Freedom Line Blog

Avik Roy, a health policy expert at the Manhattan Institute, posits an interesting option for fiscal conservatives looking for something to replace Obamacare with, if Republicans capture Congress and the White House this November: Bushcare.

The Bush plan was formulated by the White House’s National Economic Council, under the leadership of Allan B. Hubbard. The core goal of the plan was to equalize the tax treatment of employer-sponsored and individually-purchased health insurance, without increasing the deficit. (As regular readers know, the fact that employers can purchase health insurance for their workers tax-free, whereas individuals can’t, is the original sin of the U.S. health-care system.)

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Bush’s proposal sought to eliminate the unlimited tax break for employer-sponsored insurance, replacing it with a standard deduction for everyone. Under the plan, anyone—employed or not—who bought at least catastrophic insurance would not pay income or payroll taxes on the first $7,500 of their income, or the first $15,000 for a family plan.

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The Bush plan’s numbers were designed with 2009 insurance prices in mind, and the tax-deduction thresholds would grow with CPI inflation. The Treasury Department estimated that the plan would lower taxes for 80 percent of those with employer-sponsored insurance, and increase taxes for the remaining 20 percent. It would have especially benefited the 18 million people who then bought insurance on their own, along with many of the uninsured, who would suddenly find health insurance to be significantly less expensive.

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In contrast to Obamacare, however, the Bush plan would have turbocharged the market for consumer-driven health plans, tied to health savings accounts, because the most economically efficient use of the deduction would be to purchase a sufficiently generous consumer-driven plan that allowed individuals to put a maximal amount of money into HSAs. Obamacare significantly constrains the use of HSAs in its regulated insurance markets.

Among the criticisms of Bush’s health care proposal is that it “only” expanded health insurance coverage to an additional 11 million people.  Obamacare’s supporters claim – perhaps erroneously – that it would cover 33 million.  But even if we take the estimates at face value, there’s another number that’s arguably more important.

The cost of Obamacare’s 33 million newly covered citizens is agreed by all sides to be in the trillions of (new) dollars.  Bush covered 11 million for zero dollars in increased federal spending commitments.

Food for thought if the Republicans run and win on a platform to repeal and replace Obamacare.