After Obamacare
The long, tortured quest for a conservative health policy.
On January 19, 2011, in one of their very first actions after retaking majority control of the House of Representatives, Republicans voted to repeal the Patient Protection and Affordable Care Act, a.k.a. Obamacare. The vote was largely symbolic; no one expected the Democratic Senate to take up the measure. But for the House GOP, the repeal vote was the necessary fulfillment of the core campaign promise that helped sweep them back into power.
That promise, however, was only half fulfilled. Republicans had not merely vowed to remove Obamacare; they also said they would pass a program of their own in its stead. "Repeal and replace" was the mantra, and work on the second half of that slogan was to begin immediately. "We want to repeal today so that we can begin to replace tomorrow," Rep. Joe Barton (R-Texas) told The New York Times.
A consortium of House committees would be instructed "to begin work to construct an alternative health care vision" and create a "so-called replacement bill," Majority Leader Eric Cantor (R-Va.) told reporters. No specific timelines were laid out, but House Speaker John Boehner (R-Ohio) told the press that it would not be a drawn out process. "We expect them to act in an efficient way."
A year later, no replacement plan had surfaced. Republicans continued to insist optimistically that one was on the way. In January 2012, Rep. Joe Pitts (R-Pa.), head of the Energy and Commerce Committee, told a group of reporters that when the health law was adjudicated at the Supreme Court that summer, the GOP would have an alternative set to go. "We will be ready to respond to the Supreme Court decision, which is expected in June, with a replacement package," Pitts predicted. "We think that a free-market alternative is much better as far as making health insurance affordable and available to everyone."
The Supreme Court decision came and went; Obamacare survived. Republicans remained stuck on the first half of their repeal-and-replace pitch. The initial vote to get rid of the Affordable Care Act was followed by dozens more, each just as symbolic as the first. By August 2013, House Republicans had voted for repeal 40 times.
Obamacare's most consequential provisions—the health insurance exchanges and regulations on pre-existing conditions—were now about to take effect. As the October opening of the exchanges neared, congressional Republicans, at the urging of conservative activists, settled on an unlikely last-ditch gambit to stop the hated law: insisting that any measure to provide funding to keep the government open must not include funding for Obamacare.
The gambit failed, and it did so predictably. On October 1, the government shut down and the health-plan exchanges opened for business, spotty as they were. The shutdown ended two weeks later, leaving the Republican Party badly bruised in the polls and conservative activists at each other's throats over who was to blame. Far from uniting around an alternative, the GOP and its conservative base had split over the one health policy idea that was supposed to unite them all: taking down Obamacare.
For conservatives and for GOP legislators on Capitol Hill, the advent of the Affordable Care Act could have inspired a reckoning, a rethinking of how to lay the public groundwork for a post-Obamacare future. Instead, even as the ACA rollout fell on its face (see "They Lied," page 22), erasing the GOP's shutdown-triggered poll drop and battering President Barack Obama's approval ratings, uncomfortable questions remained: Is there a coherent Republican health policy? Is such a thing even possible in today's climate? Or is the political right only effective at saying the word "no"?
Looking for a Health Care Theory
The GOP's staunch opposition to Obamacare, combined with its unfulfilled promise of a replacement, has opened up the party to years of criticism that it has no health care ideas at all. In 2009, as the law was working its way through Congress, Obama accused Republicans of simply wanting to preserve the status quo. "I've got a question for them," he said. "What's your answer? What's your solution? The truth is, they don't have one. It's do nothing."
Democrats repeated similar attacks long after the law passed, and some Republicans even agreed. In August 2013, former House Speaker Newt Gingrich said at a meeting of the Republican National Committee, "I will bet you, for most of you, you go home in the next two weeks when your members of Congress are home, and you look them in the eye and you say, 'What is your positive replacement for Obamacare?' They will have zero answer."
It's not quite true that conservatives have no health policy ideas. On the day they first voted to repeal Obamacare, Republican legislators off-handedly mentioned numerous possibilities -high-risk pools for the very sick, allowing the purchase of insurance across state lines, reducing coverage mandates to make health plans cheaper-that might be part of a future alternative. Many of those ideas are still floating around the party's policy byways today, waiting to be tethered to a specific proposal.
