The false narrative of “Repeal and Replace” is keeping Obamacare

· January 12, 2017  
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What is the GOP plan to replace Obamacare? That is the question vexing all of the Republican beard strokers in Washington these days. But it is the wrong question to ask and it is built upon an erroneous premise. Along with false information about Senate procedures, it is contributing to the reluctance to repeal this disaster.

The real questions that should be on the GOP’s mind  are: what is wrong with our health care system, how did Obamacare exacerbate all of its existing vices, and how we can roll back not just the Obama-era anti-market interventions, but reform even some destructive policies that existed prior to Obamacare? 

The entire mantra of “repeal and replace” was flawed from day one because it accepted the Democrat premise that Obamacare actually served a semi-useful function, albeit with some glaring flaws, and therefore, must be replaced with something similar. It presupposes a solution without understanding the problem. It’s like the mindless calls for “immigration reform” and “criminal justice reform” without specifying what is wrong to begin with and which problem is being solved with the “reform.”

Health care reform is no different, although much more complex by its very nature.

Much like immigration reform, conservatives should absolutely have a contrasting plan on health care, but not because of Obamacare. Obamacare needs to be repealed, period. Not replaced. Conservatives should have been supporting true free market health care long before Obamacare. Rather than replacing Obamacare in pursuit of similar goals, the plan should be rooted in diametrically opposite premises, guiding principles, and goals.

The root problem with Obamacare

In pursuit of the utopian goal of universal coverage for every last American, liberals have created a living hell of unsustainable crushing costs for everyone. At its core, this is what government has been doing for decades with mandates, regulations, and subsidies. This has created a death spiral of government-induced rising costs, a need for subsidization, and a further self-fulfilling increase in prices in health care and health insurance due to the circuitous cycle of government market distortions. Obamacare merely took all of those liberal health care policies and stepped on the gas pedal, making the price of health care and insurance astronomically high, inducing a need for well over $1 trillion in combined federal and state subsidies and spending on health care overall.

To be clear, while the tax hikes, extra spending, and unconstitutional requirement to purchase insurance or for employers to offer health insurance are onerous, by far the worst elements of Obamacare are the actuarially insolvent insurance coverage regulations. Those regulations, most prominently guaranteed issue (must cover all pre-existing conditions, even if they never had any insurance) and community rating (charge everyone the same unsustainable price), have driven the cost of insurance into a death spiral. The second worst elements are the massive subsidies and the Medicaid expansion, which not only drive up the government’s budget in order to cover the self-inflicted high costs, but indirectly create an even greater inflationary pressure on consumer prices.

This entire approach is rooted in ignorance of free markets but also in a broken political barometer.

“Repeal and Replace” accepts the premise of that root problem

When Republicans refer to “repeal and replace” they really mean bait-and-switch because they are accepting the premise that we need to keep the pre-existing condition coverage mandates that are responsible for unsustainable costs along with refundable tax credits (which are subsidies in all but name only) in order to sustain the higher prices. Accordingly, when they say they are concerned we must not repeal Obamacare unless we have a replacement plan in place, they mean we must not repeal the coverage regulations until we have similar regulations in place. Likewise, they mean we must not repeal the subsidies until we have a pale-pastel version of the subsidies in place.

This entire approach is rooted in ignorance of free markets but also in a broken political barometer. Even though Republicans are in their strongest electoral position since the Civil War precisely because of the crushing Obamacare premiums, they still believe that on net they will somehow lose by repealing what they were asked to repeal. The loss of coverage and unaffordable costs are on Democrats, not Republicans. The number of people who would somehow lose coverage by getting rid of the mandates (remember, there was always guaranteed issue for those who already had some form of insurance beforehand) and would not be eligible for any other program is very small relative to the number of those who would see relief and the benefit to the broader market.

As for the subsidies and Medicaid expansion, everyone already agrees that we would have a two-year transition to give us plenty of time to lower costs both through repeal of the insurance mandates and through further free market reforms. But that decline in prices will never be actualized if Republicans don’t use budget reconciliation to get rid of the insurance regulations, particularly guaranteed issue and community rating. With the wide perception that Republicans repealed Obamacare, they will get blamed from premiums not decreasing as promised because the media and the public will not realize that the insurance regulations remained in place.

Affordable health care: repeal, reform, and restore

The central goal of any conservative health care plan, on the other hand, should be reducing market costs of health care and health insurance, not expanding access or universal coverage as an ends to itself. The essential guiding principle of achieving that goal is eliminating as many of the government regulations and interventions that have driven up the costs of health care. Simultaneously, reform must foster as much opportunity for flexibility, portability, personal responsibility for individuals; innovation, and competition in the market place for health insurance, as well as fixing anti-market forces on the supply side of health care itself. The end result will not be utopia. Rather, it will provide the largest array of choices at the lowest costs for the broadest number of people — the best outcome we can ever aim for.

The primary focus of conservative health care reform should therefore be centered on countermanding those odious price-hiking regulations and interventions, while keeping government spending on health care to as little as politically feasible.

The absolute worst thing for Republicans to do is to maintain the pre-existing condition mandate, in effect, “replacing Obamacare with Obamacare.” This is what makes insurance so costly for everyone.

Instead, Republicans should be focused on reforming the entire system and restoring the free market. Republicans should work on lowering the costs for those who want to purchase insurance on their own, and that will help expand coverage. Also, equal tax treatment for the individual and employment markets, eliminating the anti-trust exemption for insurance, coupled with expanded HSAs and breaking down cross-state insurance barriers, will make insurance portable, affordable, and foster more options and competition. It will further incentivize healthy consumers to take responsibility for their own health insurance, shop wisely, not over utilize and distort pricing, which in itself will reduce the inflationary pressure and create numerous cheaper options for a variety of coverage plans. This will limit the scope of the pre-existing condition problem and shore up more funds to deal with the minimized scope of the problem.

Coupled with numerous supply side fixes, such as tort reform, breaking down onerous FDA regulations on drugs and devices, cutting regulations on telemedicine and scope of practice for health care extenders, updating rules on medical accreditation, allowing doctors to write off the cost of indigent care, and giving hospitals authority to turn away illegal immigrants with non-urgent care will go a long way in reducing the actual cost of health care. This, in turn, will take pressure off the need for third and fourth party payer and help restore insurance to its original purpose.

Rather than a death spiral of self-fulfilling price hikes and bankrupting subsidies, restoring the free market will create a self-fulfilling momentum of price decreases, efficiency, portability, and personal responsibility.

However, each one of these ideas needs to be ironed out and passed through regular order. Unlike Democrats, we don’t believe in throwing in 10 disparate ideas into one bill. In the meantime, Obamacare — with its core regulations — can and must be repealed immediately. If Republicans truly understood health care, they would see that is the only viable option on the table. 

Author: Daniel Horowitz

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.