How the GOP can fix 'ObamaCare'

If the election were held today, President Obama would probably lose. The Republicans would very likely score gains in the Senate, but probably lose seats in the House — maybe even lose their majority altogether.

In such a case, after January 2013, the U.S. would have a president committed to the repeal of the Affordable Care Act (aka, "Obamacare") — but lacking the votes to carry out his pledge.

Perhaps the Supreme Court will rescue that hypothetical president by voiding the ACA — resetting the screen for a Republican do-over.

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More likely, though, the Supreme Court will act cautiously, leaving a hypothetical Republican president with a serious problem: How to keep his promise to his party without wrecking his own popularity. Remember, large elements of the ACA remain very popular with the public.

Republicans have assured voters that the popular bits will be maintained in a new Republican measure to "replace" the Affordable Care Act. But several months into the 112th Congress, nobody has even outlined such a replacement.

A fight for total repeal will end in total defeat.

Meanwhile, the clock is ticking. The Affordable Care Act's major provisions go into effect on Jan. 1, 2014. Come Inauguration Day 2013, a hypothetical Republican president will have less than 12 months to devise, draft, explain, and enact a new Republican health care law that preserve the parts of ACA the voters like, while junking the pieces that Republican activists and donors despise.

But a prudent Republican president will want a Plan B: A plan for living with the ACA and revising it in light of Republican priorities.

What would such a Plan B look like?

Mitt Romney has an interesting idea. Section 1332 of the Affordable Care Act enables the secretary of Health and Human Services to grant waivers to states from many ACA regulations.

With a majority of the states challenging ACA before the Supreme Court, there should be no shortage of takers for the waivers.

But as always, there are some catches.

· The waivers are only available for plan years beginning after Jan. 1, 2017.

· The replacement plans must provide benefits at least as generous and at least as affordable as those previously provided by the ACA's mechanisms. The replacement plans must also cover at least as many people.

· The waivers would not save the federal government any money. Subsidies due to individuals within the states under the ACA mechanisms would be granted in a block to the state government.

In other words: President Romney would find himself enforcing President Obama's law for at least three-quarters of his own first term. And when he finally got his chance to unleash the states, they'd still have to conform to the old law's main requirements — and would still qualify for the same federal subsidy, just in different forms.

As plans for "repeal and replace" go, this isn't very satisfactory.

What would be better?

Here's where a hypothetical post-2012 Republican administration and Congress should focus.

1) Bring forward the waiver effectiveness date to Jan. 1, 2014. It's just crazily burdensome on states that first they must get the ACA system up and working, and only then be allowed to develop their own alternative. There should be Democratic votes in the Senate for this kind of federalism measure.

2) Reform the way in which ACA is financed.

The ACA is (supposedly) paid for with new taxes on higher-income taxpayers, beginning Jan. 1, 2013.

Greg Sargent at The Washington Post has charted the distributive effect of the ACA tax increases.

For earners in the top 5 percent, the bite is real but small. For earners in the top 1 percent, the bite becomes noticeable.

If it turns out that the ACA's costs have been underestimated (a good guess), then the bite on upper-income earners will be even more severe.

But financing a universal health care benefit with a narrowly targeted tax exacerbates all the perverse incentives in U.S. health care. The U.S. already spends too much: 17 percent of national income, as compared to only 13 percent for the second-biggest spender, Switzerland. Extending health care coverage at the expense of only a few will only intensify the system's pro-spending bias.

3) Replace the individual mandate with a refundable tax credit valid only for the purchase of health insurance. Politics is not an entirely rational business. True, the individual mandate originated as a conservative and Republican alternative to government-run single-payer health insurance. But that was then. Today, the mandate is reviled among conservatives as an outrageous violation of individual liberty. There's no arguing the point. A work-around on this issue has become an indispensable ideological requirement for Republicans.

4) Unleash the cost controllers. Contrary to widespread impression, Americans don't use more health care than other people. They are actually less likely to see a doctor in a year than Western Europeans. When they go to hospital, they don't stay longer. But every item they do use costs more than its European counterpart. America needs a green eyeshade party willing to do the disagreeable work of squeezing waste from the system. And since, post-ACA, cutting waste creates opportunities to reduce taxes, the waste-squeezing job logically falls to Republicans.

Back in 2009-2010, there were opportunities to negotiate many of these changes with an administration and a Democratic Party desperately eager for Republican buy-in. Those opportunities were thrown away. Republicans should not repeat this mistake in 2013. A fight for total repeal will end in total defeat. It will leave the ACA intact, as is, to accrete interest group support until reform becomes all-but-impossible.

Yet there is a last chance to revise the law before it goes into effect. Republicans should seize that chance when the moment comes. If forfeited now through ideological excess, who knows when an equal chance will come again?