What Republicans don't have is a theory-a broadly shared vision of how health care ought to be delivered in America. Without such a shared understanding, one that can be easily and succinctly described by politicians and activists alike, it's hard to unite around, or even talk about, any particular plan. The result is that many Republicans would rather discuss the specifics of Obamacare's failings while presenting their alternative ideas in catch-phrase generalities like "patient-centered care," "affordability," and "preserving the doctor-patient relationship."
That's not to say that no one is advancing alternative principles for reform. A handful of conservatives, libertarians, and even some elected Republicans have proposed a variety of plans and principles in recent years. Their suggestions feature varying degrees of complicated details and secondary priorities, but most of them revolve around the central idea of uprooting the tax system's existing preference for individual insurance by reforming the tax treatment of health benefits.
Some proposals, like the one put forth by Cato Institute Health Policy Director Michael Cannon, focus heavily on clearing the health system's existing thicket of regulations and subsidies to create much more individual autonomy throughout the market. In a 2009 paper, "Yes, Mr. President: A Free Market Can Fix Health Care," Cannon laid out a plan for converting Medicare into a voucher system (he now favors Social Security-style direct payments to enrollees), ending state-based monopolies on both insurance and clinician licensing, capping federal spending on Medicaid through block grants, and eliminating the tax preference for employer-sponsored health care.
Eliminating that tax preference, which since World War II has allowed employers to purchase health coverage for employees on a tax advantaged basis, would actually result in a substantial tax cut, Cannon argues counter-intuitively. If employers cashed out the amount they now pay for health insurance, workers with family coverage would see an average compensation increase of $11,000. The trick would be to replace that tax preference with the creation of very large health savings accounts-tax-free savings that could be applied toward health purchases. Versions of these accounts exist today, but they are capped at $3,300 for individual coverage and $6,550 for families; Cannon's proposal would dramatically increase the cap, perhaps tripling it, and in the process free thousands in individual income both from taxation and from employer control. The result would be to simultaneously give individuals control of thousands of dollars in compensation now tied up in employer health benefits, while eliminating the government-granted financial advantage of employer-provided coverage. Individuals, and not their employment status, would then dictate health insurance coverage.
Other proposals focus on eliminating the employer-provided tax advantage by introducing a broad-based system of tax credits. An idea outlined by John Goodman and Peter Ferrara of the National Center for Public Policy Analysis would provide uniform tax credits for the purchase of health insurance to every individual, regardless of employment status or income. In addition to breaking up the employer system, that idea would also reduce its inequities: Today, the highest earners tend to get the biggest health care tax advantages. A uniform credit would make the system blind to income.
The advantage that the tax system confers on employer-sponsored coverage is in many ways the original sin of American health policy, since it creates a huge incentive to get coverage through work. But job-based coverage is not portable, which upends the incentive to create policies that can be bought at an early age and stuck with for life. And because coverage is a tax-advantaged portion of an employee's compensation package, there is an additional incentive to buy more expensive and expansive coverage than might otherwise be the case.
Unlike Obamacare, which sought to pre-serve the employer-sponsored system, most every recent right-of-center health policy proposal of significance has sought to either eliminate it or mitigate its distortionary effects. Former Bush administration health official James Capretta, for example, has proposed converting the employer tax break into a standard deduction.
But overhauling the employer-based system means that if you like your current health plan, you probably won't be able to keep it, a state of affairs that has battered the approval ratings of President Obama and his signature legislative achievement. Since Republicans' single most politically effective critique of Obamacare has been pointing out the president's phony you-can-keep-it promise, they are further tethering themselves to the health care status quo. In November, the House GOP successfully passed the "Keep Your Health Plan Act," garnering 39 Democratic votes in the process. Republicans were never particularly enamored with upsetting the health care status quo, and now they are all but duty-bound to preserve it.
GOP legislators got into this position in part because they lagged behind conservative policy wonks. "In terms of proposing something," says Yuval Levin, another former Bush health official who now edits the influential conservative policy journal National Affairs, "there's been for a while a pretty clear outline of what a Republican alternative would look like." It's just that this outline has not yet translated into concrete legislative proposals, Levin argues. "There's not been a huge desire on the Hill to get very specific about it."
Big Changes, Big Risks
Rep. Tom Price (R-Ga.) is a rarity on Capitol Hill-an elected Republican who not only talks about the need to replace Obamacare but has put forth a detailed legislative proposal to do so. "Just saying that Obamacare is bad isn't enough," he tells me.
