Nate Jackson / August 19, 2015

Scott Walker’s ObamaCare Replacement

Step one: Repeal ObamaCare. Step two: Replace it with market reforms.

Step one: Repeal ObamaCare. Step two: Replace it with market reforms. That, in a nutshell, is what Wisconsin Gov. Scott Walker proposed Tuesday in releasing his presidential campaign’s “Day One Patient Freedom Plan.” If that sounds familiar, it’s because Republicans have been wrestling with the “Well, what would you do?” question for six years.

“ObamaCare cannot be fixed. It must be repealed and replaced with a plan that returns power to consumers and the states,” Walker says on his campaign website.

The basics are, well, basic. Rather than mandate everyone buy insurance and then tax them if they don’t, a la ObamaCare, Walker’s plan hinges on tax credits for people whose employers don’t provide health insurance. And the credits are based on age, not income — while kids under 17 would net a credit of $900, adults between 50 and 64 would receive $3,000.

The Wall Street Journal explains, “This is an important change from ObamaCare’s income-based subsidies. As they phase out, income-based subsidies create high marginal tax rates on the next dollar of income that contribute to a poverty trap. A universal credit is fairer and smooths out these labor-market distortions.”

Some conservatives, however, argue these tax credits are merely another expensive and unfunded entitlement.

Walker would also nearly double the annual contribution limits for tax-free health savings accounts (HSAs), which help consumers control what they spend, as well as offer a $1,000 tax credit to those who sign up for an HSA.

The governor would reform Medicaid into three distinct programs — one for needy families, one for disabled and poor seniors, and a third for long-term health needs. He’d also permit people to buy insurance in groups not defined by employment, allow for purchasing insurance across state lines and pursue tort reform.

“It’s all about freedom,” Walker said in Minnesota. “Putting freedom back in the hands of patients and families to make decisions about your health care and about your money.”

His plan is essentially a “tax cut of about a trillion dollars,” he said. “That’s probably about one of the biggest … pro-growth, economic development tax relief plans we’ve had in the past 40 years. That’s going to have a dynamic and important impact on the nation’s economy.”

He’s absolutely right that reforms based on the free market will do far better than Barack Obama’s centralized control, and objections about the cost of his plan should take into account removing the massive economic and tax burden of ObamaCare. But Walker also aims to achieve reform without pulling the rug out from anyone and while offering a wider appeal. One such concession is a provision protecting people from being denied insurance over pre-existing conditions. Like it or not, such a practical approach will almost surely be necessary.

As the Washington Examiner’s Philip Klein put it, “Walker’s presidential campaign rejected an ideologically purer alternative in favor of a plan that he hopes will prove more politically viable by extending coverage to a wider cross-section of people than rival Republican plans.”

Gov. Bobby Jindal’s plan, for example, offers a standard tax deduction rather than the age-based credits. Fewer low-income families could take full advantage of such a plan, though it is the more limited-government idea.

Certainly imperfect, Walker’s plan is still quite good all around — particularly given the political and economic reality any reform has to take into account. As we have said before in noting similar Republican reform ideas from Senators Tom Coburn, Orrin Hatch and Richard Burr, ObamaCare has moved the political baseline for health care policy, and any effort at moving policy back to the Right will require accounting for that reality before changing it.

Finally, space doesn’t permit a full review, but Marco Rubio was actually ahead of Walker in offering his own good reform this week — which largely reiterated his earlier proposal.

To perhaps oversimplify, the biggest difference between the two plans is that Rubio would use increasing tax credits to phase out the employer-based health insurance system over the next decade. That’s probably more ideal than Walker’s credits, but also a heavier lift. Rubio also proposes Medicare reform — essentially the Paul Ryan proposal of leaving current seniors untouched but moving to a premium support model. Walker doesn’t address Medicare at all.

In short, 2016 is shaping up to have a robust debate over real conservative prescriptions to cure the chronic disease known as ObamaCare.

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