(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.
The exchanges have not turned out to be very attractive for other kinds of customers. Because they have not been able to keep premiums from rising, thus discouraging the young and healthy from signing up, they are attractive largely to people who are in poor health or who are heavily subsidized, or both. In effect, therefore, the exchanges have already operated as subsidized high-risk pools. Republicans always envisioned these high-risk pools as a transitional measure to a new system where people with pre-existing conditions got continuous private coverage without subsidies; Obamacare may inadvertently have provided for that transitional measure.
Democrats will say that the Republicans nonetheless offer inadequate protection for people with pre-existing conditions. With so many of these people covered, though, this issue may not be as much of a focus of public concern as it was before Obamacare. Costs, on the other hand, are a bigger concern. Deductibles and premiums have been rising, sometimes fast. That makes the Republican approach of cutting premiums and deductibles by eliminating mandatory benefits and other regulations more attractive.
These ideas have no immediate prospect of becoming law. They look about as unlikely to carry the day as the ideas behind Obamacare did six years before it was enacted. The House plan makes it much more likely, though, that Republicans will be ready to act should they ever attain unified control of the government. And if that day comes, Obamacare will have paved the way for its own replacement.