Replacement Parts

NR editorializes in favor of the Coburn-Hatch-Burr proposal today:

The new health-care plan from Senators Tom Coburn, Orrin Hatch, and Richard Burr is the best one to emerge from Congress yet, and marks real progress in the campaign to replace Obamacare. The plan aims to make health insurance affordable for roughly as many people as Obamacare was intended to, but without the higher taxes, the regulatory micromanagement, the threat of rationing, the reduction in consumer freedom, the vast new bureaucracies, or the perverse incentives. And while not perfect, it largely succeeds in these objectives.

About those imperfections: The editorial, I think, explains the legislation’s regulatory aspects well and judges them correctly. They aren’t great but they differ in character from the regulations in Obamacare in being, in the main, both waivable by states and compatible with the proper definition of insurance.

Yuval Levin also praised the plan, but suggested a few improvements. The tax code has for decades favored employer coverage over individual coverage, which has had all sorts of negative effects on health markets. The plan partly remedies the problem by giving people without access to employer plans a tax credit to buy coverage on the individual market. This credit is means-tested, though, phasing out rapidly as people’s incomes rise. Levin thinks that’s a mistake: “I also think a flat, universal tax benefit for coverage would be better in many respects, as noted here. And that means I think the phasing out of the credit at 300 percent of poverty is not ideal, as it does not extend the tax benefit to much of the middle class.” Avik Roy, also writing in favor of the plan, thinks the plan’s means-testing is appropriate: It limits the budget impact of the tax credit, targets its help at those who most need it, and may not lead to as much political pressure for expansion. If the case for flatness were purely a matter of simplicity and political appeal, then I think that Roy’s counter-arguments would make it a close question. But the other problem with the phase-out of benefits is that it raises implicit marginal tax rates: The more you work, or the more raises and promotions you get, the fewer benefits you get, and thus your incentive to make the extra income goes down. For me, that consideration leads to Levin’s side of the argument.

I suspect that Levin, Roy, and I all agree, however, with the closing thought of NR’s editors:

One of the great liberal conceits of the age is that to extend insurance coverage to the uninsured and make sure the sick do not fall through the cracks requires the centralized political management of the health sector. Given those objectives, the administration and its allies insist, Obamacare or something like it is the only game in town. The great service that Senators Coburn, Hatch, and Burr have performed is to explode that myth.


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