This week, another GOP contender for president released a plan for replacing Obamacare — demonstrating again that yes, there are Republican alternatives.
As with the plan proposed earlier this year by Florida Senator Marco Rubio, the main feature of Wisconsin Gov. Scott Walker's plan to change the pre-Obamacare status quo is a refundable tax credit for those who buy insurance outside their workplace. This is designed not only to ease the transition away from an Obamacare system laden with mandates and subsidies that drive up the cost of care, but also to make insurance affordable for more people than it was before Obamacare.
Some conservatives object that this sounds too much like Obamacare's tax-code-based insurance subsidy. They are right to make their voices heard, but the idea that this proposal is "Obamacare Lite," or even a step in the wrong direction, is preposterous. In fact, the idea of a tax credit had currency in conservative circles when Obamacare was still just a bad idea. More importantly, the subsidies that currently make Obamacare's sky-high premiums more palatable for consumers are not even one of the messy program's bigger problems.
The biggest single problem with Obamacare is its abridgment of human freedom — its unprecedented requirement that every American obtain insurance as a condition of existing, under penalty of fine, and likewise that every employer enter the insurance business or face a penalty.
But the main practical problem with Obamacare so far has been how badly it messed up the insurance market for millions of Americans in the individual and small group markets. These are people who were perfectly happy with what they had, and must now pay more for an inferior product. The additional (often unnecessary) coverage mandates and elimination of all underwriting either caused monthly premiums to skyrocket or caused insurers to jack up deductibles and skimp on their provider networks in order to make their premiums seem like a good deal — in many places, both of these things occurred.
The result is that many Americans who were previously happy with their coverage suddenly find themselves paying substantially more for policies they either cannot use or cannot afford to use.
Walker's and Rubio's plans, as well as that of Louisiana Gov. Bobby Jindal, would undo that crucial part of damage from Obamacare, allowing insurers to tailor plans (no more forced maternity coverage for 70 year-olds) and permit more flexible arrangements like miniature plans. They would also break the state regulatory monopoly on insurance licensing, so that New Jerseyans can buy plans that sell in Iowa for a fraction of the prices they must currently pay. This already makes all of their plans superior not only to Obamacare, but also to what existed before it.
But each also has a mechanism for making insurance more available than it was previously. Walker and Rubio have chosen a tax credit system. Jindal has gone the more ideologically pure route of a deduction, which would not subsidize anyone who does not pay taxes. But the conceptual difference between the two is smaller than you might think. Payroll taxes are taxes too. A refundable credit effectively gives all workers a break on them — including those too poor to pay income taxes but too rich to qualify for Medicaid.
Everyone in the Republican field agrees on Obamacare repeal. Conservative tastes will differ on the precise details of the replacement. But it's healthy for the candidates to show their work and demonstrate their commitment to repeal by presenting real plans for replacement that can always be improved upon later. Walker has done the right thing here, and all other candidates who haven't done so yet should follow suit.
