A healthy alternative to Obamacare

Obamacare’s open enrollment period will close in less than a week. It’s poised to go out with a whimper rather than a bang. Only one in every seven Americans believes that Obamacare has helped them and their family.

The other six may not have to put up with the law much longer. On March 4, the U.S. Supreme Court will consider King v. Burwell, a case that could result in Obamacare’s demise. If that happens, Republicans must have a healthcare reform plan of their own ready that empowers patients and doctors to deliver better care at lower costs.

The plaintiffs in King are challenging the federal government’s authority to distribute subsidies to people in 37 states who bought coverage through the federally-operated HealthCare.gov exchange.

The law seems to be on their side. Even though the Internal Revenue Service disagrees, the Affordable Care Act states that the feds can only offer subsidies “through an exchange established by the State.”

If the U.S. Supreme Court invalidates the subsidies, Obamacare would collapse. Healthcare costs for many of the enrollees who lost subsidies would quadruple. Their tax bills could spike by up to $5,000.

Obamacare’s defenders say that a loss for the federal government in King would force states to create exchanges. Those who lost their subsidies would surely agitate for their states to restore them, right?

That’s fantasy. Only 13 states and the District of Columbia built their own exchanges. Thirty-seven states defaulted to the federal government. Three-quarters of them now have Republican governors. The GOP controls the executive and legislative branches in more than half. They’re unlikely to spend billions of dollars to build exchanges — and hand President Obama a major victory in the process.

Several state exchanges have failed already. Oregon abandoned its exchange for the federal one after throwing away $248 million. Maryland’s $260 million health exchange failed so miserably that the federal government opened an investigation.

Hawaii’s exchange signed up barely 3,000 people, despite spending $204 million. Romanians hacked one of Vermont’s health-exchange servers. A director for Colorado’s exchange pleaded guilty to defrauding taxpayers at a separate nonprofit.

That’s just the highlight reel.

But Republicans can’t simply wait for Obamacare to fall apart. They must prepare an alternative that can help cover the millions of people who previously relied on the federal exchange. If they can make health care more affordable for everyone else in the process, even better.

First, Republicans should allow states to opt out of Obamacare’s most onerous regulations, including the individual and employer mandates and those that require coverage of “essential” benefits and procedures. That would empower patients to choose insurance that meets their needs — not an arbitrary standard set by employers or the federal government.

Second, Congress must rewrite the tax code to permit Americans to buy health insurance with pre-tax dollars, just like businesses. For low-income folks, Congress could offer a refundable tax credit to be applied against the cost of coverage. Currently, 151 million Americans — about half the country — get coverage through their employers. Because they don’t pay the bill directly, they don’t perceive the actual cost of their care. So they have an incentive to over-consume. Such “first dollar coverage” raises costs.

If patients controlled their healthcare dollars, they’d have a stronger incentive to consume care wisely. Already, more than 17 million Americans have chosen to do so through Health Savings Accounts, which allow patients to save money tax-free for routine care.

Injecting this dose of consumerism into the healthcare marketplace would boost competition among insurers and healthcare providers. That, in turn, would drive down costs and improve the quality of care.

Fortunately, the GOP has begun work on such a plan.

Last week, the House voted 239-186 to repeal Obamacare. The bill empowered three committee chairmen — Reps. Paul Ryan, R-Wis., Fred Upton, R-Mich. and John Kline, R-Minn. — to develop a replacement plan. One day later, Sens. Orrin Hatch, R-Utah, and Richard Burr, R-N.C., along with Upton released a replacement plan called “The Patient CARE Act.”

If the U.S. Supreme Court rules against the Administration in King v. Burwell, Republicans will have the chance to write the obituary for Obamacare — and prepare a birth announcement for their new plan this year. They must make the most of it.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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