rom the time of its inception until the end of June of this year, the Affordable Care Act had been riven with uncertainty about whether it would pass, what would happen to it in a Republican-led Congress or with a President Romney, and whether it would survive judicial scrutiny. But when the next president enters office in 2017, he or she will have to deal with the stark fact of its existence. The Supreme Court ended any hope of its destruction before Obama’s departure from office when it chose to uphold the “intent” of the law in King v. Burwell at the end of its 2015 term—rather than ruling that federal subsidies to states that have not set up their own health-care exchanges were a clear violation of the language of the statute. There will be no visitation from above to save America from ObamaCare. The ACA appears fairly ensconced. It is not a success, and it remains unpopular, but there it is, and there, for now, it will stay—and the various players in the U.S. health-care system are trying to work through, or perhaps more accurately, around, it to get things done.
The GOP primary battles will help select a standard-bearer who can champion and rally support for a single plan that the party can finally call its own.
Due to these uncertainties, this Republican president would need a slate of proposals that could be pursued under almost any scenario. While running for office, he or she would need to lay the groundwork to press forward a mandate that could work in the various political configurations of Washington. A Republican candidate who wants to win the primaries will have to advocate outright repeal of ObamaCare. But to win the general election, he must also have a plan that can be acted upon if repeal proves impossible to attain in 2017—even if the new president goes for it anyway and fails.
Republicans have long been accused of not having alternatives to the ACA, but in truth, if anything, Republicans and conservatives have designed and proposed too many plans to replace ObamaCare. This makes it extremely difficult for Republicans to unite behind a single plan. Fortunately, the primary battles will help select a standard-bearer who can champion and rally support for a single plan that the party can finally call its own.
The candidates, and eventually the new president, will have to properly define the ObamaCare problem. In designing the Affordable Care Act, the Obama administration tried to lasso the moon—to bend the cost curve down while providing universal insurance coverage at the same time. In doing so, the president highlighted the number of people who were uninsured at any point throughout the year, a figure that ranged between 30 million and 46 million.
The law failed to solve either problem. Costs have continued to rise, and even with the increase in the number of people covered, there are and will remain tens of millions of people in the uncovered category. According to the Congressional Budget Office (CBO), there are 35 million people currently uncovered. Even in 2025, more than a decade after its implementation, there will still be 27 million uninsured Americans. The ACA, therefore, has not solved the problem of insuring all Americans at some point in the course of a year. By the standards of the legislation’s intent, it has been, and it will remain, a failure.
The ACA has also failed in its secondary objective: It has not solved the problem of rising costs. Indeed, it has probably made things more costly for both the insured and the federal budget. A recent analysis by Health Pocket found that the ACA plans submitted across 45 states were an average of 14 percent more expensive for the upcoming 2016 year than they were in 2015. And according to the University of Minnesota’s Stephen Parente, the average family plan could cost 61 percent more in 2023 than it did in 2015.
The sales job Obama did on the Affordable Care Act compelled him to claim it would be the comprehensive solution to America’s health-care ills, and his immodest approach unsurprisingly yielded an immodest and unwieldy result. Providing a path to a positive and more tailored solution is therefore essential to replacing or reforming the legislation.
Such a path requires reframing the problems that serious health-care legislation must solve.
Not only has ObamaCare failed to meet its cost-control and universal-coverage promises; it has also proved disruptive to those who were already covered.
Second, government must get out of the business of setting prices. It cannot determine prices in health care without severe consequences for patients, companies, and technological progress. Markets are most efficient at determining prices, and only market forces can simultaneously meet needs and create an incentive for innovation while driving down prices. Government can impose costs, as the ACA does, by, say, taxing medical devices or imposing mandates on insurance plans. But such acts only drive up prices and distort incentives. The lesson to be derived from these facts is that health-care policy should not aim to set prices or demand that industry not hike prices. Rather, government policy should promote transparency and unleash the power of hundreds of millions of consumers making smart, value-driven choices to help bring down health-care costs. Focusing on these two matters will take the Republican candidate far down the path toward building public sentiment for a genuinely workable health-care policy.
fter this, the theoretical Republican running for president in 2016 must also take an accurate measure of where things stand politically. The primary advantage a new Republican president would have is ObamaCare’s continued unpopularity. Support for the act has consistently remained under 50 percent, and in the two congressional elections in which the GOP made it a central issue, the party won overwhelmingly. If a Republican were to win in 2016, it is a safe bet that the ACA’s continued unpopularity will have been a major factor in that victory.
This unpopularity is not merely the result of partisan sour grapes. It is due to an endless train of ugly headlines and even uglier letters to small businesses and individual consumers. Not only has ObamaCare failed to meet its cost-control and universal-coverage promises; it has also proved disruptive to those who were already covered (thus belying the president’s assertion, “If you like your plan, you can keep your plan”). The 5 million Americans in the individual coverage market, for example, lost their coverage as a result of the ACA’s requirements. Employers are changing and reducing the value of their health-care offerings as a result of the costs that the ACA has imposed on them. And then there is the looming excise tax on so-called Cadillac plans—a levy of 40 percent on employer-provided insurance plans over a certain size—beginning in 2018. Nor will employer-sponsored care go untouched over the long term (such plans provide health care for 169 million Americans), as employers try to adhere to the requirements of the ACA while carefully bypassing the 40 percent Cadillac-tax levy. It is not clear whether anyone will be able to keep his plan by the mid-2020s, as the cost of health care will continue to rise, and the Cadillac tax will affect more and more plans. By 2031, the average family health-care plan is expected to trigger the Cadillac tax.
A replacement to ObamaCare would have to come up with, at minimum, $137 billion in savings, either in the form of higher taxes or spending reductions.
