centerpiece legislation of Barack Obama’s presidency. It was very unpopular when the Democrats passed it, cost the Democrats the House in 2010 and the Senate in 2014, and remains very unpopular more than five years after Obama signed it into law. It is ripe for repeal. The only thing that’s been missing is a candidate who is willing to champion a credible conservative alternative. Walker has now stepped into that leadership void and has shown a willingness to take on this crucial fight. If he makes his alternative the centerpiece of his campaign, he may well have the chance to sign legislation in early 2017 that would mark a defining turn in the battle between limited-government conservatism and big-government liberalism.
© 2015 Weekly Standard LLC. Reprinted with permission.