theodore M I R A L D I mpa ... editor, publisher, writer

Monday, December 21, 2015

Obamacare Alternative: A Growing Consensus and Emerging Debate


Ten prominent policy experts have released a new Obamacare alternative published by the American Enterprise Institute. The most important part of any Obamacare alternative is how it would address the longstanding inequality in the tax code (which favors employer-based insurance over individually purchased insurance) that's at the root of our nation's (pre-Obamacare) health-care woes. It's therefore encouraging to see that this is another prominent proposal—along with the one that Ed Gillespie almost rode to victory in the Virginia senate race, and the one introduced by Tom Price in the House (and cosponsored by Jeb Hensarling, Trey Gowdy, and 77 others)—that has adopted the tax treatment proposed by "An Alternative to Obamacare" (originally released by the 2017 Project).
"An Alternative to Obamacare," and all of the proposals based upon it, would leave the tax treatment of the typical employer-based insurance plan alone, while closing a tax loophole at the high end. These proposals would do so by capping the tax break for employer-based insurance at $20,000 for a family plan an $8,000 for an individual plan. (A family with, say, a $23,000 family plan would still get their full tax break on the first $20,000, just not on the last $3,000.) These proposals would likewise offer a simple, refundable, non-income-tested tax credit for those in the individual market—thereby providing a long-overdue tax break to those who buy health insurance on their own—in the following amounts: $1,200 for those under the age of 35; $2,100 for those between 35 and 50; $3,000 for those 50 and over; and $900 per child. And they would offer a one-time, $1,000-per-person tax credit to those who have or who open a health savings account (HSA).
(The AEI-published proposal leaves a bit of rhetorical wiggle-room on some of these points, but the version of it that was scored includes all of these provisions. The plan also proposes Paul Ryan-style Medicare premium-support (a crucial reform), Medicaid reforms, and other miscellaneous health-care reforms.)
This growing consensus—on maximizing the chances of repeal by not disrupting the employer-based market; offering simple, non-income-based tax credits with three simple age-bands; and promoting the use of HSAs—is welcome. But at the same time, there is a debate emerging on the right or center-right between those who want to spend all or most of the Obamacare money, and those who don't. And there is a corresponding debate emerging between those who want to have the government deal directly with insurance companies on people's behalf, even in cases where people haven't asked for this to happen, and those who think American citizens should be in control of their own money, decisions, and bill-paying, rather than having such things handled for them by benevolent technocrats.
The AEI-published proposal is on the pro-spending, pro-technocratic side of this emerging rift. It would make tax credits advanceable (available in advance of tax time). This almost certainly means making them not really tax credits—tax credits should cut people's taxes—but direct subsidies to insurance companies, like the ones Obamacare provides. (There is a way to make an advanceable tax credit genuinely a tax credit, but there's no evidence that this newly released plan would adopt such an approach.)
Furthermore, the AEI-published proposal would encourage state governments to "auto-enroll" Americans in insurance plans they haven't chosen and haven't given any indication they want. In the proposal's words, this would involve "assigning persons who are eligible for the tax credits but have failed to pick an insurance policy" to a policy of the government's choice. (The person's premiums would be paid through a direct taxpayer-funded subsidy to the insurance company.)

In addition to being paternalistic, this "auto-enroll" provision could be politically toxic. In some ways, it would go beyond even Obamacare's despised individual mandate. Obamacare compels Americans to buy insurance. But even it doesn't "assign" people to insurance that they've "failed" to buy.

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