Why the GOP's ObamaCare replacement plan is such a dud

The House GOP's ObamaCare replacement plan has arrived. While it contains a few worthy features, overall, it's a dud.

Before getting into the plan, why it's bad, and how to fix it, it should be noted that House Speaker Paul Ryan (R-Wis.), who is the plan's main author, is in a near-impossible situation. He has many constituencies to please, and their wishes seem incompatible. There are hardcore small-government purists who view any government spending to help people get health care with tremendous skepticism. There are skittish Republican moderates fearful of robbing constituents of ObamaCare's existing benefits. There is the inherent complexity of health care reform. And then there is the fact that the White House is out to lunch on health care.

The House's plan has many features that conservatives (myself included) like. It overhauls Medicaid financing by turning it into a per-capita allotment to the states. This would encourage states to improve the way Medicaid is delivered. The plan also dramatically expands health savings accounts, which many conservatives see as the path to improving health care by endowing it with the force that has ensured many other industries see both technological improvement and reduced prices, namely decentralized choice.

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But the new plan has a major downside: It provides refundable tax credits to enable people who aren't covered through their employers, Medicaid, or Medicare to purchase insurance. This is a good conservative idea: Enable people to make their own decisions; give money to those who can't help themselves. The problem is that the tax credits are structured in a way that will almost certainly make it impossible for millions of vulnerable people currently covered under ObamaCare to get coverage.

The plan seems almost designed to make everyone unhappy. Some small-government purists in Congress (and elsewhere) hate the idea of tax credits for insurance on principle; but the way the credits are structured means moderates will be turned off by a plan that leaves so many people out in the cold. It's a surefire political loser, and when the sob stories about people who lose coverage come out, the GOP will own their misery. The plan's crafters are aware of these flaws — that's why the GOP plans to rush it through before the Congressional Budget Office can score it, because the CBO would show that many millions of people would lose coverage. This is also why some key provisions only kick in after the 2020 election.

So why come out with such a turkey?

Fundamentally, I believe the problem boils down to one thing, which is that Republicans still don't understand who their base is. Since the Reagan Revolution, lazy pundits and political strategists operated on the idea that the vaunted GOP base is made up of small-government purists and Buckley-style conservatives. The reality, which has been apparent in the numbers all along, and has been pointed out by conservative thinkers like Ross Douthat and Reihan Salam, but which should be apparent to everyone now that Trump is president, is that while there is a significant "traditional" conservative constituency within the Republican Party, its true base is white working-class voters who, while "conservative" in some ways, are much less ideological than, say, National Review.

Many enthusiastic Trump voters are ObamaCare beneficiaries. Maybe they don't realize it. Or maybe they do, and they find the program inefficient or screwed up in a number of ways, which is certainly consistent with what we know of its rollout, what with people losing their doctors or with double-digit price increases for many plans. A key part of Trump's appeal, both in the primary and in the general election, was that his ObamaCare replacement would "take care of everyone."

In other words, the key metric for whether "TrumpCare" will be a political success will not be whether it meets some imaginary Beltway litmus test, but whether Americans broadly like it. What matters is whether people who consume health care, particularly those who don't receive coverage through their employers, find their new health care experience better (and less expensive) than before.

This points to the need for a plan that is both "more" conservative and "less" conservative. As Avik Roy of the Foundation for Research on Equal Opportunity notes, with some tweaks to the bill's tax credit formula, it would cover more people than ObamaCare and at a lower cost. Meanwhile, Republicans should focus even more on empowering health care recipients, through regulatory action and enabling people to port coverage from job to job, to ensure there is more choice in the health care market, which should improve quality and reduce costs.

Time to go back to the drawing board.