Are These GOP Candidate Health Care Plans Too Little Too Late?

Repeal and replace plans from Walker and Rubio are constrained by five years of Obamacare.


Republicans are finally coming around to the reality of Obamacare. The problem is that they're five years too late.

Gage Skidmore

Since the passage of Obamacare in 2010, Republicans have repeated the mantra that the health law should be repealed and replaced. But while repeal votes have been plentiful (though not, as Obamacare's continued presence suggests, entirely effective), replacement plans have been few and far between, and GOP leadership has generally shied away from the proposals that do exist.

There are signs that may be changing. Earlier this week, two leading contenders for the Republican presidential nomination, Wisconsin Governor Scott Walker and Florida Senator Marco Rubio, released plans providing basic outlines for how they would replace the president's signature law.

The two plans differ in their particulars and the level of detail they provide, but, broadly speaking, both take a similar approach, proposing to repeal Obamacare in its entirety and then replace it with a system of advanceable, refundable tax credits intended to help people purchase health insurance, and a strengthening of the continuous coverage guarantee to protect individuals with preexisting conditions, so long as they maintain their insurance.

What both of these plans reveal is that, despite the continuing forceful Republican opposition to Obamacare, Republicans cannot escape the gravitational pull of the president's health law. After five years, it has boxed them in, set expectations, and defined the health care debate.

Some conservatives, including, most prominently, Rubio and Walker's fellow GOP presidential candidate, former Louisiana Governor Bobby Jindal, have blasted their plans as little more than "Obamacare Lite" because of their reliance on a universal system of refundable tax credits. Jindal said that under Walker's plan, "a new entitlement is created for every single American human being from the time they are born right up until they grow old and become eligible for Medicare." 

That's very much an overstatement. But both plans share some of Obamacare's premises, namely that health insurance should be widely subsidized through tax credits, and both work from a sensibility shaped by years under the health law. This is what Republican health care reform looks like in the post-Obamacare world.

One thing that's telling about both plans is what they don't say: Rubio's plan was released in the form of a brief op-ed in Politico Magazine; it gives a sense of the basic elements he would employ, but it's more of a sketch than a full-fledged proposal.

Walker's plan is more detailed, but it still leaves a variety of unanswered questions, such as how and whether to mitigate the risks posed to insurers when sicker individuals sign up, and along the same lines, how to allow people to change plans—as Walker promises he would—without allowing them to game the insurance market by buying cheap plans with little coverage, then immediately transferring to gold-plated insurance when they get sick.

The biggest question, though, is how to pay for it all without raising the deficit. The core of Walker's is a substantial tax credit for anyone who signs up for a health savings account under the law, with the amount determined by and individual's age; it's advanceable as well as refundable, meaning that the credit is available even if it's larger than someone's tax liability. As with Obamacare, it's essentially a subsidy, although it goes to individuals rather than to insurers.

And, as we know from Obamacare, providing a subsidy on that scale is an enormously expensive proposition. As Avik Roy, a conservative health policy expert who is currently an adviser to Walker's rival presidential candidate Rick Perry, notes at Forbes, it's likely in excess of $1 trillion over a decade. But Walker offers no clear way to fund it.

Obamacare pays for its coverage expansion through a combination of taxes and reductions to Medicare spending, which could perhaps be used to help fund the new credit. But Walker's plan repeals the health law in its entirety, and specifies no mechanism for funding its central tax credit, saying only that the Walker administration would make improvements to the health care system that would result in offsetting savings.

It is, essentially, a giant magic asterisk promising to figure out how to pay for it all later. Perhaps a President Walker would eventually find a way, as his plan promises. But settling on offsetting spending cuts is enormously challenging in the best of times, since they inevitably mean that someone, somewhere is losing the funding they have, and thus has a major incentive to mobilize against them.

Republicans, meanwhile, have made this even harder by spending the last five years campaigning against Obamacare's Medicare cuts. Indeed, during the 2012 campaign, GOP nominee Mitt Romney explicitly promised to reverse Obamacare's Medicare cuts.

Obamacare made real health care reform more difficult. Republicans, by waiting so long to offer their own alternatives, have made that project even more difficult still.

Indeed, the similarities between the plans suggests how constrained Republicans are in what they can offer. There are differences, of course, but both plans start by repealing Obamacare, but then attempt to find their own ways to provide federally subsidized coverage, and to keep people paying for coverage without an explicit mandate.

Neither, for example, attempts anything along the lines of the radical restructuring put forth by the Cato Institute's Michael Cannon, who has put forth a plan to use extremely large Health Savings Accounts to unwind the third-party payment system encouraged by the existence of health insurance tax credits. Nor does either plan start, as Avik Roy's plan does, by accepting that Obamacare is here to stay, and then attempt to improve it while using it as a vehicle to overhaul the entire entitlement system—arguably a bigger long-term problem than Obamacare. (Rubio does voice support for a Paul Ryan-style premium support system, while Walker does propose some changes to Medicaid.) Both plans work from the same playbook, one developed largely during the age of Obamacare.

I don't mean to say that these new plans are all bad. There are good ideas in both, particularly in the ways they propose to deregulate the insurance market. More generally, they add to the discussion, and, coming from prominent presidential candidates, elevate the issue. Every GOP candidate should offer a plan.

But the two plans we saw this week, and the similarities between them, reveal the consequence of waiting five years to propose an alternative to Obamacare, just as Obamacare was the consequence of the GOP's failure to make health care reform a priority in the years before it passed. The starting point is, inevitably, a world in which Obamacare is already in place, and the debates it has sparked. Yes, they would repeal Obamacare, but they would still be living in its shadow.