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Topics: Obamacare

Can conservatives co-opt Obamacare?

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Beltway Confidential,Opinion,Philip Klein,Obamacare,Health Care

As many conservatives have grappled with ways to repeal and replace President Obama’s health care law, the Manhattan Institute’s Avik Roy has been advocating in favor of co-opting Obamacare, and using a reformed version of its basic structure to achieve broader entitlement reform objectives.

He made his case in a cover story for the Washington Examiner print edition, which I discussed with him at length in this video.

Since we spoke, Roy has been working to put flesh on the bones of his idea. And on Wednesday, Roy unveiled a detailed reform proposal he estimates will insure 12 million more Americans than Obamacare by 2025 while bringing down premiums, reducing deficits by $8 trillion over 30 years, and making the pre-existing entitlements of Medicare and Medicaid fiscally sustainable.

Roy's plan shouldn't be seen as a pure free market proposal, as it makes many significant concessions to the structure of Obamacare and shares the law's ultimate goal of expanding coverage. Though Roy frames it differently.

“Obamacare is the law of the land,” Roy told me in a phone conversation on Wednesday, defending his position. “It has been for four years and will be at least for seven years [assuming it can't be repealed until 2017, after Obama leaves office]. So, my view has always been that we have to, on the conservative side, contend with that. I don’t see that as a concession. I see that as the real world.”

His plan reforms and deregulates the insurance exchanges at the heart of Obamacare, and then, over time, relies on the exchanges to cover Medicare and Medicaid beneficiaries — creating what he refers to as “universal exchanges.”

Roy argues that his vision for a reformed insurance exchange will help bring down premiums relative to Obamacare. To that end, his plan would return more power to the states, reduce the number of benefits that insurers are forced to provide, and allow insurers to charge older Americans more for insurance — meaning a lighter burden would be placed on younger Americans. In addition, he would scrap a health insurance tax, subsidize health savings accounts and encourage higher-deductible plans.

His plan would still force insurers to cover those with pre-existing conditions and prevent them from charging different rates based on enrollees' health statuses. These two policies — known as “community rating” and “guaranteed issue” — have combined to drive up the price of insurance under Obamacare. But Roy argued to me that his extensive research found that the primary factor driving up insurance costs is the limitations on what companies can charge older Americans. He said that allowing insurers to charge older Americans six times as much for health insurance as younger Americans (as opposed to Obamacare’s 3:1 limit) would significantly reduce premiums relative to Obamacare.

At the same time, Roy’s plan would repeal the individual mandate. He argues that due to the reforms he’s proposing, there would be less reason for young Americans to avoid the insurance market. In addition, he’d replace the current annual open enrollment period with a limited six-week period every two years. In other words, anybody who chooses to forgo insurance coverage would have to wait two years for their next crack at purchasing insurance in the event of an unexpected illness.

In addition to the health insurance tax, Roy’s proposal would repeal taxes on drug makers and medical device manufactures. He would also repeal the employer mandate. But he would maintain the “Cadillac Tax” on benefit rich employer health plans and even move up its effective date by a year, to 2017.

The plan would then gradually move more and more Medicare beneficiaries over to the exchanges. He would achieve this by increasing the retirement age by four months every year. So, while the reform wouldn’t effect existing retirees, each year, more seniors would be moving to the exchanges. As an example, after 30 years, individuals between 65 and 75 would be obtaining insurance through the exchanges rather than traditional Medicare. This could be seen as a way of using Obamacare’s exchanges to get to something akin to the Medicare reform in House Budget Committee Chairman Rep. Paul Ryan’s budget.

The plan would also move Medicaid beneficiaries onto the exchanges for regular medical care and have the federal government pick up the full tab. But states that accepted the federal funding would have to take over financial and administrative control of long-term care (such as nursing homes stays for elderly and disabled beneficiaries).

Assessing Roy’s plan from a free market perspective requires first deciding what it should be compared against. The plan concedes a lot of ground to the left when it comes to emphasizing universal health insurance and maintaining key regulations, and it would spend more on subsidizing health insurance in the individual market than the system that existed prior to Obamacare.

On the other hand, it would loosen the government’s grip on private health insurance relative to Obamacare, and it would inject market elements into Medicare and Medicaid, which are fully government-run systems.

So, whether or not free market advocates can get behind Roy’s approach will depend largely on how they view the status of the fight against the Obamacare. Those who view the battle as largely lost, can see in Roy’s proposal a way to make Obamacare less bad, while achieving long-term entitlement reforms that have eluded limited government supporters for decades.

On the other hand, those who are more optimistic about undoing Obamacare are going to see Roy’s proposal as conceding too much, too soon.

Roy hopes his proposal, by embracing many of the goals of the left and right, could be the basis of a grand health care compromise. But it could also have the opposite effect. Because it adopts many elements of Obamacare, it would likely be untouchable for most Republicans. On the other end, because it overhauls Medicaid and Medicare – including hiking the retirement age – it would be difficult to swallow for even moderate Democrats.

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