17 December 2015

Obamacare sinks, right alternative rises

By Jeffrey H. Anderson

Obamacare compels Americans to buy health insurance, yet the Obama administration still can’t get people to buy it.  So far, about 60 percent of the newly insured under Obamacare have merely been dumped into Medicaid, rather than enrolled in private insurance.

It’s not hard to see why Americans aren’t eager to pony up for Obamacare-compliant plans.  Opponents have long predicted that the 2,400-page overhaul would raise health costs and reduce the quality of care—but things are arguably ‎playing out even worse than opponents had predicted.  Obamacare premiums are going up an average of 12 to 13 percent from 2015 to 2016 (and that’s according to an Obamacare supporter).  Doctor and hospital networks are narrowing to frightening degrees.  And the typical 36-year-old who makes $36,000 is too young and too wealthy to qualify for the taxpayer-funded subsidies that Obamacare funnels to insurance companies (mostly on behalf of the near-poor and near-elderly).

Put all of this together, and it’s not too surprising that the Obama administration now says it “expects” only 10 million people to be enrolled in the Obamacare exchanges by the end of 2016—less than half the tally of 21 million that the Congressional Budget Office projected just nine months ago.  Meanwhile, more than 90 percent of the polls taken on Obamacare this year have found it to be unpopular, often by double-digit margins.  An impartial observer would seemingly have to say that Obamacare is ripe for repeal.

The question is whether its opponents are willing to offer up a compelling alternative.

While the Republican presidential field has so far been rather quiet on this front, the answer in the conservative-leaning policy world is an emphatic “yes.”  Most recently, a group of ten prominent policy experts released a 70-page proposal called “Improving Health and Health Care: An Agenda for Reform.”  Published last week by the American Enterprise Institute, the proposal offers Medicare and Medicaid reforms and—yes—an Obamacare alternative.

This new alternative indicates the degree to which a consensus has started to form on the right.  It calls for addressing the longstanding inequality in the tax code, which grants tax breaks to Americans who receive employer-based insurance but not to most Americans who have to buy insurance on their own.  Importantly, it does so not by transforming the tax treatment of the typical employer-based plan but rather by offering a tax break, in the form of a tax credit, to those who buy their own insurance.

The proposal leaves a bit of wiggle room on the specifics, but according to the version that was scored (by the nonpartisan Center for Health and Economy), it would offer age-based, non-income-tested, refundable tax credits in the following amounts:  $1,200 for those under the age of 35; $2,100 for those between the ages of 35 and 50; $3,000 for those who are 50 or over; and $900 per child.  These tax credits could be used to buy insurance of people’s choice, freed from Obamacare’s mandates.

This marks the fourth major proposal that has followed the lead of “An Alternative to Obamacare” (originally released by the 2017 Project) in calling for tax credits in these exact amounts.  The others have been advanced by House Budget Committee Chairman Tom Price (who kicked off the event at which this new proposal was unveiled, and whose H.R. 2300 is cosponsored by Jeb Hensarling, Trey Gowdy, and 77 other House members), by Ed Gillespie in last year’s Virginia Senate race, and by Scott Walker during his brief presidential run.  All of these proposals (aside from Walker’s, which didn’t specify) have also called for capping the tax break in the employer-based market at $20,000 for a family plan and $8,000 for an individual plan.  All would offer a one-time, $1,000-per-person tax credit for having or opening a health savings account. And all would provide commonsense protections to make sure those with preexisting conditions have access to affordable insurance.

This latest proposal, however, departs significantly from the others by suggesting state governments “auto-enroll” Americans in insurance policies that they haven’t picked themselves—by (to quote the proposal) “assigning persons who are eligible for the tax credits but have failed to pick an insurance policy” to a policy of the government’s choice.  (This person’s premiums would be paid through a direct taxpayer-funded subsidy—not a tax credit—to the lucky insurance company.)  On the heels of Obamacare’s despised individual mandate, this paternalistic “auto-enroll” provision would be politically toxic even if it wouldn’t cost a fortune—which it would.

Despite this caveat, it’s encouraging to see agreement emerging about what, specifically, an Obamacare alternative should look like.  Indeed, with such a consensus forming, next fall’s open-enrollment period may double as Obamacare’s farewell tour.

Jeffrey H. Anderson, a Hudson Institute senior fellow, is the author of “An Alternative to Obamacare.”