Why replacing Obamacare is dividing Republicans

Republicans dislike Obamacare: The party is unified on that issue. But they don't all dislike it for the same reasons, and their disagreements help explain their continued inability to figure out how to respond to a Supreme Court decision on the law that's expected by the end of June.

Many of the Affordable Care Act's opponents, like many of its supporters, identify the law's core feature as the use of federal subsidies to help millions of people who had lacked health insurance to get it. They think the proposed Republican alternatives — which also involve offering subsidies to help people buy insurance — look awfully similar to this arrangement. "Obamacare lite" is their preferred disparagement.

But an alternative view is that while the federal government over-subsidizes the consumption of health care — and has for decades — increasing subsidies was not the main way that Obamacare expanded government involvement in health care. Rather, its key innovation was to make the health care system further centralized, regulated and coercive.

On this view, the law's most objectionable aspect isn't the tax credits. The real problem is that Obamacare makes the federal government the primary regulator of health insurance, uses that regulatory power to strictly define coverage in ways that restrict options and competition, attempts to force people to buy insurance products they don't want, creates a federal board of dubious constitutionality to set standards, and assumes that empowering experts in Washington is the best way to make health care more efficient and rational. The tax credits in Obamacare are objectionable mainly insofar as they further this highly prescriptive scheme.

Yet tax credits could, in this view, be an important part of a reform that reduces the federal role in health care. That reform would pare back the total amount of subsidies offered, but more importantly use the subsidies to empower consumers and create competition among insurers and health care providers. It would avoid favoring employer-provided insurance over plans purchased by individuals (which federal tax preferences have done for six decades), allow cheaper and more expensive coverage to compete on a level playing field, and bring people into health-insurance markets rather than relegating them to Medicaid's inferior alternative.

This is the approach taken by several congressional Republicans, who would make use of tax credits while also scrapping Obamacare's mandates and regulations. The credits would enable the emergence of a competitive marketplace with very little in the way of central direction. Being able to get the tax credits wouldn't require meeting Obamacare's definition of "essential benefits," for example, or using one of its exchanges.

I have some sympathy for both conservative viewpoints, the one that emphasizes the dangers of subsidies and the one that focuses on overregulation. I suspect that health care markets would work better if we had never created a tax break for health insurance decades ago, and if Medicare had been confined to the elderly poor. But if subsidization of health care is the decisive battle for conservatives, it was lost long ago. There aren't more than a handful of congressmen who would be willing to scale back subsidies drastically, let alone eliminate them. And there's no good argument for refusing to let any subsidies flow to the people who have gotten health insurance through Obamacare while preserving the larger subsidies — affecting more people — that predate the law.

The case before the Supreme Court now is increasing the tension in the conservative mind about health policy. The court may take subsidies away from millions of people on the grounds that President Barack Obama's administration had no legal authority for extending them in most states. (The text of the law authorizes subsidies for people who buy insurance through exchanges "established by the state," but most states didn't establish such exchanges and instead rely on the federal healthcare.gov system.) Many congressional Republicans favor a short-term extension of subsidies for those affected while preparing for a longer-term reform that modifies those subsidies and moves away from Obamacare's regulation-heavy model.

Republicans who balk at this idea, by and large, think that a victory over Obamacare would mainly mean that its beneficiaries stop getting subsidies. And they think that any extension of the subsidies would amount to a surrender. Republicans who support this legislation, on the other hand, are implicitly taking the view that what's most important is to reduce the federal government's heavy-handed role in managing health care.

Both sides of the debate have some reasonable points. But as long as it continues, Republicans will be handicapped. They aren't likely to come up with a suitable response to Obamacare if they can't agree on what's wrong with it.

Previously:

• 05/26/15: Sixteen questions Hillary Clinton should answer
• 05/14/15: Free-trade opponents get less logical by the day
• 02/25/15: Republicans unite to ignore immigration in 2016
• 02/11/15: 6 questions as Scott Walker eyes 2016 campaign
• 02/09/15: Bobby Jindal shows how not to replace Obamacare
• 02/02/15: Republicans should plan for post-Obamacare world
• 01/29/15: Why Obamacare should lose in next Supreme Court case
• 01/22/15: Proving they can work with Dems isn't GOP's most important political task
• 01/13/15: Newly empowered Congress passing tax reform in 2015? Not a chance, and here's why

Ramesh Ponnuru
Bloomberg News
(TNS)

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Ramesh Ponnuru has covered national politics and public policy for 18 years. He is an author and Bloomberg View columnist.