I missed this when it posted nearly two weeks ago, so apologies for the delayed response.
It's a lengthy post by Reihan Salam defending conservative and Republican healthcare ideas from my characterizations, and my conclusion that conservative health policy would be far more disruptive than Obamacare is proving to be.
In a sense this dispute is academic and will remain so until conservatives both coalesce around a single alternative to Obamacare and develop a time machine so we can evaluate the Affordable Care Act and the Conservative Care Act side by side, pre-passage.
"Repeal and replace" is a fantasy, but if it were genuinely feasible, Reihan would have to contend with the disruptive nature of both halves of the strategy. The earliest Republicans will be able to repeal and replace Obamacare is January 2017. I assume he'd concede that wiping Obamacare off the books three years from now and replacing it with anything at all would be more disruptive than putting Obamacare on the books in the first place.
So let's imagine for the sake of argument that this debate were taking place in 2009. We can introduce yet more clarity by distinguishing between conservative proposals and Republican ones.
Let's start with the former.
Reihan first takes issue with my characterization of conservative healthcare ideas -- the claim that conservative reforms would be vastly more disruptive, even if implemented slowly, and my claim that one conservative vision -- indeed the ur conservative vision -- for healthcare reform is to universalize (or nearly universalize) catastrophic coverage and pair it with a subsidy system to help people pay for non-catastrophic care.
I think both characterizations were basically fair. Where I said the right's response to Obamacare's disruption is to propose more disruptive, conservative alternatives but to "rip the bandaid off slowly," I was referring to Ramesh Ponnuru's reaction to the cancellation row.
"The problem is that if young and healthy people leave their employer plans to get cheaper coverage on their own, those employers will either have to offer worse policies to their remaining covered employees — or have to drop their coverage altogether," he writes. "The answer to this problem, I think, is not to abandon the idea of moving in the direction of free-market health care as an alternative to Obamacare; it’s to make that move in steps."
It's not clear to me how small these steps would be. But the point is that once they're complete, the country's healthcare system would look much different than it did in 2009, and than it will under Obamacare's comparatively modest reforms.
If step one is "flattening the [group market] tax break so it no longer rewards the purchase of the most comprehensive coverage available," then the first question is what the new group market parameters would be. Obamacare does something like this with a light touch, starting a few years from now; Reihan suggests conservatives would be somewhat more aggressive. James Capretta and Doug Holtz Eakin suggest a large minority of employer-sponsored plans would take a hit, forcing millions and millions of people into less generous coverage.
But details are crucial here. Do too much to equalize the tax treatment of group and individual markets, and you destroy risk pooling in group markets creating truly massive disruption. Work slowly and the disruptions would be fairly modest at first. But then we get to step two and beyond.
Here I'm cribbing from a couple of different sources.
Reihan:
[M]any conservatives have embraced James Capretta’s idea of a fixed tax credit which would be used as a foundation for coverage. That is, everyone gets the credit. Employers who provide employer-sponsored coverage would top up the credit as part of the compensation they provide their employees. Middle- and high-income individuals would top up the credit with their own money — by a little if they want low-cost catastrophic plans, by a lot if they want high-cost comprehensive plans. Medicaid-eligible individuals would top up the credit with a premium subsidy that would vary according to need, and that would be designed to limit out-of-pocket costs. (Keep in mind that the current tax exclusion subsidizes the cost of employer-sponsored insurance. It doesn’t cover the entire cost of comprehensive plans.) What is true is that young, healthy, non-Medicaid-eligible individuals who don’t consider comprehensive insurance coverage a good deal would be nudged towards catastrophic coverage under this approach.
More from Capretta: "The Medicaid program would be substantially reformed. For the non-elderly and non-disabled, Medicaid eligible families would first get the new federal tax credit for insurance. States would then use Medicaid to supplement the tax credit to make coverage even more affordable for the lowest income households. The federal share of the revised Medicaid program would be adjusted so that combined federal costs from the credits and the Medicaid program equal what would have been spent federally without the reform."
Ponnuru, with coauthor Yuval Levin, would tack on Medicare: "Medicaid and Medicare would be converted into subsidies—essentially add-ons to the tax break or credit for coverage—for people to buy private coverage and pay for out-of-pocket health expenses."
I'll spare you my normative assessment of these approaches, which I've admittedly sort of mooshed together, but there's just no denying they would be enormously disruptive. The Medicare and Medicaid changes speak for themselves. If young, healthy people are given an incentive to leave their employer plans, group markets would experience big premium hikes and untold cancellations. And without spending lots of money, or keeping some remnants of Obamacare in place, it would make the perilous experience of being a person with a preexisting medical condition a permanent feature of the healthcare system.
