Alternatives to Replace, Not “Fix”, ObamaCare

Should Republicans “fix” or replace ObamaCare? That is the big question on the minds of Republican lawmakers who now control both houses of Congress.

Today I continue a discussion of Republican alternatives to ObamaCare, which began with earlier posts The Coming Republican Opportunity to Change ObamaCare and was followed by Alternative ObamaCare Solutions Preserve Choice. The issue has become paramount as the government prepares to make its case in King v. Burwell, which will be heard by The Supreme Court of the United States (SCOTUS) on March 4, 2015.

A victory by King will force the government to drop subsidies for health insurance purchased on the federal exchange because the literal wording of the law says these subsidies are only available on “exchanges established by the State.” Since this would eliminate health insurance for millions of Americans, Republicans must be prepared with a suitable alternative.

The 2017 Project Solution

Jeffrey H. Anderson, co-founder of The 2017 Project, says Republicans should propose a solution that effectively repeals and replaces ObamaCare in the 36 states that are affected by this decision (those states that didn’t set up state exchanges). If the other 14 states like the change they could drop their established exchanges and adopt the new law.

The foundation of The 2017 Project solution is refundable, non-income-tested tax credits. It may be easier to think of these as vouchers because they are essentially government pre-paid vouchers to purchase health insurance. They can only be used for health insurance and have no other monetary value. They are available to everyone regardless of whether they pay taxes or not. They discount the cost of purchasing private health insurance.

President Obama is infatuated with the concept of “fairness”. He uses it often to justify his redistribution of wealth policies. In his latest State of the Union address he repeatedly talked about “middle-class economics” which he explained as “the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same rules.”

This has great populist appeal even though Obama’s policies hardly exemplify such rhetoric. ObamaCare is a great example. Anderson makes this point well in a recent article in The Weekly Standard.

            “It (ObamaCare) treats everyone differently, bestowing almost all of its lavish benefits on a select few – the near-poor and near-elderly – while sticking the middle class with the tab.

            For example, a 39-year-old single woman in Fairfax County, Virginia, who makes $35,000 a year doesn’t get a dime in ObamaCare subsidies – she’s too young and too middle class. She would need to be at least 40, make less than $35,000, or both. Meanwhile, a married 60-year-old couple down the street that makes $60,000 gets $8,632 in subsidies. If that same couple makes $65,000, they get $0.

            If a 45-year-old married couple in that same county has two kids and makes $25,000, they get $10,507 in ObamaCare premium subsidies, plus additional subsidies for out-of-pocket costs. If they make $20,000 – $5,000 less – they get nothing, although their kids (only their kids) get to go on Medicaid. If they didn’t have kids, they’d get $7,243 instead of $0.”

 

If President Obama really wants to create a system of fairness, he should embrace new law that levels the playing field for taxing the purchase of health insurance. For the last 70 years the federal government has given a tax exemption for health insurance purchased by employers but not for individuals who purchase the same insurance. The proposal of The 2017 Project would do away with this inequality.

Anderson proposes Republicans make the new tax credits as simple as possible. He suggests tax credits of $1200 for those under 35 years of age, $2,100 for those between 35 and 49, $3000 for those over 50, and $900 per child. These credits, based on age rather than income, reflect the rising cost of health insurance with age. Anderson says these tax credits would significantly reduce federal spending compared with ObamaCare’s subsidies, while benefiting far more people.

An important provision of such a change would be elimination of all ObamaCare regulations and mandates in the 36 states affected. This will restore freedom to choose the health insurance policies that fit the needs of the individual – rather than be forced to purchase unneeded benefits that only raise the costs. This would also simplify the use of the exchange websites because income verification would be unnecessary – and the IRS would no longer be the enforcer of the Individual Mandate.

The time is now for Republicans to come together in agreement on an alternative that will replace ObamaCare. We can – and must – do better.

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