GOP Candidates Must Offer Obamacare Alternative

rice-logoBy Lanhee Chen 

Despite the Supreme Court’s recent decision in King v. Burwell and President Obama’s pronouncement that the debate over the Affordable Care Act (ACA) is over, health care reform will be a major topic of discussion in the 2016 presidential campaign. What the 2016 Republican presidential candidates must realize, however, is that since 2012, the politics of health care reform have changed. And these changes have amplified the need for the candidates to propose policies that they would want to replace President Obama’s signature health care law, if elected.

MedThree key changes are noteworthy. First, core provisions of Obamacare—including the individual mandate, subsidies to help low- and middle-income Americans to afford coverage, and its health insurance exchanges—went into effect in 2014, turning the abstraction of the ACA into a reality for many Americans. These provisions mark significant changes to the health care system that become more entrenched with each passing day.

Second, and relatedly, the fact that the law now has millions of beneficiaries makes it more challenging to repeal in its entirety. A significant number of Americans have benefited either from the ACA’s expansion of Medicaid or through tax credits for the purchase of health insurance on exchanges created by the law. Any change that seeks to take away these benefits without a replacement will meet significant political resistance.

Finally, the need for Republicans to coalesce behind a set of solutions that can replace the Affordable Care Act has never been greater. While the GOP has consistently advocated for repealing and replacing Obamacare, the emphasis to date has primarily been on repeal. The focus in the 2016 campaign and beyond will likely shift to the policies that replace the law.

Of course, there are many proposals in Congress that would do just this. Republican Sens. Orrin Hatch and Richard Burr, along with House member Fred Upton, have the gold standard in ACA replacement proposals—their plan lowers costs, expands coverage, and more carefully tailors the federal interventions in the health care system than does the ACA. Other congressional Republicans, including Budget Committee Chairman Tom Price and members of the conservative Republican Study Committee, have comprehensive proposals to replace the ACA.

The big question now is what the Republican presidential contenders will say about health care. Each of the GOP candidates should, at the very least, articulate the principles that would guide their health care policies if elected president. They would also be well served to go further and detail for voters how they plan to supplant the ACA with specific, market-based health care reforms.

Two of the current candidates, Bobby Jindal and Marco Rubio, have a head start on the field. Jindal released a lengthy white paper describing reforms that would replace Obamacare, including federal incentives for state innovation in health care, protections for those with preexisting conditions, and regulatory reforms designed to expand portability and enhance choice in health coverage. Rubio has established a framework for a replacement of the ACA that would create a universal tax credit for the purchase of health insurance, strengthen and reform Medicare while expanding choices for seniors, and give states greater authority and responsibility over their Medicaid programs.

Other candidates have given us a more general sense of the principles that would guide their policymaking in health care. Jeb Bush has called for empowering states, ensuring protections for patients with preexisting conditions, and enhancing transparency and accountability in health care. Ted Cruz, who last year led the charge to defund Obamacare, introduced a bill in the run-up to the King decision that would encourage the interstate sale and purchase of health insurance. And Ben Carson has previously called for every American to be given a health savings account at birth.

While each candidate will have his or her own take on what reforms ought to replace Obamacare, their plans should include solutions that address the following areas of health reform.

First, the presidential candidates should support policies that equalize the way that tax policy treats health insurance purchased through employers with coverage purchased individually. There are any number of ways this can be done, including as Rubio has proposed. While this discussion has been fraught with political peril in the past, Obamacare’s so-called “Cadillac Tax,” which imposes a tax on employers who furnish very generous health insurance plans beginning in 2018, has made it easier for Republicans to propose their own alternatives.

Second, the GOP contenders ought to return the primary authority for the regulation of health insurance markets to the states. Obamacare represents an unprecedented intrusion by the federal government into the marketplace for health insurance plans, going so far as to dictate the specific benefits that every plan must furnish. This is one of the causes of both the higher health insurance premiums and diminished consumer choices that Americans have witnessed since 2014. In general, a post-Obamacare world should recognize that a system in which states are empowered to innovate solutions that work for their own citizens is vastly superior to a Washington-driven, one-size-fits-all approach to health policy.

Third, any candidate’s reform plan should address the systemic defects in both the Medicare and Medicaid programs. Health policy experts across the ideological spectrum have argued that the existing fee-for-service Medicare program is broken and desperately in need of repair. And Obamacare simply expanded the number of people receiving coverage through Medicaid, a program that has produced uneven health outcomes for beneficiaries and threatens to bust state budgets around the country. Reforms should focus on transitioning Medicare toward a model that expands choices for seniors and transitions compensation for providers from volume to value. States should also have greater flexibility to innovate their Medicaid programs, drawing on best practices from around the country and breaking down barriers between Medicaid beneficiaries and the commercially insured.

Finally, any plan to replace Obamacare must ensure that those with preexisting health conditions retain access to quality, affordable coverage. Obamacare addresses this challenge by requiring that insurers offer health coverage to all comers while effectively ending the practice of health underwriting, where insurers vary premiums based on an enrollee’s health status. A less prescriptive approach that more closely targets the needs of those with preexisting conditions is better policy. For example, a targeted federal regulation that guarantees access to insurance for any individual with a preexisting condition who has been continually insured would avoid the gaming of the system that the ACA’s blanket prohibition encourages, while protecting those who have acted responsibly.

The presidential candidates will need to translate these broad principles into specific reforms. And the process of rolling back and ultimately replacing the Affordable Care Act will take time, patience, and public support.

But there is one practical step that a new president can immediately take to begin this process by dramatically expanding the flexibility that states have to pursue their own health reforms. This step actually relies on a provision that’s already in the Affordable Care Act. Section 1332 of Obamacare allows states with their own reform plans to waive many of the law’s most onerous restrictions, including its individual mandate and its essential health benefits requirement, which mandates what insurance plans must cover. This provision of the law is written vaguely, specifying that state reform plans must furnish coverage that is at least as comprehensive, affordable, and widespread as that furnished through the ACA. Regulatory guidance has made clear that whether this requirement is met is in the eyes of the beholder (namely, the secretary of Health and Human Services).

An innovation-friendly HHS secretary—under the leadership of a Republican president starting in January 2017—could easily give states the leeway and freedom to craft their own reforms as a first step away from Obamacare. A new president could then craft a new, less intrusive federal framework within which state reforms could operate.

Whether Republicans are able to prevail in next year’s election depends, in part, on their ability to articulate a forward-looking vision of health reform that recognizes the changes that Obamacare has made to our health care system, proposes plausible reforms to replace current law, and convinces voters that conservative solutions will produce results that are superior to the status quo. These aren’t easy tasks, but they are ones that Republicans must accomplish if they want to win back the White House and improve America’s health care system.

Lanhee Chen is research fellow at the Hoover Institution and director of domestic policy studies in the public-policy program at Stanford University. He was also the policy director for the Romney-Ryan presidential campaign in 2012.

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