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John C. Goodman / Aug. 17, 2014

How Republicans Can Win (or Lose) on Health Care

This should be a banner year for the Republican Party. Democrats are stuck with health care reform that most people don't like. Even among those who do like it, almost everyone admits the law has defects galore. Now for the surprise. What should be a cakewalk for Republicans in the fall is proving to be anything but that. Republicans aren't doing noticeably better in the polls, and they are especially failing to take advantage of the health care issue.

This should be a banner year for the Republican Party. Democrats are stuck with health care reform that most people don’t like. Even among those who do like it, almost everyone admits the law has defects galore.

Now for the surprise. What should be a cakewalk for Republicans in the fall is proving to be anything but that. Republicans aren’t doing noticeably better in the polls, and they are especially failing to take advantage of the health care issue.

Here’s why. Think of Obamacare as having two parts: a revenue side and a spending side. It is the spending side that needs to be repealed and replaced. Republican candidates who promise to do that should win and win big, other things being equal. If Republican candidates promise to repeal the revenue that funds Obamacare, however, they are taking a big risk. In fact, such a position could actually cost them the election.

During the next 10 years, Obamacare funding will total about $2 trillion. Where is all that money going to come from? The bulk of it will come from groups who agreed to receive fewer benefits or pay more in taxes in order to fund health care reform. Almost none of them are asking for their money back.

About half the funding for Obamacare comes from cuts in Medicare spending. Although many seniors may not like that, AARP supported those cuts and still does. Further, these same cuts are part of the Paul Ryan budget that almost every House Republican voted for. A Republican candidate who promises to restore Medicare to the spending path it was previously on will get no support from AARP and will be contradicting his vote on the House Republicans’ plan for the federal budget.

Much of the rest of the funding for Obamacare comes from special taxes on insurance companies, drug companies, medical-device manufacturers, the self-insured health plans of large companies and on the health plans of labor unions. The only one of these groups that seems to be making a lot of noise about getting their money back is labor.

Even worse, if Republicans succeed in repealing the revenue that funds Obamacare, they will be taking away the money that right now is funding insurance for 10 million or more people. Is it good politics to take insurance away from millions of people in order to hand money over to the largest corporations in America?

Fortunately, there is a much more conservative and much more libertarian way to dispose of $2 trillion. We need a massive tax cut. However, it needs to be tied to health care – much like the $1,000 child tax credit is tied to children.

If we took all of the ways in which the government is subsidizing health insurance, I believe we could offer a tax credit of $2,500 for every adult and $8,000 for every family of four. This would be in place of the arbitrary and unfair subsidies in the Obamacare exchanges. It could also substitute for the regressive way in which we currently subsidize employer-provided coverage.

Based on Congressional Budget Office figures, for this amount of money, people could buy something equivalent to Medicaid. They could have more accessible care and better care if they and their employers add private funds to those amounts.

Beyond that, a Republican repeal-and-replace plan for Obamacare spending should have these elements:

Choice: People should be able to choose insurance that meets their needs, not the government’s needs.

Fairness: Subsidies for health insurance should be the same for everyone at the same income level.

Universality: Unclaimed tax credits should be sent to safety-net institutions in the areas where the uninsured live – as a backstop in case they cannot pay their medical bills.

Portability: Everything in the federal law that prevents employers from buying individually owned insurance should be repealed.

Transparency: Insurers should be required to make their networks and any restrictions on access to drugs and other care visible to enrollees at all times.

Real insurance: Genuine protection for pre-existing conditions means that insurers should receive an actuarially fair premium for people with high heath care costs – much as is currently done in the Medicare Advantage program. Otherwise, the insurers will try to avoid the sick – as they are currently doing in the Obamacare exchanges.

Reform along these lines would empower individuals, allow real competition and create the kind of incentives that will lower costs, raise quality and expand access to care.

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