Avik Roy: Hard-liners incoherent on AHCA

House Republican leaders unveiled their long-awaited Obamacare replacement. The plan was swiftly panned by observers from all over the ideological spectrum. But there was one group whose complaints made the least sense: GOP hard-liners who believe that any attempt to provide financial assistance to the uninsured amounts to “Obamacare Lite.”

It was a phrase we heard over and over on Tuesday. “This is Obamacare Lite,” said Sen. Rand Paul, Ky. FreedomWorks, a conservative activist group, used the same epithet. Rep. Justin Amash, Mich., called the AHCA “Obamacare 2.0.”

Strictly speaking, the AHCA is nothing close to Obamacare Lite. The bill would repeal the Affordable Care Act’s Medicaid expansion and entirely defund its health insurance exchanges. The bill would transform Medicaid into a modernized, dynamic insurance program. The bill would dramatically expand health savings accounts, allowing patients to control more of their own health-care dollars, and give those who buy coverage on their own significantly more choice in the kinds of plans they buy: a reform that would have the side benefit of lowering premiums.

Each of these provisions, individually, represents a significant advance in free-market health reform. But to the hard-liners such as Paul and FreedomWorks, none of these reforms matter, because the AHCA commits the cardinal sin of offering assistance to people who can’t afford health insurance.

The idea of offering tax credits to the uninsured to buy health insurance has been around since long before Obamacare was even a word. Conservative think tanks have talked about them for decades. In 2008, Sen. John McCain, R-Ariz., was the GOP’s choice for president on a platform of offering every American a tax credit to purchase health insurance. The 2012 GOP nominee Mitt Romney proposed them in his campaign as well.

Paul and other hard-liners might respond that none of that history matters, because neither McCain nor Romney is a “real conservative.” Except that Paul, Amash and company aren’t campaigning to repeal Medicare, which provides hundreds of billions of dollars annually to subsidize health insurance for wealthy Americans, such as Warren Buffett, who are older than 65. Indeed, in 2012, Paul introduced a bill that sought to offer seniors generously subsidized private coverage, with richer benefits and lower premiums than Medicare. Like Obamacare, Paul’s program would require insurers to charge seniors the same premiums regardless of health status or pre-existing conditions and cap total out-of-pocket costs.

Furthermore, Paul and those who agree with him don’t want to curb the $400 billion annual federal subsidy for employer-based coverage, which disproportionately benefits high earners.

Rhetorically, GOP hard-liners such as Paul claim that they are implacably opposed to federal subsidies for health insurance, that they’re taking a brave stand against big government. Operationally, however, they support subsidies for the rich, and only oppose subsidies for the poor and the sick. That comes across as a political stand against Americans whose votes they don’t need.

Real conservative reformers, who have been studying this problem for years, understand that the way to make our health-care system freer and fairer is to rectify that imbalance between how we subsidize health insurance for the wealthy and how we do it for the poor. That would involve reorienting Medicare away from the wealthy and toward the middle class and the poor. It would involve reforming the tax subsidy health insurance plans. It would involve helping vulnerable and poor Americans buy private coverage and build health savings accounts.

Paul is right that the American Health Care Act is flawed. But it isn’t flawed because it offers financial assistance to the uninsured. It’s flawed because it doesn’t provide enough assistance to them, making premiums unaffordable for many poor people. Republicans can fix that problem while also reducing the size of government, but only if they’re willing to limit the role of government in subsidizing health insurance for the wealthy.