Price's plan, a 250-page bill dubbed the Empowering Patients First Act, was originally drawn up in 2009 in conjunction with the conservative Republican Study Committee. It too relies heavily on tax-system reform: After repealing Obamacare, it would facilitate health coverage through a multilayer system of deductions combined with both refundable and advanceable tax credits, create short-term purchasing pools for individuals with pre-existing conditions, and attempt to ward off waste by reducing the need for doctors to engage in defensive medicine. In the past, Republicans have pushed for reforms that cap non-economic damages in malpractice lawsuits; Price's plan avoids caps and would instead offer legal protection to doctors whose medical treatments were consistent with federally approved best practices. In December 2013, an analysis by former Congressional Budget Office director Douglas Holtz-Eakin projected that the plan would result in $2.3 trillion in federal savings over a decade.
Rethinking the health care system has long been a priority for Price, an orthopedic surgeon. When he first came to Congress, he says, "there were people nipping at the sides and margins of health care to try to fix the challenges that we have, but no one was addressing the big picture." His goal was to develop a comprehensive alternative. "The reason why comprehensive is important is because the system has been so tinkered and so flawed for so long that the financing and delivery of health care no longer works." The American health care system has a mixture of high quality care, exorbitantly high costs, and too many individuals without insurance, he says. "That's the fault of the system."
But with all the moving parts, changing that system isn't easy. "Health care is complex," Price says. "Most individuals kind of have their topline talking points. But if they're asked any questions beneath that veneer about the practicality or logistics of providing care and the consequences of whatever system you're recommending, it becomes very difficult to answer any of those questions in a normal talking-points kind of language." Agreeing to complex specifics, and finding acceptable ways to talk about them, is a problem that affects policy makers in both major parties, he says. "Once you drill down a little bit, people become a bit uncomfortable."
GOP staffers on Capitol Hill say that the replace effort Republican leadership promised back in 2011 became bogged down in part because too many members didn't feel comfortable supporting anything their policy staffers proposed. Reforms required changes to the current health and tax systems-the bigger the reforms, the bigger the changes. And Republicans, particularly those who came to office in 2010, understood all too well that changing the existing health system entails significant political risk.
"There's been a lot less policy entrepreneurship amongst Republicans" than in the past, says Levin. GOP legislators used to be more willing to propose legislation, make a case for it, and then wait for reactions to come in to see if an idea had staying power. That sort of leadership "just doesn't happen anymore," he says. Now, the policy conversation "happens at the staff level. Some of the ideas are discussed. There's a meeting. Some people say 'I don't like that.' And nothing happens."
The political scandals of the past year don't make it any easier for Republicans to rally around a plan. One Republican policy aide notes that changing the tax code, which is at the core of so many conservative reform plans, presents a potentially thorny messaging problem for a party that has spent months attacking the Internal Revenue Service as politically biased because of unusual audits conducted on Tea Party groups. The IRS, he argues, is now viewed as so unfair, incompetent, and biased that conservatives would resist any program that relies on it to implement complex reforms.
And Obamacare's disastrous fall launch complicates the picture even further, souring politician and voter alike on grand policy schemes. Several Republican aides say that negative public reaction to Obamacare's size and scope has made party leaders less interested in pursuing a large-scale reform plan of their own. "There's certainly some resistance, especially among conservative voters, to any big bill, and it's understandable that they share it," says Levin. "I think an alternative wouldn't have to be the kind of big bill that Obamacare is."
Another reason that Republicans haven't spent much time developing a replacement plan is that any time and effort spent on replace is time and effort not spent on repeal. "There's been a sense amongst Republicans that if you put up your own proposal, you complicate the case against Obamacare, or you distract from the case against it," says Levin.
Repeal is intellectually, if not legislatively, easy. Replace is hard. "Republicans have had a hard time working on health care issues for a while," says Heather Higgins, the founder of the Repeal Coalition."There's a segment on the right that does not want to talk about any kind of replace or reform of the system."
In background conversations, Republican aides agree. "There's just no appetite to lay out an entirely new agenda of ideas," a House GOP staffer told me in October. Instead, the focus is on "expanding existing criticism" and "continuing to bludgeon the administration" over problems with the current law. "If Republicans were interested in fixing health care, they would have been talking about it much earlier," the staffer said. "They weren't."
