The Obamacare Debate Heats Up in Virginia

Real Healthcare Reform by from The Weekly Standard, October 19, 2014

In the wake of their passage of Obamacare, the Democrats have repeatedly claimed two things: Republicans don’t have an alternative, and in any case the health care debate is over. But a Washington Post editorial published Saturday makes it clear that neither of these claims is true.

The Post praises Republican Virginia Senate candidate Ed Gillespie for advancing an alternative to Obamacare, even though the Post remains supportive of the president’s overhaul.  (Gillespie’s opponent, Democratic senator Mark Warner, who of course voted for Obamacare, received the Post’s endorsement last week.)  The Post writes:

Mr. Gillespie’s proposal was developed by a conservative group called the 2017 Project, which, as the name implies, aims to provide templates for Republican policymaking after the next presidential election.  It is a real plan, which is to be commended.  But it would be worse than the Affordable Care Act.”

We at the 2017 Project accept the Post’s commendation, and we commend the Post in turn for engaging the debate.  But we think the Post’s argument for Obamacare and against the 2017 Alternative is easily rebutted.

The Post claims the alternative would be worse in four basic ways: It would help people get “catastrophic” insurance but not prepaid health care, it wouldn’t include enough government mandates to provide sufficient consumer protection, it wouldn’t be redistributive enough, and it would raise deficits. The last of these claims is false. The first three actually highlight the alternative’s virtues.

Obamacare provides lavish benefits to a small portion of the citizenry at great expense to the citizenry as a whole. Take this example: A single woman living in Fairfax County, Virginia who’s between 21 and 40 years of age and makes $35,000 a year gets no subsidy whatsoever under Obamacare.  She’s too young and too middle class.  Meanwhile, a family of four living in that same county, with 53-year-old parents and an income of $50,000, gets a $10,294 subsidy — at taxpayer expense.

The 2017 Project Alternative that Gillespie is championing would instead offer the same tax credit to everyone, varying only by age:  Those under 35 years of age would get a tax credit of $1,200, those between 35 and 49 would get a tax credit of $2,100, and those 50 and over would get a tax credit of $3,000.  Parents would get a tax credit of $900 per child.  So a 40-year-old single woman would get a tax credit of $2,100.  A family of four with 53-year-old parents would get a tax credit of $7,800.  In this manner, millions of middle-class Americans who buy insurance on their own would finally get a tax break, much as if they got insurance through their employer.

The Post objects to giving the same tax credits to everyone (subject only to the three age-bands), writing that under the alternative, “Everyone — lower-, middle- and upper-class — of a certain age group would get the same amount of help, even if some wouldn’t need it to pay premiums and others would struggle to make premium payments of any kind without [further] assistance.”

But tax credits, by their very nature, are already progressive.  Someone who would have paid $2,100 in federal income taxes, but gets a $2,100 tax credit, would pay $0 — an income-tax cut of 100 percent.  Someone who would have paid $4,200 but gets a $2,100 tax credit would get a tax cut of 50 percent.  Someone who would have paid $210,000 but gets a $2,100 tax credit would get a tax cut of just 1 percent.  In short, the poorer one is, the more one benefits from a tax credit.

Not income-testing the tax credits is simpler, fairer, lets people see what they’ll receive, and greatly reduces the role of the I.R.S.  Under Obamacare, your subsidy — if you’re old enough and/or poor enough to get one — varies with each change in income, residence, marital status, etc. This requires the I.R.S. to track these things at every stage of one’s life.

Our tax credits could be used to buy whatever insurance people want, not merely the insurance Obamacare compels them to buy.  The Post worries that “the repeal of Obamacare’s consumer protections would allow insurance companies to deter high-risk patients by carefully shaping their coverage plans — refusing to cover certain HIV or cancer medications, for example.”  But this would happen only if insurers didn’t care about selling policies to young, healthy people who want insurance that protects them against catastrophic events.  But insurers do care about selling such plans — and, if they don’t, their competitors do.

The 2017 Project Alternative would make insurance affordable for all Americans while encouraging them to shop for value.  The Post doesn’t dispute that the alternative’s tax credits — combined with its protections for preexisting conditions — would enable people to buy health insurance.  Its objection is that many people “would not be able to afford any more than a bare-bones ‘catastrophic’ plan.”  Of course many of those people want a catastrophic plan.  And the alternative provides further help for health costs through a health savings account tax credit. But in any case, wasn’t a key purpose of Obamacare to reduce the number of uninsured?  Our alternative does that — while avoiding the negative consequences of Obamacare.

The Post grants that the alternative has protections for preexisting conditions, but it claims those have “strict limits.”  In fact, young adults who turn 18 or leave college would have a full year to buy insurance without being charged more for a preexisting condition, parents with a newborn baby would enjoy that same protection, those moving from the employer market to the individual market would have two months to buy insurance (with the help of their tax credits) without being charged more for a preexisting condition, and no one who is already insured could be dropped from his or her insurance, or re-priced, due to a preexisting condition. What the alternative would prevent is letting people wait until they’re already sick or injured to buy insurance.

As for costs, the nonpartisan and politically neutral Center for Health and Economy scored the 2017 Project Alternative and said it would save $1.13 trillion in federal spending from 2014-23.  It also said the alternative would lower premiums significantly, enhance access to doctors and hospitals in the individual market by 57 percent, and increase the number of people with private health insurance by 6 million.

Despite this, the Post insists that the alternative would increase deficits by $300 billion versus Obamacare.  This assertion is rooted in the fictional notion that Obamacare, a massive new federal entitlement program, would reduce deficits.  That claim, always specious, is now outdated as well — as it’s based on Congressional Budget Office (CBO) scoring that hasn’t been updated for more than two years.  The claim has been thoroughly debunked by Paul RyanChris Conover, and others.  It relies on Obamacare’s siphoning nearly $1 trillion out of Medicare, money that the Obama administration says would magically remain in Medicare as well.  Absent this double-counting, Obamacare would blow a hole in the deficit.  Even apart from the double-counting, Senate Budget Committee staff, using recent CBO projections for matters like Obamacare’s effect on labor markets, found that Obamacare is now set to increase deficits by $131 billion.  In any case, it strains credulity to believe that a conservative alternative that would cost $1.13 trillion less than Obamacare is going to raise deficits versus Obamacare.

The Post’s editorial tries to make the case for Obamacare over our conservative alternative.  It fails.  But in making the attempt, it compels candidates and elected officials to engage in a debate that, contrary to the wishes of the Obama administration, is very much alive.

Jeffrey H. Anderson is executive director of the 2017 Project.

 © 2014 Weekly Standard LLC. Reprinted with permission.