NCPA - National Center for Policy Analysis

How to Replace the Health Reform Law

March 27, 2012

History suggests that, now that the Patient Protection and Affordable Care Act ("ObamaCare") is with us, the law cannot be reversed without a credible proposal for what should take its place.  Those reforms must account for both the strengths and the weaknesses of our health care system, and must solve the problems that contributed to the demand for ObamaCare in the first place.  There is room for debate about the particulars of these reforms, and different components of our health care system will call for different kinds of fixes.  What any effective solution must involve, however, is the creation of a true market in health coverage -- one that drives efficiency through competition, and places health care decisions in the hands of consumers and taxpayers, where they belong, say James C. Capretta, a visiting fellow at the American Enterprise Institute and a fellow at the Ethics and Public Policy Center, and Robert E. Moffit, a senior fellow in the Center for Policy Innovation at the Heritage Foundation.

To be credible, the replacement for ObamaCare must address in a plausible way the genuine problems with our system of financing health care.  Preeminent among these are the explosion in costs, the rising numbers of uninsured, and the challenge of covering Americans with pre-existing conditions.

  • The first crucial component of any serious reform must be a "defined contribution" approach to the public financing of health care -- the essential prerequisite for a functioning marketplace that imposes cost and quality discipline. For market forces to work, consumers must be cost-conscious.
  • The second pillar of reform should be personal responsibility and continuous-coverage protection.
  • The third pillar of reform must be a genuine partnership with the states.
  • The fourth pillar of a real reform agenda would address the tax treatment of employer-sponsored plans, transforming today's tax exclusion for employer-provided insurance into a standard tax credit that would extend to all Americans, regardless of employment status, which they could then use to purchase the private coverage of their choice.
  • The fifth key component of a genuine health care reform plan must be an overhaul of Medicaid -- policymakers should move lower-income people out of the limited sphere of Medicaid options and into the same private health insurance markets in which their fellow citizens purchase coverage.
  • The sixth pillar of a replacement plan must be premium-support reform of Medicare.
  • Finally, as a key criticism of ObamaCare is the danger it poses to federal finances, the seventh pillar of a serious health care reform plan must be the full offset of all new costs through spending cuts.

Source: James C. Capretta and Robert E. Moffit, "How to Replace ObamaCare," National Affairs, Spring 2012.

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