ObamaCare Freedom and Failure Options

Ted Cruz’s idea is good policy, but is it a political hill to die on?

Sen. Ted Cruz, talks with the media on Capitol Hill on June 27.
Sen. Ted Cruz, talks with the media on Capitol Hill on June 27. PHOTO: CQ-ROLL CALL

Senate Republicans will roll out a revised health-care bill as soon as Thursday, and then begin a final drive to a vote this month. So this is a moment to take stock of some of the larger political dimensions of the ObamaCare debate.

Legislative progress has been slower and more difficult than it might have been for a party that ran for seven years on a repeal-and-replace agenda. The benefit is that Senate Republicans are better educated about health-care substance and prepared to make hard governing choices—if they can persuade the remaining Bartlebys.


One remaining debate is over Ted Cruz’s “freedom option.” The Texas Senator’s amendment says that any insurer that offers at least one ObamaCare-compliant plan could also sell other types of coverage off the exchanges. The expectation is that a more competitive and dynamic insurance market will emerge outside of ObamaCare. Released from federal mandates and price controls, insurers could offer many more innovative products designed for individuals, rather than standardized coverage planned in Washington. 

Mr. Cruz acknowledges that insurance markets could “segment,” meaning that younger and healthier people would gravitate to the Cruz option, where premiums are likely to be much cheaper. Older people with more health expenses would remain on ObamaCare, which bars insurers from charging higher premiums based on health risks and bans exclusions for pre-existing conditions.

ObamaCare’s logic is that low-cost people must be charged more in order to charge high-cost people less. But these transfers aren’t a good value for low-cost people, which is why enrollment in ObamaCare has been so disappointing. This in turn has led to a cycle of higher premiums and less enrollment.

The logic of the Cruz proposal is that there is a rough consensus among Republicans that government should guarantee access to coverage for people with pre-existing conditions. In that case, government should pay for this guarantee, in the form of a de facto high-risk insurance pool, rather than hiding the cost in cross-subsidies imposed on private citizens.

The virtue of this approach is transparency and honesty. In a bifurcated market, premiums would be much higher for ObamaCare plans. But they’d be offset for consumers by much higher federal subsidies that rise with premiums, and the Senate bill also includes at least $50 billion for market stabilization and probably more once this exercise concludes. Federal spending might be higher as a result, but at least the taxes to pay it aren’t indirect and unfairly distributed.

One danger is that the Cruz amendment could precipitate a wave of market failures, where the ObamaCare side becomes so expensive that insurers quit even if they have to quit the deregulated side too. People whose incomes are too high to qualify for ObamaCare subsidies and then develop medical problems would also get a worse deal.

The political disadvantage is reopening the emotional pre-existing conditions brawl, which the GOP doesn’t want to fight. But under the Cruz plan, they could point out that ObamaCare protections would remain in place while adding more options for people who want them.

Mr. Cruz’s amendment has the makings of a sensible political compromise between conservatives and moderates—i.e., free-market prices in health care, with subsidies for those who can’t afford free-market prices. But if moderates make the Cruz plan a red line, conservatives will have to decide if they want to insist on it. Is the freedom option worth losing the other gains of the overbill bill, including the first major Medicaid reform since 1965, repealing the individual and employer mandates, reversing a chunk of ObamaCare’s tax hikes and other types of deregulation such as state waivers.


Meanwhile, some GOP centrists are still pretending that if the bill dies, both parties will come together and pass some glorious compromise. This ignores the vast philosophic differences between conservatives and liberals on health care and the role of government, and it assumes that Chuck Schumer and the Democrats who have pledged total resistance to Donald Trump will negotiate in good faith. There will be no such mercy.

GOP moderates have already moved the health bill toward the political center and earned zero Democratic interest in return—not even from Joe Manchin, though Mr. Trump carried West Virginia by 42 points, or Heidi Heitkamp, though Mr. Trump won North Dakota by 36. On Monday Mr. Schumer sent a letter laying out his price to start negotiations, citing four bills as the basis for his “bipartisan” terms—all sponsored by Democrats alone.

Politically, a grand bargain would throw a lifeline to the likes of Missouri Democrat Claire McCaskill, whose home state is facing an exodus of ObamaCare insurers. She’ll claim she voted to solve a problem Republicans caused, even if the practical effects are nil.

Republicans running for re-election in 2018 will see no similar upside, because no deal the GOP could cut with Democrats can repair the ObamaCare exchanges before the election while their pro-repeal voters will be demoralized. The trade Mr. Schumer is offering is political insulation for Democrats while inviting Republicans to accept the blame for surging premiums and diminishing coverage.


Once Senators have time to inspect the new bill, better to vote for the motion to proceed and bring the legislation to the floor. That will start a robust debate and the amendment process. Every idea will get a vote and the public can see which command a majority.

Republicans are fast approaching a binary choice. They can either repeal and replace ObamaCare with a center-right reform, or they can collapse in failure and throw power to Mr. Schumer. Republicans who issue ultimatums over this or that detail are supporting the failure option.

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