Distraction, Disunity, and Dissent
It's not just the distraction that worries Republicans. It's the inevitable disunity involved in trying to get behind a single plan. And the saga that led to the 16-day government shutdown in October illustrates how difficult it is to hold the GOP coalition together even over the easy part.
Following the initial January 2011 vote to repeal the Affordable Care Act, a few conservative activists with inspired imaginations argued that the votes actually presented a plausible path to full repeal. But two years and dozens of repeal votes later, it was clear that the votes had become a strictly symbolic ritual.
Activists on the right wanted action-and with October looming, they were running out of time to prevent ObamaÂcare from becoming a potentially permanent fixture in American law. As the opening of the exchanges grew closer, a small band of conservative activists and legislators, many of whom were relatively new in Washington, began to push a strategy they said offered the last, best chance of taking the law down before its major provisions went into effect. Their idea was to strangle the law at birth by cutting off its funding in the continuing resolution for funding government that needed to be passed by October 1.
If President Obama and Senate Democrats did not agree to pass a funding bill that stripped the health law of financial support, then House Republicans would refuse to play along, and the government, lacking congressionally approved funding, would enter shutdown mode. That was the leverage point: Obamacare goes down, or the government will close.
The argument from supporters of the defund push was that Obamacare was so unpopular a government shutdown would be blamed on Democrats for protecting their hated law. But the plan was contentious even among some of the most entrenched critics of Obamacare. Sen. Tom Coburn (R-Okla.), an outspoken opponent of the ACA, called the defund plan "dishonest" and "hype," telling The Washington Examiner in July that it was a "denial of reality" to think it would succeed. "I'd be leading the charge if I thought this would work," he said. "But it will not work."
Even within the repeal coalition, there was significant dissent. Those opposed to the plan pointed to the government shutdown under President Bill Clinton and House Speaker Newt Gingrich, which succeeded mostly in souring public opinion about the GOP. The same thing, they predicted, would happen again this time, with Republicans eventually being forced to pass a funding bill with few if any concessions. (Polls taken toward the end of summer provided more evidence: The public remained opposed to Obamacare, but it opposed shutting down the government to defund Obamacare even more.) More to the point, there was no possible way that the president or Senate Democrats would agree to defund the law.
Defund defenders responded by saying that any vote for the continuing resolution would be a vote in favor of the law. "Defund it, or own it," said Sen. Mike Lee (R-Utah), who along with Sen. Ted Cruz (R-Texas) helped lead the defund push, in a July floor speech. The defund camp was accusing fellow Republicans of selling out the conservative movement.
"This was a complete fiction by the defunders that they had a more conservative, radical, free-market position," says Grover Norquist, the influential head of Americans for Tax Reform. "No they didn't. All they had was the position that clearly made no sense strategically, invented by the guys who decided to invade Iraq. Step one: Invade Iraq. Step two, Iraq turns into Kansas." The defund push, Norquist says, made just as much sense. "Step one, demand the president give us his most precious achievement in life, Obamacare. Step two, he'll give it to us."
Norquist argues that worries that the law would become untouchable once implemented were mistaken. "They had this magical view that everyone was really going to love Obamacare," Norquist says. "Which makes you wonder why they were opposed to it so much if they thought everyone would love it."
By October 1, defunders had dug in their heels and the Republican leadership in the House agreed to go along with the plan. They passed a funding measure without money for Obamacare, the Senate refused to consider it, and the government shut down. Obamacare's exchanges opened for business. And rather than a public outcry for Democrats to reopen the government without funding the Affordable Care Act, polls showed that most Americans blamed Republicans. Indeed, the shutdown may have helped Obamacare, albeit temporarily: An NBC-Wall Street Journal poll published October 11 found that support for the health law had jumped seven points since the previous month.
The plan's critics saw the whole episode as a lost opportunity. "The challenge with the defund-only strategy was not only that it failed, but we spent two months not doing other things," says Norquist. "The defunders added nothing to the conversation. They detracted from the educational process of explaining how bad Obamacare is."
Saved by Obamacare?
The shutdown ended on October 17. But sniping between the two anti-Obamacare camps continued. Norquist gave a series of interviews in which he leveled particularly harsh criticism at Sen. Cruz. "He pushed House Republicans into traffic and wandered away," Norquist told The Washington Post. Cruz responded with several speeches to conservative groups in which he defended the strategy and blamed its failure on the lack of conservative unity and the timidity of establishment Washington.
