Obamacare Replacement Do’s and Don’ts

Friendly advice for Trump & Co.

For the first time since the enactment of President Obama’s misguided and destructive health care law, Americans are in a position to effect its repeal.

In the wake of the historic 2016 elections, Republicans control the Senate, the House, and the White House.

And with the Obamacare exchanges collapsing, the case for repeal has never been stronger.

But the question remains: What, exactly, should we replace the so-called Affordable Care Act with? Also: By what process should be go about it?


1. Do stick to first principles.

Step one: Identify sound principles to guide our health care reform efforts. Here are my suggestions:

  1. The states, not the feds, are the proper regulators.
  2. Consumers, not bureaucrats, are the proper sovereigns.
  3. Lower medical costs, not “universal coverage,” is the proper goal.

If we follow those three rules, we can’t go wrong.

When it comes to reforming American health care, decentralization is the highest form of wisdom—and the highest form of compassion. Markets work, when we let them.

“Universal coverage” is a mirage. We can never reach it, and we can only get close to it by imposing bureaucratic burdens that end up impeding markets and thus produce more harm than good. Obamacare is Exhibit A for this truth.

Only by decentralizing health care markets and liberating consumers can we reduce costs, improve quality, and promote innovation. Only when the patient is the consumer and the consumer is king can we expect to see universal access to timely, affordable, high-quality medical care for all.

Regulation is necessary, to be sure, but it must be sensible, local, and minimal. Where markets fail or leave gaps, the remedy is not government mandates, price controls, or entitlements. The remedy is private charity and, where necessary, targeted local welfare.

Freedom is the best medicine.

2. Do repeal every word of Obamacare.

Despite what some Republicans have claimed, we can in fact repeal every word of Obamacare’s misguided and harmful insurance market “reforms” with a simple majority vote in the U.S. Senate. This is important. Democrats have no power to block a full repeal bill. I’ve written more about this elsewhere.

If we attach to a full-repeal bill some transitional block-grant funding, in order to smooth out the speed-bumps for people who are currently dependent on Obamacare subsidies, and to help people with prohibitively high medical expenses, we can have it all: we can repeal and replace Obamacare in a single bill, with a single vote, without impediment or delay. We can repeal and replace right now, and not, as some Republicans suggest, “years” from now. Total victory!

This bold, principled path is more politically prudent than “repeal and delay” and similar, timid strategies. Full, immediate repeal is more compassionate, and politically less painful, than partial or gradual repeal. Repealing every word of the health care law’s market “reforms” minimizes the disruption and other negative impacts that would come from repealing, say, only the individual mandate. And acting swiftly and decisively removes the uncertainty that would otherwise harm fragile insurance markets.

Therefore, Republicans should stop trying to cling to those parts of Obamacare that happen to poll well. I’m thinking in particular of the law’s ban on preexisting conditions exclusions and its mandate to let adults stay on their parents’ insurance till they’re 26—which many Republicans support because they are popular. Such mandates are bad policy, but states can always impose them whenever they wish. There is no need for federal involvement. Far better to be consistent and principled—and repeal every word of the federal “reforms.”

Note: I want to make clear that, by the term “every word of Obamacare,” I mean every word of the Affordable Care Act’s market “reforms,” that is, all of Title I of the Act, plus a few closely related provisions like the individual mandate tax penalty. I am not including in that definition the law’s numerous peripheral items, such as its tax hikes, Medicaid expansion, Medicare cuts, and public-health pork. That stuff is mostly bad policy, to be sure, and most of it should be repealed at some point. But what really needs to go, right now, is the ACA’s core mandates and price controls.

3. Do make health insurance voluntary.

If for some reason, Republicans don’t repeal every word of Obamacare, they must at the very least repeal its infamous mandate to buy health insurance. This is vital. The individual mandate is the law’s linchpin and its most unconstitutional and anti-liberty provision. It is also the least popular. There is no excuse for retaining the individual mandate. Once that provision is gone, the rest of Obamacare’s market “reforms” will inevitably follow, because that’s what happens when you remove a linchpin.*

Note: By the same principle, we must also repeal Medicare’s individual mandate. Yes, Medicare has one, and it’s even stiffer than Obamacare’s. Right now, seniors are legally compelled to accept Medicare benefits whether they want them or not, and are effectively trapped in a government-run health care program for the remainder of their lives. That is wrong and un-American. In a free country, acceptance of government aid should be voluntary without exception.

4. Do follow the Constitution.

The Constitution’s Tenth Amendment leaves health insurance regulation to the states. And states are more than capable of regulating insurance. Federal meddling is unwarranted and unnecessary. In working to replace Obamacare with something better, Republicans should resist such popular but pointless ideas as forcing health insurance to be sold “across state lines” and such unconstitutional ones as imposing federal medical malpractice reforms on the states. It’s okay, Uncle Sam. Let it go. States have this.

5. Do promote HSAs.

Health savings accounts, created in 2003 and today enjoyed by more than 20 million Americans, are the best available tool for promoting patient-driven health care. Expand them aggressively.

6. Do create transitional block grants.

As a practical matter, we need to smooth the transition back to a state-regulated, consumer-driven system. But that doesn’t require a lot of complex legislation. All we need is to do is replace Obamacare’s existing subsidy schemes with transitional block grants to the states, to help people who are currently dependent on Obamacare subsidies and to help those with prohibitively expensive medical conditions. Establishing such block grants would also create the necessary infrastructure for the eventual transfer of all federal health insurance regulatory powers and subsidy schemes back to the states (and the private sector), where they belong.


