How to Judge Obamacare Alternatives

(Bloomberg) -

The rocky rollout of the Patient Protection and Affordable Care Act has forced President Barack Obama to express his openness, albeit half-heartedly, to reforms that might accomplish the law’s goals. In response, congressional Republicans have offered no fewer than three major alternatives to Obamacare, the most recent being an overhaul plan from Republican Senators Tom Coburn, Richard Burr and Orrin Hatch. All these proposals address the issue at the heart of the law’s name — the affordability of health care.

So why has so little attention been paid to these … replacements? The main reason is that much of the … media, as well as Democrats who support the law, isn’t all that concerned about … affordability. … Instead, they have bought into a flawed thesis: …the only way to measure … alternatives is by counting the number of people they would insure.

Rather than asking if substitute plans would provide more affordable care, Obamacare supporters focus on how many more people the plans would cover. Expanded coverage is a laudable goal, but a narrow focus on it … creates its own problems.

The first is that coverage numbers don’t speak to the quality of the care being offered. For example, a little more than a third of those who will be covered by the health-care law will get their care through Medicaid. Some analysts have argued that Medicaid provides substandard care. Recent research shows that, on some health measures, Medicaid provides no better outcomes than being uninsured does. Health-insurance coverage alone doesn’t mean people are healthier or physically better off.

The focus on coverage numbers in isolation also treats each type of private plan — whether purchased on an exchange, on the open market or through an employer — as one and the same. But as we saw from Obama’s ill-fated promise that people who liked their health-insurance plans could keep them, not all private plans are equal. And while any alterations to the existing health-care system have the potential to produce changes in coverage for some Americans, the question of how severe that displacement is, or how it affects health-insurance marketplaces, should be considered as well.

If coverage is the sole indicator of success, even the health-care law falls short. The Congressional Budget Office estimates that, when Obamacare is fully in place in 2023, 31 million Americans will remain uninsured. Less than half of them will have voluntarily foregone coverage.

So what should be the primary consideration when judging replacement plans? The most important metric should be how the plan affects health-care costs. Lower costs, after all, mean more people will get coverage and fewer people will go uninsured.

This is where the Republican alternatives have a distinct advantage. Analysts across the political spectrum recognize that the existing (essentially unlimited) tax preference for employer-sponsored health insurance drives up health-care utilization and costs. It also creates a cost disadvantage for anyone seeking to purchase health insurance independent of an employer. By and large, people aren’t buying health insurance today; they’re buying pre-paid health care with relatively few limits on the services they can obtain.

Reform of the existing tax treatment of health insurance is an important step toward reducing costs and avoiding the rationing and service limits that afflict the health-care systems of many other countries. The Affordable Care Act does little to address the tax treatment of health insurance and other dynamics that push up health-care costs.

We also ought to judge … alternatives by examining their effects on unemployment, federal spending and the tax burden on U.S. households. In each of these, … Obama’s health-care law falls short. For example, the latest CBO analysis concludes that incentives in the law will push people out of the workforce, resulting in the equivalent of 2.5 million fewer full-time workers by 2024; greater dependency on government subsidies for health care; and lower economic output.

There’s nothing wrong with wanting to expand quality, affordable health-insurance coverage to more Americans. It’s a goal both parties ought to share. But by focusing entirely on whether an Obamacare replacement provides that coverage — without considering whether it addresses the cost drivers that make coverage affordable … supporters are doing the country an injustice.

Americans should know that there are workable Republican alternatives to Obamacare. And while none of them is perfect, any one of them would be better than the law now on the books.


Lanhee Chen is a Bloomberg View columnist and a research fellow at the Hoover Institution at Stanford University. He was the policy director of Mitt Romney’s 2012 presidential campaign.