How the 2016 Republicans Will Fight Over the Future of Obamacare

Repeal, yes. But then what? Setting the stage for the presidential primary.

From left to right: Chris Christie, Jeb Bush, Marco Rubio, Rand Paul and Rick Perry
National Journal
March 30, 2015, 4 p.m.
  1. Repeal Obamacare.
  2. ?????
  3. Conservative health care reform!

Every Republican 2016 presidential hopeful is going to start their health care policy platform with repealing the Affordable Care Act. It is a central tenet of the faith.

But what then? Conservative repeal-and-replace plans have popped up from time to time over the last five years, but rarely garnered more than token press coverage and have never received a full vote in front of Congress. In other words: There has been no vigorous debate that shapes a white paper into real policy.

Some contenders, like Louisiana Gov. Bobby Jindal, have proactively released painstakingly detailed and comprehensive plans. Others, like physician Ben Carson, have never held public office and never needed to explain their positions in much detail. Some proposals — like health savings accounts, block-granting Medicaid, or allowing insurance to be sold across state lines — are universally popular on the right. But the proverbial devil is always in the details.

(RELATED: Obamacare Could Be in Trouble if It Drives Businesses From Insurance Market)

“I think you have to present something that is so attractive that people would flock to it,” Carson told National Journal. “We need to bring the health care system into the free market.”

The presidential campaign might be the first opportunity for Republicans to really have the tough talk about how they would actually go about dismantling and replacing the law they’ve spent the last half decade campaigning against.

There are arguably three schools of thoughts within the GOP on health care, said Avik Roy, a senior fellow at the Manhattan Institute.

One wants to effectively revert to a pre-Obamacare world. Another acknowledges the new reality that Obamacare has created and encourages conservatives to consider what’s politically viable in that world. The third would say that Republicans should yield the coverage side of health care reform to liberals and work on the best free-market alternative they can muster without measuring it against the ACA.

With that in mind, and some guidance from Roy and Douglas Holtz-Eakin, another leading conservative policy wonk, former director of the Congressional Budget Office, and John McCain 2008 campaign adviser who now heads the American Action Forum, here are three big areas for debate in 2016.

Tax treatment of health insurance.

This is a big one, because employer-based health insurance covers almost half of the U.S. population, and a big reason for that is employer contributions are excluded from taxes. You start messing with that, and you risk a lot of people getting worried that they’re going to lose a plan they like. (Sound familiar?)

But, Holtz-Eakin said, it is a big issue for conservative wonks. They see the status quo, which exempts health-insurance contributions from being treated as taxable income, as a huge subsidy that “feeds the appetite for inappropriately large plans” and drive up costs. Obamacare could actually give Republicans more freedom on this issue, Roy pointed out, because its “Cadillac Tax” has already instituted a tax on employer-based health insurance.

(RELATED: Obamacare Promises Tax-Season Surprises)

There are still likely to be some risks, though, depending on what you propose. The usual options are eliminating it, capping, it or replacing it with some kind of tax credit that any individuals who purchase their own insurance can also use.

Here is one instructive episode. Last year, Republican Sens. Richard Burr, Orrin Hatch, and Tom Coburn produced a comprehensive health care plan. It would have initially capped the employer exclusion, as it’s called, at 65 percent of the “average (health) plan’s costs.”

That would have meant a huge tax increase for a lot of Americans — hundreds of billions of dollars combined, by some estimates. That attracted critical press coverage, which led to the senators quietly revising their plan to cap the exclusion at the average cost of an “expensive high-option plan,” significantly reducing the impact — and therefore political risk. But that is indicative of the tricky terrain that the 2016 candidates will be navigating.

What does the safety net look like?

Repealing Obamacare means scrapping its Medicaid expansion and tax subsidies, both of which have helped millions of poorer Americans purchase private insurance. Which leaves the question of how you provide some kind of safety net for that population, which has historically been less likely to be insured and most at risk of medical bankruptcy.

Block-granting Medicaid — sending states a set amount of federal dollars and then giving them substantial freedom in what they do with it — is beloved by conservatives. Sen. Ted Cruz called it one of the things Republicans “generally agree about when it comes to health care reform.” But they usually step over the stickier questions of how you hold states accountable for what they do and prevent them from throwing millions off Medicaid rolls.

(RELATED: Support for the Affordable Care Act Breaks Down Along Racial Lines)

Then there is also the possibility of continuing some kind of tax credit to help people buy private insurance. Rep. Paul Ryan and other House leaders proposed doing so in their post-King v. Burwell contingency plan. The Burr-Hatch-Coburn plan would also have kept a tax credit. “That’s where the action is,” Roy said. Conservatives disagree on whether to have a flat-tax credit or to means-test it, giving a more generous credit to lower-income people as Obamacare did.

Former Florida Gov. Jeb Bush has hinted at a third path recently: some kind of government-supported catastrophic coverage. “The effort by the state, by the government, ought to be to try to create catastrophic coverage,” he said in Iowa, “where there is relief for families in our country, where if you have a hardship that goes way beyond your means of paying for it, the government is there or an entity is there to help you deal with that.

What about small businesses?

The final piece of the puzzle is how Republicans would help small businesses and their employees access health insurance.

Obamacare is supposed to create special marketplaces for small businesses to, as a group, get a better deal on health plans. The candidates will have to figure out what they would do instead.

There are generally two competing ideas on the right: One is letting small businesses pool together and shop for insurance as a unit, not unlike the Obamacare marketplaces. Another is giving them some kind of special tax credit. Wisconsin Gov. Scott Walker argued in 2010 that eliminating a tax on health savings accounts and thereby expanding access to them would encourage small businesses to offer health insurance — though he earned a “Mostly False” from PolitiFact when the news organization consulted policy experts about that claim.

Caitlin Owens contributed to this article.
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