7. Don’t pass a 2,000-page bill no one has read.

Instead, follow regular order. Whatever can’t be attached to the repeal-every-word bill should be considered separately and with care. Move multiple small bills. Permit lots of time to read them. Allow plenty of amendments. Legislate.

8. Don’t focus on covering the uninsured.

Instead of focusing on the number of people with a “health insurance card,” we should focus instead, and exclusively, on reducing health care costs. That will make it easier for people to obtain an insurance card, if they want one. Trying to “get more people covered” with government-defined and approved insurance is a game conservatives can never win. Progressives will always outbid them, leading inevitably to more government interference, poorer quality, and more needless suffering and death. In practice, a “universal coverage” bidding war pretty much always ends up leading to more people being put on Medicaid, because Medicaid, a broken program that ill serves the poor, is comparatively cheap. It’s cheap because it’s skimpy. Indeed, it’s the skimpiest insurance in America. If you want to put an “insurance card” in the maximum number of hands, for the lowest budgetary cost, Medicaid is your ticket. But it will be a crappy insurance card. People holding that card will find it hard to find a doctor who will agree to see them. I would humbly submit that’s not compassionate. True compassion means actually making it possible for people to see a doctor or obtain a therapy when they need one. And that can only happen when you reduce costs and increase competition. In other words, it can only happen when you fire the central planners and liberate patients to control their own health care decisions and their own health care dollars.

9. Don’t disrupt the employer-based system.

While the tax code definitely needs to be changed to make health insurance more affordable and portable, we also need to be careful. Half the U.S. population gets its health benefits through the workplace, thanks to generous federal tax subsidies created in the 1940s. Those subsidies are wasteful, distortive, and redistributive, but because most American are more or less satisfied with their existing arrangements, it’s risky to mess with them. We could perhaps cap the existing tax subsidies, as a first step to equalizing the tax treatment of health benefits. But we should not eliminate the existing subsidies until the public is ready for the change. For example, it would make perfect sense in a context in which we are getting rid of the income tax altogether.

10. Don’t create Obamacare Lite.

In my more pessimistic moments, I’ve predicted that Republicans will replace Obamacare with something that looks a lot like Obamacare—Obamacare Lite, if you will. And that continues to be the apparent direction of GOP leaders. But I prefer to be optimistic. We can do this, people!

What’s “Obamacare Lite”? When I use that term, I mean the following. “A modified government-run health care system that includes at least these three components: 1) subsidies to help individuals purchase health insurance, 2) mandates, direct or indirect, on individuals to purchase health insurance, and 3) mandates on insurers that prevent health insurance from being priced according to medical risk.” In short, a pseudo-market scheme of “managed competition,” in which markets are not allowed to work, but politicians and bureaucrats get to pat themselves on the back for making sure everyone has a health insurance card. Both Obamacare and the current crop of leading Republican “replace” plans are forms of managed competition. All trace their ancestry to that grandaddy of such schemes, the old Heritage Foundation health care plan from the 1990s. Though well-intentioned, that plan was based on a number of naive and mistaken assumptions, beginning with the “universal coverage” mirage. To be fair, the emerging Obamacare Lite plans that Republican leaders are currently drafting on Capitol Hill do represent a kinder, gentler version of Obamacare. They soften the individual mandate, for example, and loosen the law’s community-rating price controls (from 3:1 community rating to 5:1, with states allowed to go even further). Obamacare Lite would presumably be less noxious than Obamacare Classic. But why bother? If they share the same flaws, they’ll cause the same harms, soon enough. No. Let’s try a different approach. Let’s try giving patients and doctors their freedom back.

11. Don’t increase the deficit.

What about the price tag? Would replacing the failing health care law with a return to state regulation, consumer sovereignty, and free markets, facilitated by transitional block grants, expand the deficit? The answer is potentially yes, if states and private entities demand additional upfront spending, to smooth the transition. In fact, such demands are likely. And I have to say, it would be worth it—Obamacare is that destructive and harmful. But would it be necessary? No. Our national debt already stands at a staggering $20 trillion. Expanding that burden would be pretty unconscionable. Uncle Sam spends more than $4 trillion a year. There’s plenty of waste, duplication, and unconstitutional spending in the federal budget to make room for important and needed spending. We can repeal Obamacare without adding one dime to the deficit.

Dean Clancy, a former senior official in the White House and Congress, writes on U.S. health reform, budget, and constitutional issues. Follow him at deanclancy.com or on twitter @deanclancy.


* Update, Feb. 24: It turns out House Republican leaders, although they want to formally repeal Obamacare’s individual mandate, hope to replace that mandate with a back-door version of the same thing. Sigh.

In a recently leaked draft of their “Repeal Plus” health care reform package, dated Feb. 10, Paul Ryan and company propose to enact two new policies that together amount to an individual mandate by another name: 1) a new “continuous coverage” penalty that jacks up your health insurance premiums by 30 percent if your coverage has lapsed for any reason for more than 60 days during the past 12 months, and 2) a new “refundable” health insurance tax credit (essentially a voucher) worth thousands of dollars a year, that you must buy government-approved health insurance to obtain, and which, if you decline it, means you forgo those thousands of dollars—in other words, a nominal carrot with the effect of a stick. In short, a back-door individual mandate. Now, to be sure, the goal of the tax credit—reducing the tax-code discrimination against people who buy their insurance outside the workplace—is an important one. But in combination with the Republican “continuous coverage” mandate, it’s excessively coercive—and unnecessary. If we repeal all of Obamacare’s mandates and send health care regulation and subsidies back to the states, where the Constitution wisely leaves them, there’s no need for this kind of coercion.


Yes, We Can Repeal Every Word of Obamacare

How to Fix Paul Ryan’s ‘Obamacare Lite’ Plan

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