So this is the Republican advantage. The Republican weakness is that by the time a Republican president would take office, the ACA will be nearly seven years old. The longer it lingers, the more some patients will become dependent on it and the more it will become enmeshed in our daily lives. This will lay the groundwork for Mediscare Part Deux: the use of scare stories describing the dire consequences for patients if we get rid of the ACA. Furthermore, the conservative tendencies of both the business community and the American people will make both groups more resistant to getting rid of ObamaCare.
Another challenge is the structure of the U.S. government, which presents a number of institutional roadblocks to the ObamaCare-replacement effort, primarily the Senate’s 60-vote threshold to bring a bill to the floor for a vote—a fact the GOP is unlikely to overcome in the next election cycle unless it decides to “go nuclear” and break the 60-vote cloture system forever. Then there is the Congressional Budget Office, which is tasked with scoring the cost of certain government actions. It has said that repealing the ACA would cost either $137 or $353 billion, depending on what kind of scoring method it uses. That $200 billion differential in scores is so ludicrous that it makes one wonder whether important issues of public policy should be so dependent on such obvious and nearly comical guesswork. Even so, such guesswork means that a replacement to ObamaCare would have to come up with, at minimum, $137 billion in savings, either in the form of higher taxes or spending reductions.
To sum up: There is hunger for reform, and many good ideas for how to bring about that reform, but repeal itself remains a difficult lift. Therefore, this putative next Republican president will need to present the country with some kind of Chinese-menu approach to repairing the national health-care system—one that offers a variety of mix-and-match options to attain whatever is attainable in differing configurations based on what is politically feasible. Thus, in addition to the quest for repeal, the Republican candidate should also put forward a consensus position adopting commonsense market policies that most, if not all, Republican reforms plans call for.
Such consensus positions include, but are not limited to health savings accounts, tort reform, greater flexibility for states with respect to both Medicaid and the ObamaCare exchanges, and the ability to purchase insurance across state lines. A package including these elements was the House Republican alternative plan of 2009, which the CBO estimated would reduce the cost of insurance premiums in the small-group, the large-group, and the individual insurance markets. A package including these elements would help bring the cost of health care down and begin to address some of the excesses and cost increases brought about by the Affordable Care Act. In addition, the new president would need to be prepared to pursue a slew of administrative changes, including additional flexibility for governors for Medicaid reforms and flexibility in the management of state-level exchanges, as well as the use of the administrative state to change or amend whatever is changeable in the Affordable Care Act.
The legislative proposals should come in the form of a series of bills, each of which would improve health care in America and increase the ability of markets to drive health-care costs and value. The new president would not have to limit himself, or herself, to one massive stand-alone bill à la ObamaCare but should embark on a number of actions, both administrative and legislative, that would benefit health-care consumers. These benefits should come from the proposals both individually and collectively. Each provision would take us closer to a better, cheaper, more inclusive system, but we should not repeat the ACA’s mistake of making each and every provision dependent on every other provision.
A relatively simple idea is at the center of all anti-ObamaCare reform proposals: using the cost savings from system reforms to pay for subsidies that would encourage low-income, uncovered Americans to purchase insurance. One advantage the new president would have is the extremely high cost of the ACA subsidies and Medicaid expansion. Scaling back the excessive spending in this area would give policymakers some revenue to work with. A disadvantage, though, are the so-called cost savings in the ACA as scored by the Congressional Budget Office. These are made up of new taxes, Medicare cuts, and hoped-for improvements in the cost of care over time.
The financing piece is the most difficult part of the whole puzzle, one fraught with the most political and policy peril. The key matter here is the tax treatment of the purchase of health care, and the structure of whatever subsidies the government provides in order to aid the purchase of health care. Internal disagreements on the question of a tax credit versus a tax deduction have paralyzed conservative thinking on this issue for almost a decade. To circumvent this battle, the next Republican president should set out coverage and subsidy goals and simultaneously acknowledge that these goals could be achieved in a variety of ways. This higher-level approach would signal that it makes sense to let the political process work that out rather than insist on a very specific proposal in advance.
Even if the ACA is not repealed in toto, the next president can help Americans understand the problems in the system and make significant changes that can improve things and push the system in a more market-driven direction.
The Republican president should aim to reduce the disparity in the tax treatment of health-insurance purchasing—meaning that individuals as well as employers should get a tax break for purchasing insurance. In addition, there should be some kind of tax benefit to encourage the purchase of a high-deductible insurance plan (a so-called catastrophic policy). The plan should also avoid massive disruption of the employer-based system, as most Americans already get their coverage there and express satisfaction with that care thus far. And this tax break should be means tested, which means that it should not go to upper-income individuals, thereby avoiding the entitlement mentality that has set in with the Medicare program, where all who come get benefits, regardless of income levels.
In pursuing this approach, the GOP standard-bearer need not give the details on every aspect of every component of the plan. Recall that Senator Obama’s plan for health care was a collection of generalities, and one of the key components of the ACA—the individual mandate requiring that every American purchase health insurance—was something Obama opposed in his primary bid against Hillary Clinton. The next Republican candidate for president, while maintaining flexibility in both details and approach, should provide the American people with a roadmap of where the country should go. Even if the ACA is not repealed in toto, the next president can help Americans understand the problems in the system and make significant changes that can improve things and push the system in a more market-driven direction.
This theoretical new president cannot waste the limited window of opportunity. He will have to move, and move quickly. If he does not, or if he fails spectacularly to repeal the bill with no backup plan in place, the prospects for a workable alternative to ObamaCare will become vanishingly small, to the permanent detriment of patients, doctors, taxpayers, and the United States.