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Question: What should replace Obamacare?
B) New tax credits or deductions
C) New block grants to states
Correct Answer: D) Devolution
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Let’s look at each of these four options more closely.
Option A (replace Obamacare with nothing) is appealing but not viable. The pre-Obamacare status quo wasn’t Utopia. Health care suffered from serious problems: job lock, rising costs, excessive state and federal mandates, and red tape. Repealing Obamacare won’t remedy those problems. We must also reform health care.
Option B (tax subsidies) is favored by most Beltway conservatives. It would replace most of Obamacare’s mandates and subsidies with a voucher-like federal subsidy scheme administered by the IRS. In the best versions of this option, the so-called Tax Exclusion, the existing subsidy for employer-sponsored health benefits, would be scrapped or capped. That’s a sound idea. The Exclusion is the single largest cause of our current health insurance woes, encouraging overconsumption of health services and creating job lock.
Conservatives are split over whether the new tax subsidies should take the form of credits or deductions, and over whether they should be universal, means-tested, or age-based. But those are details.
A more important question is whether new federal tax subsidies for health insurance are even a good idea?