The coming battle over Obamacare replacement

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Now that Republicans have taken both houses of Congress, it is likely they will in the spring pass an Obamacare replacement that will land on President Barack Obama???s desk to be vetoed. That will mark a point at which Republicans must choose to embrace one or more plans for Obamacare replacement. Several have been put forward in the past, but none that actually would end up at the White House.

Congressional Republicans agree about the majority of what they want to do when it comes to replacing Obamacare. Here are eight things they agree about:

  • They want to end the tax bias in favor of employer-sponsored health insurance to create full portability (either through a tax credit, deductibility, or another method);
  • They want to reform medical malpractice laws in a Constitutional manner (likely through carrot incentives to the states);
  • They want to allow for insurance purchases across state lines;
  • They want to support or repair state-level pre-existing condition pools;
  • They want to fully block-grant Medicaid;
  • They want to shift Medicare to premium support;
  • They want to speed up the FDA???s device and drug approval process; and
  • They want to maximize the health savings account model and consumer-driven health plans, one of the few avenues proven to lower health care spending, supporting high deductible insurance + HSAs.

There are other areas of major agreement, of course ??? the real issues of difference are in the details of how these various aims are achieved. Of the major plans, the area where most differ is whether health insurance ought to be encouraged via a tax deduction versus a tax credit.

But one area where there is a real disagreement within the Republican Party ??? and, I suspect, a disagreement between policy leaders and the base ??? concerns the issue of Obamacare???s tax hikes, and whether they ought to be retained in order to pay for the GOP replacement. Chris Jacobs of Gov. Bobby Jindal???s think tank, America Next, outlines the issue here (emphasis mine):

A line buried in a Heritage Foundation policy paper issued just before the November elections hinted at a major fissure point in discussions surrounding a conservative alternative to Obamacare. The distinctions it raised could shape the form of any health-care alternatives the Republican-led Congress considers next year.

The policy brief, outlining the principles for any conservative health-care alternative, included the following lines:

???Replacing the current tax treatment of health benefits with a new design for health care tax relief that is both revenue and budget neutral (based on pre-PPACA levels) is the first step in transforming the American health system into one that is more patient-centered, market-based, and value-focused.???

The words in parentheses pack the most punch, for they lay down a clear marker regarding budgetary baselines ??? which define the parameters of many policy debates in Washington.

Consider a hypothetical alternative to Obamacare that repeals the law entirely, including its more than $1 trillion in tax increases, but then imposes new limits on the tax break for employer-provided health coverage ??? raising, say, $400 billion in revenue ??? to finance coverage expansions. Does that alternative cut taxes by $600 billion (the $1 trillion in repealed taxes, offset by the $400 billion in new revenue), or raise taxes by $400 billion, because repeal of the law should be seen as a given?

Polling data conducted for America Next earlier this year suggests that Americans believe the latter. A majority of voters (55%) ??? and sizable majorities of conservative voters ??? believe that ???any replacement of Obamacare must repeal all of the Obamacare taxes and not just replace them with other taxes.???

There is likely to be a very real disagreement on the right about whether Republicans ought to retain the revenue from Obamacare???s tax hikes to pay for a new tax credit or benefit, or whether their plan should truly repeal all of Obamacare, including its tax hikes. It will be interesting to see how much the grassroots engages in this issue, as it could dictate the outcome of the argument.