(Bloomberg View) — Paul Ryan has gotten his often fractious House Republicans to endorse an outline of a plan to replace Obamacare, although not yet an actual piece of legislation. While the outline contains many of the health policies conservatives sought even before Obamacare, those policies may have particular appeal against the backdrop of the health care system Obamacare has created.
In the past Republicans have argued about how to reform tax policy on health care: Should employer-provided coverage remain untaxed, or should this tax break end? Should people without access to such coverage get a tax credit or a tax deduction? The House plan lets the tax break stay — avoiding the political disaster that a less compromising free-market plan would have courted — but trims it for the most expensive plans.
And it offers those without employer coverage a tax credit. Republicans would not have resolved the issue that way without Obamacare. Offering a tax credit, instead of a deduction, would enable many more low-income people to buy coverage, but by the same token it eats up more of the budget. In the aftermath of Obamacare, though, Republicans realize that they need to minimize the number of people who lose coverage under a replacement.
A thorny issue for any health care plan other than single-payer is how to handle people with pre-existing conditions. Obamacare’s approach is to prohibit insurers from considering these conditions. But that prohibition means people can wait until they get sick to buy insurance, threatening the viability of insurance markets. The Affordable Care Act attempted to solve that problem by requiring healthy people to buy insurance.
The Republicans take a different approach. They too would keep insurers from discriminating against people with pre-existing conditions — so long as those people had maintained continuous coverage. That regulation creates the opposite incentive from Obamacare’s total prohibition: Healthy people have a reason to buy insurance, so no further action needs to be taken to get them to do it. And because of the tax credit, everyone would have the means to buy a policy. While the outline does not specify how large the credit would be, most such plans involve an amount that allows people to buy at least catastrophic coverage of a sort that would be attractive to young and healthy people but that Obamacare’s regulations do not permit.
People who had not maintained continuous coverage, who do not have an employer plan and who cannot buy private coverage would be covered by subsidized high-risk pools. Obamacare has, however, done a lot to reduce the need for and the potential cost of these high-risk pools. A lot of people with pre-existing conditions have already gotten coverage through Obamacare’s exchanges, and would thus be eligible for the regulatory protection the Republicans would provide.