Meanwhile, Obamacare's exchanges were online. It was hard to imagine that the GOP would be able to start a productive conversation about health policy-what to do about it, and how to talk about it-at a time Obamacare was not only the law of the land but a working policy affecting millions of people's lives. As it turned out, they didn't have to.
Obamacare's glitch-ridden opening day ushered in a disastrous opening month. The federally run exchange system operating in 36 states was practically useless-a catastrophic failure of mismanaged government contracting and technology development. Several of the state-run exchanges experienced serious failures as well.
Suddenly, Republicans had a clear and united path forward: They would intensify their criticism of the law, holding hearings to find out what went wrong while blasting the administration for mismanaging the process. Obamacare's failures had saved Republicans from figuring out what to do about Obamacare.
The exchange mess kept Republicans busy. But the reprieve was almost certainly temporary. The GOP will soon be faced with the same old questions: What does the party stand for when it comes to health care? What, exactly, do Republicans want to do, and what is the method by which they propose to do it?
Some answers to these questions will depend on the outcome of the next several elections. "Given that they don't have majorities to pass legislation, Republicans have to understand the Obamacare fight as a longer-term fight that will require winning elections," Yuval Levin told me in late October. "The fundamental change that has to happen is going to require election victories for people who want to replace this law. And I think that means very different tactics than have been used in the last few weeks."
In the short term, that probably means going small. Big, comprehensive reforms make for big targets and big controversies, so scaled-down ambitions may win the day. "There are smaller pieces that we can break out," Rep. Price says. "We've begun the process of breaking our bill down into smaller pieces of legislation."
In the longer term, it means being patient, and learning to compromise. "Let's get to a free and open market in health care," says Norquist. "How do we get there? Are there baby steps? Maybe. There are some times you have to wait."
To an extent, the Republican Party is hampered by its relative inexperience. With a flood of new members, there has been a concurrent loss of institutional memory as long-time legislators and staffers depart. Republican aides say it's harder than ever to work through major legislative deals simply because so few legislators have a feel for the required compromise. "We don't have a Republican majority that remembers how to govern and understands how to juggle tradeoffs," one health policy aide complains.
Substantial reform would mean sustained work over long periods of time, involving legislators, activists, and the policy community. It requires, in other words, a concerted effort much like the one Democrats and their allies made in the years prior to passing Obamacare.
Or, alternatively, like the one that Republicans have already started with Medicare. A decade ago, Republicans passed a deficit-funded expansion of the law-the prescription drug benefit that became Medicare Part D. But there was no consensus plan to restrain the entitlement's unsustainable long-term spending requirements, and limited-government Republicans pointed to Part D as a damning indictment of Bush-era conservatism. But over the years, Republicans slowly coalesced around a broad plan drawn up by Rep. Paul Ryan (R-Wis.)-a plan that many expect to be a centerpiece policy for any future Republican governing coalition.
Ryan's work on Medicare suggests that it's possible to bring Republicans together on meaningful health and entitlement reforms. His work also suggests the sort of steps that will be necessary for a plan to gain broader acceptance. Ryan offered multiple versions of his plan over the years, persisting even as GOP leadership kept its distance. As the plan caught on, Ryan met with virtually all of his Republican colleagues individually to walk them through the details, ensuring that they both understood and could explain what the plan entailed. And he worked across the aisle, signing on to a compromise with Sen. Ron Wyden (D-Ore.) that would leave traditional Medicare in place, even while expanding its menu of private options. The plan eventually helped earned him a slot as Mitt Romney's running mate in the 2012 presidential campaign.
Yet Ryan's struggle to convince his own presidential ticket-mate about the reform plan also suggest the limits of even the most diligent GOP policy entrepreneurship efforts. Ryan's Medicare reforms wormed their way into the congressional consciousness as part of a larger budget blueprint that was amended and reissued multiple times over the years, and eventually helped inform Mitt Romney's Medicare overhaul proposal in 2012. But despite the plan's influence, and Ryan's own slot on the ticket, Romney failed to explicitly endorse the Ryan blueprint for reforming Medicare, deciding a less detailed plan would be more difficult to attack.
That sort of calculated political timidity is why so few Republicans have reached the first step: simply coming up with a plan and then making it known. "There should be different approaches out there," says Levin. "They should be competing, and there should be a sense that Republicans want to solve the problems in the health care system, that they should have different ways of solving it than Obamacare, and right now they're thinking it through. But that's just not happening."
