How to Prepare for Obamacare's Collapse
Fear of disruption has long dominated the politics of health care. People seem to have a strong, and reasonable, preference that their health-insurance arrangements not be up-ended by the ideological schemes of politicians.
That's been an obstacle to left-wing dreams of a single-payer system and right-wing dreams of an individually based market to replace the insurance most people get from their employer. The Affordable Care Act took its worst P.R. hit when President Barack Obama's promise that people who liked their existing insurance could keep it turned out to be false.
But there may be more up-ending ahead. Several million Americans could find their health insurance becoming vastly more expensive if the Supreme Court rules against the Obama administration in a pending case. That's what the court should do -- see here for a longer argument on that point -- but the elected branches of government need to develop contingency plans to deal with the affected people.
The problem is the fault of the administration and its supporters. Obamacare, their most cherished accomplishment, authorizes tax credits to help people buy insurance on exchanges established by state governments. Because political resistance to the law has been longer-lasting and more widespread than advocates anticipated, however, 36 states didn't establish exchanges. The federal government stepped in and set up exchanges for the residents of those states, as the law allowed. But the law nowhere says that the government can offer tax credits to help buy plans on those federal exchanges.
The initial instinct of the Internal Revenue Service was to follow the law, and not provide the credits. The White House insisted that it barrel ahead. The court ought to rule that that the IRS can't rewrite statutes to suit the administration's preferences. If it does that, however, it will create hardship for people who get their coverage through federal exchanges and could lose their tax credits. Many of them would no longer be able to afford insurance.
At that point, Republicans will have three basic choices.
The first is one that Democrats will presumably demand: that Republicans end the hardship. State legislators and governors will be pressured to create exchanges to get their residents qualified for the tax credits, and Congress will be asked to amend the law. This would solve the immediate problem. But Republicans would and should be loath to go along because it would involve expanding a program they consider a colossal mistake.
The second choice would be to do nothing, watch a lot of people suffer, and say that it's the administration's fault and not something they're obliged to do anything about. I suspect that much of the public will, in fact, blame the administration. But Republicans also will look bad if they take this stance, and may find that the pressure to do something grows and grows. In the interim, many people will have been yanked around by the government.
The third choice, which I favor, would be for Republicans to pass bills that take care of the affected people while advancing a much more conservative and sensible set of health-care reforms. The solution, that is, is for Republicans to begin to make good on their promise to replace Obamacare.
James Capretta and Yuval Levin have recently outlined what a conservative Obamacare replacement could look like. Their plan involves lower spending, lower taxes, and lower premiums than Obamacare, contains no mandates or essential-benefits package, and offers more protection against catastrophic medical expenses. A similar plan has been estimated to provide coverage for slightly more people than the Affordable Care Act does. And the authors have explained how we could transition from Obamacare to the new system while reducing the difficulty, cost and inconvenience for current beneficiaries.
Republicans haven't embraced this plan en masse. But the soon-to-be-chairman of the Senate Finance Committee, Orrin Hatch, has sponsored very similar legislation, and the soon-to-be-chairman of the House Ways and Means Committee, Paul Ryan, has endorsed comparable ideas.
If Republicans did unite behind this approach, the administration would surely oppose it. But Obama would be in a pretty weak position to bargain. Much of Obamacare would have just self-destructed due to its own design flaws and lack of public support, and Republicans would be offering a way to advance the law's stated goal of assuring coverage -- if not in the highly prescriptive and centralized manner the White House prefers. Democrats' favored lines of attack on Republicans over health care -- that they have no alternative, that they would take people off the insurance rolls -- would have been neutralized.
Would Republicans respond to the court this way? Will they start co-sponsoring and talking up this legislation now in preparation for a possible ruling? It would be the right thing to do and it would be in their interests.
So probably not.
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