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An Unenviable Healthcare Choice for Conservatives

If Republicans want to have a chance at all in the healthcare debate, they have to figure out a way to provide something that covers preexisting conditions.
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There's a lot for people to dislike in President Obama's healthcare plan: it will raise health care costs for most, cut some types of Medicare subsidies, and make individuals more dependent on the government for healthcare. Although I like a few of its features -- cuts to the wasteful, ineffective Medicare Advantage Program, I would not have voted for it myself were I a member of Congress. That said, I think that a health care reform measure that looks at least a little like it is probably inevitable no matter what the Supreme Court decides.

Lets start with a look at what the people want Congress to do. As the Supreme Court deliberates over the plan's fate, it's clear that Obamacare has, at best, tepid public support. Most polls show a roughly even split among those who have formed opinions and a rather high percentage of Americans who have no opinions. But one feature of the bill -- a mandate that insurers cover preexisting medical conditions -- is overwhelmingly popular. Depending on how one phrases the question, the provision has somewhere from 70 to 99 percent (yes) support. Even the Tea Party inspired "Pledge to America" that served as the Republican Party's 2010 campaign manifesto includes a promise to implement it. But this popular feature seems to mandate that one create something a lot like the system that President Obama wants.

Quite simply, it's impossible, as even the Obama administration admitted in arguments before the Supreme Court, to require universal coverage for pre-existing conditions unless people are always covered. This is so for the same reason that property insurers won't write a policy on a house once it starts burning down and auto insurers won't pay to fix a car that's already in the shop. If everyone has to be covered at all times, on the other hand, it's possible to imagine that coverage of preexisting conditions could be made to work. Otherwise, people could buy insurance only when they got sick and this would defeat the purpose of having insurance in the first place. Thus, a mandate is part and parcel of covering preexisting conditions for everyone. Since health coverage is expensive, having a mandate requires more subsidies for people to buy coverage that they couldn't afford otherwise. And this -- coverage for preexisting conditions, a mandate to purchase coverage, and subsidies for the poor to purchase coverage -- is basically an outline of the bill that Congress actually approved. Sure some of its details (health exchanges) aren't necessary to covering preexisting conditions, but most of its big features still are.

The result leaves opponents of Obamacare like me with a rather unenviable set of choices even if the Supreme Court does strike down some or all of the law: endorse some of its fundamental provisions to allow coverage for preexisting conditions or cede the healthcare issue entirely to the Democratic Party.

The second, to me, isn't a viable option. Left to their own devices, many Democrats will work to implement a system that simply centralizes almost all control of healthcare with the government. Vermont has already implemented the basics of such a single payer system and California may well follow suit. Such a system might produce better health outcomes for some people with lower incomes and, by cutting salaries in the medical sector and rationing care, save tax money too. But it would be a disaster for medical innovation, wealth creation, and anybody with a medical condition that doesn't have political juice behind it.

Thus, if Republicans want to have a chance at all in the healthcare debate, they have to figure out a way to provide something that covers preexisting conditions. The best way to do this might be a truly radical solution: end much of the Medicare, Medicaid, and SCHIP programs as they currently exist as well as tax incentives for employers to provide health coverage and replace them with an income and age-related individual subsidy that might cover all costs for poor children and nothing at all for an older, wealthy person like Warren Buffett. People would then buy their own insurance on the private market. Although such a system, based on grants useable only for health insurance, wouldn't be a "mandate" as such, it would have almost the same effective consequence since people would have fewer resources if they didn't buy coverage. (Just as they do if they pay a fine.) If such a system extended the idea of "creditable coverage" (which requires insurers offering group plans to cover preexisting conditions for people who previously had coverage with no breaks more than 63 days) to the individual health marketplace as a way of covering preexisting conditions, then the de facto incentives to procure coverage would be even stronger than those provided by the modest fines found in Obamacare.

I think that such a system would have enormous advantages over the current system as well as the one that President Obama wants to create. But, if we're really honest about it, it still has some of the same fundamental features.

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