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The new GOP plan to replace Obamacare doesn’t answer a really important question

GOP leadership in the House of Representatives are introducing a plan to replace the Affordable Care Act. Here's what the proposal wants to change. (Video: Jenny Starrs/The Washington Post)

On Wednesday morning, Republicans in Congress added a proposal of their own to the long list of big health care promises that politicians have made to voters during this campaign.

The document is part of a broader effort by House Speaker Paul D. Ryan to show that the Republican majority is committed to sound governance and to a substantive debate about public policy amid what has been a chaotic presidential cycle. Yet, Ryan and the GOP lawmakers who wrote the proposal do not offer a clear plan for financing the major new expenditures they put forward.

It seems unlikely that the GOP plan would leave the government short $17 trillion over a decade, as the health-care proposal from Democratic presidential candidate Bernie Sanders might. Yet, the Republican proposal to replace the Affordable Care Act, President Obama's major health-care overhaul, raises more questions than it answers, particularly about cost.

"There have been very few detailed proposals to replace the ACA," said Larry Levitt, a health-care expert at the nonpartisan Kaiser Family Foundation. "It doesn’t mean it’s not technically possible, but it’s politically very difficult — and I think this is part of why we may not see details in the plan this week."

Just hours before the third Democratic presidential primary debate, candidate Bernie Sanders released details about his proposed single-payer health-care plan. (Video: Sarah Parnass/The Washington Post)

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In repealing the law commonly known as Obamacare, the GOP legislators would eliminate expenses associated with the law, such as the subsidies that help many middle-class policyholders pay for insurance in the individual market.

At the same time, the authors propose repealing all of the new taxes that the reform imposed, including an increase of 0.9 percent in the payroll tax and a 3.8 percent surcharge on capital gains and other income from investments for wealthy taxpayers.

Some of the new taxes still haven't been implemented, but assuming that they are, Obamacare should bring in more than enough new revenue to cover the additional costs, according to the Congressional Budget Office. The nonpartisan agency forecasts that repealing the law would increase the deficit by $137 billion over a decade, which means that the Republican plan for repeal is starting from behind.

Eliminating taxes and reducing federal spending have long been a goal for Republicans. While the new proposal would eliminate taxes, the authors would also replace much of the outlay under Obamacare with new spending of their own.

To replace the subsidies under the current law in the individual market, the proposal calls for a monthly tax credit that households could use toward insurance. The value would be adjusted for age, and households that paid less than the value of the credit in taxes would still receive the full benefit. Subscribers could spend any remainder from the credit that they do not use toward health insurance on incidental expenses such as dental care or over-the-counter drugs.

The proposal does not specify how much this credit would be worth to individual families or how much the authors think it would cost on the whole, but it is clear the credit would be a substantial grant made to a large number of people.

The authors write that the credit "would be large enough to purchase the typical pre-Obamacare health insurance plan," and that it would be universally available to anyone without employer-sponsored insurance, Medicare or Medicaid. By contrast, the Affordable Care Act only makes subsidies available to households of modest means.

Additionally, the GOP lawmakers propose dedicating new federal funds to help states insure the most ill and most expensive patients. Currently, Obamacare requires insurance companies to cover these patients. The law is designed to defray the cost of doing so for the private sector by creating new customers with the requirement that most Americans, even if they are relatively healthy, buy insurance.

The Republican proposal would repeal that individual mandate and instead help pay for the sickest patients' care with federal subsidies. The document calls for $25 billion over 10 years to help underwrite special markets for these patients.

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Yet past estimates of cost of such markets, known as "high-risk pools," suggest that amount might not be nearly adequate.

"That's not enough money," said Tom Miller, a health-care expert at the conservative American Enterprise Institute, who estimates that the cost of a robust system of high-risk pools would likely be between $70 billion and $100 billion over a decade.

"If you want to be credible about his, you do have to have sufficient funding," he added. "That number seems to be a good bit lower than it needs to be."

The GOP proposal rejects enforcing waiting lists for especially unwell patients hoping to participate in the high-risk pools to limit the costs. The document also rules out charging participants exorbitant premiums to make up the expense, so the states would presumably have to come up with the missing funds to cover their sickest citizens.

The proposal does include some provisions that would help pay for these new programs. For example, the authors want to limit the amount of employer-sponsored health-care benefits that are exempt from taxation — firms and their employees would have to pay taxes on benefits paid above that limit.

The proposal does not specify what the limit would be or how much revenue it would create. The authors write that the limit would be high enough that "the vast majority" of companies would not pay new taxes. "Most Americans' plans would not be affected," they write. A limit that imposes new taxes on only a few, very generous plans would bring in less revenue.

The GOP document suggests there is some bipartisan agreement on health care. Democrats have also endorsed the basic aims laid out in the new Republican proposal — reducing costs overall while ensuring that more Americans have coverage, including those who need it most.

Republicans might well have ideas for achieving those aims more cheaply, but their plan won't be free either, and so far, Ryan and his colleagues haven't put the money on the table.

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