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A Step Toward Repealing and Replacing Obamacare

Real Healthcare Reform by from The Weekly Standard, May 13, 2015

Assuming a Republican wins the presidency in 2016, his top domestic priority will be—and should be—to repeal and replace Obamacare. The health care overhaul is the cornerstone of President Obama’s project to transform America into a top-down administrative state. The effects of repealing Obamacare, and replacing it with a conservative reform that moves us away from government control even by comparison with the pre-Obamacare status quo, would be hugely consequential. The reverberations from its defeat would be felt across the American political landscape. Such a profound rejection and reversal of the progressive worldview and agenda would strengthen the resolve of conservatives, shake the confidence of liberals, and usher in further conservative victories. Needless to say, a failure to repeal and replace Obamacare despite a GOP presidential victory would have the opposite effect.

It’s therefore heartening that House Budget Committee chair Tom Price has just introduced the strongest Obamacare alternative offered in Congress to date. Price, a medical doctor, has long been a leader in the Obamacare debate.  His new proposal is based on the alternative to Obamacare advanced by the 2017 Project, headed by Jeffrey Anderson, which I chair.

Price’s legislation would offer simple, refundable, age-based tax credits to Americans who buy health insurance on their own.  This would effectively fix the longstanding inequity in the tax code that has kept the individual market from competing with employer-based health insurance. Since the World War II era, most Americans who buy insurance on their own have had to do so without a tax break, even as their neighbors with employer-based insurance get tax breaks. This unfairness affects millions of middle-class Americans. Obamacare didn’t solve it. Price’s bill would.

Like the 2017 Project’s alternative, Price’s legislation would more or less equalize the tax treatment of health insurance by offering tax credits to help people buy insurance of their choice, in the amounts of $1,200 for those under the age of 35, $2,100 for those between 35 and 50, and $3,000 for those 50 and over — plus $900 per child.  It would encourage the use of health savings accounts by offering a one-time tax credit of $1,000 for opening or having an HSA.  It would cap the employer-based tax break at $20,000 for a family plan and $8,000 for an individual plan. (Those with, say, a $24,000 family plan would still get the full tax break on the first $20,000.)  And it would do so without changing the tax treatment of the typical American’s employer-based insurance.

Price’s legislation would encourage people to shop for value by letting anyone who buys insurance for less than the value of the tax credit deposit the savings into an HSA. It would provide commonsense protections for those with preexisting conditions. And it would repeal Obamacare — and every one of its coercive mandates.

The result would be a revitalized individual market in which prices would start to be revealed, people would start to control their own health care dollars, choices would increase, quality would rise, and costs would drop.

Price’s alternative would cut federal spending by something on the order of $1 trillion over a decade by comparison with Obamacare, and its outlays would likely be fully paid for even compared to the pre-Obamacare status quo.  It would cut taxes by something on the order of $1 trillion over a decade compared to Obamacare, and it would likely provide a tax cut even compared to the pre-Obamacare status quo. Most importantly, it would undo Obamacare’s consolidation and centralization of power.

The bill isn’t perfect.  Rather than providing direct tax credits to individuals and families — and thereby giving millions of middle-class Americans a tax cut — it would instead mostly channel the subsidies through insurance companies. But this could easily be fixed.

The Price legislation has the best chance of any proposal to date to unite Republicans around an Obamacare alternative.  That’s because the legislation is well-conceived both politically and as policy.  It is simple and understandable.  It wouldn’t disrupt the tax treatment of the typical American’s employer-based insurance, thereby denying liberals their easiest potential line of attack.  And it splits the difference between the two other leading Congressional efforts — the Republican Study Committee and Burr-Hatch-Upton proposals — in that it doesn’t benefit only one portion of the population (Burr-Hatch-Upton would help almost exclusively the poor and near-poor, while the RSC proposal with tax deductions rather than credits would mostly help the middle class and up). Instead it provides real reform that would be good for a wide cross-section of American society.

Price has dropped his new legislation, which has Jeb Hensarling and Marsha Blackburn among its original co-sponsors, at a good time. It provides the makings for a sound response to a potential ruling against the Obama administration in King v. Burwell.  More importantly, it provides Republican presidential candidates with a concrete example of a legislative alternative to Obamacare that is politically attractive, would make possible full repeal of Obamacare, and would offer real reform right away and lay the groundwork for further reforms down the road.

Now it’s up to the congressional Republican leadership and Republican presidential candidates to pick up the ball Price has tossed into play, and run with it.

© 2015 Weekly Standard LLC. Reprinted with permission.