A Big Step Toward Repealing and Replacing Obamacare

For six years, it has been abundantly clear that Americans want Obamacare to be repealed—but only if a well-conceived conservative alternative is positioned to take its place. That's why the recent release of the House GOP health care plan is a big deal. The new plan would of course repeal Obamacare. But it would also fix what the federal government had already broken even before the law was passed and made things so much worse.

The proposal pairs an Obamacare alternative with Medicaid reforms and the crucial Medicare reforms (amounting to a kind of "Medicare Advantage Plus") that Speaker Paul Ryan and House Republicans have long championed. As Ryan put it after the proposal's release, "The way I see it, if we don't like the direction the country is going in—and we do not—then we have an obligation to offer an alternative….And that's what this is." He called the plan not merely "a difference is policy" but "a difference in philosophy."

Like the Obamacare alternatives advanced by the 2017 Project, the Hudson Institute, Ed Gillespie,Tom Price, and Scott Walker, the House GOP plan would finally fix the tax inequality in health care—which favors job-based insurance over individually purchased insurance—by offering a simple, refundable, non-income-based tax credit to those who buy health insurance on their own. (Those who don't use their whole tax credit could put their savings in a health saving account.) Why should someone who has to buy health insurance on his own not get a tax break while his next-door-neighbor, who has job-based insurance, gets a tax break? Fixing this longstanding tax inequity, combined with repealing Obamacare, would allow the individual market—finally—to begin flourishing.

Meanwhile, the GOP plan wisely wouldn't touch the tax treatment of the typical American's job-based insurance—that wouldn't change one iota. At the same time, however, the proposal would close the tax loophole on high-end insurance—which says the more you spend (on insurance), the more you save (in taxes)—without resorting to a new, clunky, punitive tax like Obamacare does with its "Cadillac tax." The GOP proposal would merely cap the existing tax exclusion for job-based insurance, at a level well above the cost of the typical American's insurance plan, and let people get the whole tax break up to that amount.

Given that the CBO says that Obamacare has increased the number of people with private insurance by a mere 8 million (or 2.5 percent of the population), which is probably a generous estimate, it's hard to believe that the GOP plan wouldn't result in roughly as many (and perhaps far more) people having private insurance as under Obamacare—without compelling them to buy it. Indeed, as John Merline atInvestor's Business Daily highlights, based on numbers from the Obama administration's own Department of Health and Human Services, a lower percentage of Americans below the age of 65 have private health insurance under Obamacare (65.6 percent in 2015) than had it a decade earlier (68.4 percent in 2005)—see the table on page A3—or in 2007 (66.8 percent), the year before Obama's election.
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