What Republicans Must Tell America About Their Replacement Of Obamacare

REUTERS/Aaron P. Bernstein - RTX317VW

Lewis K. Uhler and Peter J. Ferrara National Tax Limitation Foundation
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Republicans have not done a good job explaining their Obamacare Liberation bill to the American people.  But the Republican bill would actually be far better for the middle class, working people, and the poor than Obamacare.

First, the Republican bill would be better for the poor on Medicaid. Despite all the hysterical name calling about the Republican bill, everyone on Medicaid today would be individually grandfathered, as well known health policy expert Betsy McCaughey has explained. No one presently on Medicaid will be thrown off under the Republican bill.

Moreover, adding millions more Americans to taxpayer dependency on Medicaid is not a solution for the uninsured. Even though Medicaid already spends hundreds of billions a year in federal and state funds, the government does not pay doctors and hospitals enough to assure that the poor dependent on the program can get essential health care when they need it.

That is why medical studies show that health outcomes for the poor dependent on Medicaid are not any better than for the uninsured. Medicaid has consequently gone from a program of assuring essential health care to the truly needy to effectively an institutionalized means of denying health care to the poor.

The much denounced Republican health reform plan includes fundamental Medicaid reforms that would address this problem by transferring control over Medicaid to the states through block grants. The states, as in Indiana and Rhode Island, have proven that they can reform Medicaid to better serve their needy poor, actually assuring access to health care.

Secondly, the Republican bill would assure coverage for those with pre-existing conditions. Obamacare seeks to provide that coverage by “guaranteed issue” and “community rating” regulations, forcing insurers to sell insurance to everyone at the same standard rates, no matter how sick and costly when they first apply. That encourages people not to buy insurance when they are healthy, knowing they could always buy insurance when they get sick.

Both of those effects are major reasons insurance premiums have soared under Obamacare. That applies to insurance sold in the individual market, which covers 15% of Americans. Guaranteed issue and Community Rating piles in the sickest and most costly of the uninsured into that market. Those covered by employer insurance would not have this problem.

McCaughey has shown that those sickest and most costly of uninsured Americans account for 50% of total costs in the individual market. That means under Obamacare, these costs are shared by only 15% of Americans. No wonder their premiums have soared.

The Republican bill provides over $100 billion to the states over 10 years that can be used by each state to finance High Risk Pools. Those who could not get health insurance because of a costly pre-existing condition, like cancer or heart disease, would thereby qualify to get health insurance coverage covering the condition from the High Risk Pool. The cost of their pre-existing condition would then be spread among all taxpayers, rather than just the 15% in the individual market.

Costly pre-existing conditions would then be covered by health insurance, through the High Risk Pools, without trashing the health insurance markets for everyone else.

Thirdly, the Republican bill would help restore booming economic growth. The taxes and regulations of Obamacare have been like a wet blanket on the economy, preventing it from ever achieving a normal recovery from the financial crisis. The American historical record has long been the worse the recession the stronger the recovery, as the economy grows faster than normal for a few years to catch up to where it would have been on the long term economic growth trendline.

But no such recovery ever happened with President Obama’s economy. Instead, under President Obama America suffered the worst economic recovery from a recession since the Great Depression.

Obamacare raised taxes by about a trillion dollars over 10 years, to finance about a trillion in increased government spending. Those taxes included a 3.8% surtax on capital gains, dividends, and interest, increasing the tax rate on such capital income by close to 20%. Repealing those taxes, and Obamacare spending, would help promote a booming, full recovery at long last.

Moreover, the Obamacare employer mandate is effectively a tax on jobs, which employers have avoided by reducing growth of full time jobs, defined as 30 hours a week or more. The individual mandate is effectively a tax on the middle class and working people. Repealing those taxes would further promote economic growth, jobs, and wage and income increases.

Fourthly, the Republican bill would repeal the individual mandate and the employer mandate, freeing both workers and employers to choose the health insurance each preferred in the competitive marketplace. That would be health care liberation, delivering on an original promise of Obamacare that if you like your health plan you could keep your health plan, and if you like your doctor you can keep your doctor, on the network of your health plan.

Market competition plus Republican repeal of regulatory and tax burdens on health insurance would reduce insurance premiums, by as much as 30% CBO estimates. That would deliver on still another promise made by (and broken by) Obamacare, to reduce health insurance costs.

Declining health insurance costs would encourage more of the healthiest Americans to buy such insurance, prompting further declines due to a healthier overall pool. Those declines would encourage more of the uninsured to freely choose to buy health insurance, reinforced by the bill’s tax credits to purchase health insurance.

Lewis Uhler is Founder and President of the National Tax Limitation Committee and the National Tax Limitation Foundation (NTLF). He was a contemporary of a collaborator with both Ronald Reagan and Milton Friedman. Peter Ferrara is a Senior Fellow with the Heartland Institute, a Senior Policy Advisor with the National Tax Limitation Committee, and Principal and General Counsel with the Raddington Group, an international economic consulting firm. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.