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Updating Reaganomics is complicated by Obamacare

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Politics,Beltway Confidential,Philip Klein

Ramesh Ponnuru has a thoughtful op-ed in the New York Times today arguing that instead of just recycling Ronald Reagan’s agenda out of context, Republicans need to update their policies to make them more relevant to today’s challenges.

Ponnuru makes a brief mention of health care policy, “Controlling the cost of health care has to be a bigger part of the Republican agenda now that it’s a bigger portion of the economy. An important first step would be to change the existing tax break for health insurance so that people would be able to pocket the savings if they chose cheaper plans.”

As somebody who has been urging Republicans to become serious about health care policy for years, I’d agree in principle of the need to address health care costs. But as I’ve cautioned before, the reality of President Obama’s national health care law makes it a lot more complicated for Republicans to institute market-based solutions to control costs.

Changing the tax treatment of employer-based health care has long been the cornerstone of market-based reform, because it would give individuals more choices and more incentive to control their medical spending. But with the new health care law in place, changing the tax treatment could simply mean that many more people get dumped into the  government-run insurance exchanges, helping accelerate the growth of Obamacare.

This isn’t to say that Republicans should rule out the idea, or that they shouldn’t be thinking about creative ways to address health care costs. But it’s to acknowledge that at this current time, crafting market-oriented health care policy is like trying to repair an airplane in mid air. Full repeal of Obamacare is no longer a viable option, but at the same time, there is tremendous uncertainty surrounding how the implementation of the law’s major components will go next year. If implementation goes poorly and runs into additional legal hurdles (as many conservatives assume) there will probably be a window to revisit the law, at least partially. So, on one hand, Republicans thinking about health care policy have to grapple with the reality of Obamacare, but on the other hand, they don’t want to offer proposals based on the assumption that the entire law is set in stone only to see the realm of what’s politically possible change dramatically.

So, my guess is health care policy (beyond Medicare and Medicaid) will be in a bit of a holding pattern on the Republican side until 2014 or 2015, when when there will be a better idea of how much of Obamacare could be re-opened and the GOP presidential race starts to gear up.

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