Reihan takes exception to my claim that the end goal for some conservatives is universal catastrophic coverage/health savings account model, which is how conservatives like to describe Singapore's (in fact highly regulated) healthcare system. And perhaps I'm overstating the constituency on the right for a start-from-scratch type of overhaul. But it's not a figment of my imagination. And even if the end point of conservative healthcare reform falls far short of the right's "beau ideal," the question is whether it would shake up the system more than the Affordable Care Act does. I think it clearly would.
Remember, though, this is an approach, or mixture of approaches, favored by a subset of conservative intellectuals. On Capitol Hill, no Republican legislators of any consequence have endorsed anything like this, and generally don't favor expanding coverage beyond the pre-Obamacare status quo very much, if at all.
There's no leadership-backed Republican healthcare reform bill on the docket in Congress. But if you patch all the points of near-consensus together, the congressional GOP's healthcare vision is, roughly, to kick millions of people off of Medicaid, millions of people off of group insurance, millions, eventually, off of Medicare, encourage the creation of state-based, high-risk pools but provide only a fraction of the funds required to finance them, and degrade the already abysmal quality of individual market insurance for everyone who doesn't already have coverage. (If you like your plan, of course, you should be able to keep it.)
Most of this is indefensible. Reihan defends congressional Republicans specifically from my claim that they want to phase out traditional Medicare. But in so doing he misreads my position and introduces a small but significant historical revision.
Nearly all Republicans support Wyden-Ryan, and Wyden-Ryan does not envision phasing out what some are calling the Medicare public option. Rather, it envisions a transition to Medicare competitive bidding…. The Medicare public option is meant to be a permanent feature of the landscape, in part because it will have a significant advantage in rural areas. I don’t doubt that some Republicans favor eventually phasing out a Medicare public option (this was Ryan’s original position), but Republican voters tend to be older and many of them find the idea of phasing out traditional Medicare extremely unattractive, hence the GOP position has shifted. What Beutler seems to be saying is that competitive bidding might undermine the Medicaid public option. But he is underestimating the advantage the Medicare option will have outside of dense regions — in dense regions, it will be much easier for private plans to create low-cost narrow networks; in rural regions, it will be difficult if not impossible, and so the Medicare public option will probably emerge as dominant in Rural America. (The most sophisticated argument against Medicare competitive bidding is that it will increase costs as private firms game risk adjustment systems. Much depends on whether you believe that risk adjustment systems can improve over time.)
It's true that the most recent GOP budget preserves "traditional" Medicare as a public option. But just two years ago nearly every Republican on Capitol Hill voted for a complete phaseout of the program. The decision to reincorporate it was undertaken less as an accession to political reality and more as a public relations stunt designed to allow Republicans to claim their reform had Democratic buy-in. In truth, only one Democrat supports the Wyden-Ryan Medicare plan (Ron Wyden himself) and Ryan's decision to preserve Medicare as a public option was hugely controversial within the conservative coalition. Conservative lawmakers were deeply displeased. Philip Klein at the Washington Examiner articulated their grievances when he wrote, "I fear this will prove a premature capitulation on Ryan's part."
I'm sure some Republicans on the Hill would like absolution for their 2011 vote, but they can't unreveal the preference. Not all that much has changed since Newt Gingrich explained that the goal of conservative health policy is to allow Medicare to wither on the vine. And again, setting aside normative assessments, this would be highly disruptive.
The only way to portray Obamacare as similarly disruptive to either the conservative or GOP approaches is to argue that the marginal changes it will impose on some group plans are comparable to the cancellations and "rate shock" we're seeing on the individual market today. But if the ACA really were imposing similar burdens on people with employer-sponsored insurance, it's hard to imagine its polling would be holding as steady as it has been through the rocky rollout of its individual market reforms.
Part of the problem here is that the term "disruption" is highly subjective. But I think it's fair to assume that the truly burdensome disruptions of any hypothetical plan would be reflected in public opinion. And if that's right, then conservatives need to have confidence that their reforms would upon implementation enjoy a better mix of favorables and unfavorables than Obamacare does. There's just no way that would be true of the GOP patchwork, and it's a stretch to imagine it would be true of the conservative intellectual approach either. But it's hard to say conclusively.
The conservative blueprint is still largely blank. Once it's completely filled out, the real question will be whether implementing it while phasing out key elements of the Obamacare framework would be more or less disruptive than just tweaking Obamacare at the margins, letting it find its sea legs, and calling it a day. Like it or not, we can't go back in time and pretend conservatives were willing to be constructive reform partners after Obama's first inaugural. And it's hard to see how dramatically overhauling Obamacare would be less disruptive than making modest changes to it. But for a deeper look, I endorse everything that Austin Frakt writes here.
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