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The Apothecary
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On Monday evening, in front of a cheering crowd, Florida Sen. Marco Rubio (R.) announced his candidacy for President of the United States. At times stirring, at times nervous, Rubio declared that one of the core planks of his policy platform would be to “repeal and replace Obamacare.” Unlike some of his companions in the race, Rubio has outlined what his Obamacare replacement might look like. It’s a solid start, but it’s silent on a key detail.

Does Rubio think repeal is even possible?

People may have forgotten, but Marco Rubio was one of the key supporters of the effort in 2013 to try to defund Obamacare by causing a government shutdown. Like fellow defunders Ted Cruz and Mike Lee, Rubio argued then that it was worth risking a shutdown to defund the health law, because once Obamacare’s subsidies went online in January 2014, the law would be impossible to repeal.

“This is the only chance and the last chance we have” to repeal Obamacare, Rubio told Fox News’ Bill O’Reilly in July 2013. In September of that year, in an op-ed for, Rubio wrote, “Over the next two weeks, we have our last chance to stop Obamacare by defunding it in the [continuing resolution].”

Factually speaking, Rubio was incorrect. The continuing resolution would not have defunded Obamacare; it would have only eliminated funding for a tiny portion of the law’s budget. The vast majority of Obamacare’s spending occurs through provisions that were not governed by the continuing resolution.

And now, it would appear, Rubio disagrees that the shutdown was the last chance to repeal and replace the law.

Rubio embraces the conservative wonk consensus

Three weeks ago, Rubio published an op-ed on with his “three part plan for the post-Obamacare era.” The plan falls firmly within the conservative health wonk repeal-and-replace consensus. Obamacare offers tax credits—subsidies through the tax code—to buy costly, highly-regulated insurance products. The Rubio replacement, like many others, would offer such tax credits to purchase a broader selection of insurance plans and health savings accounts, across state lines.

For the older, Great Society entitlements, Rubio would apply Paul Ryan-style premium support to the Medicare program, and use a reform first proposed by Bill Clinton—per-capita caps—to reform Medicaid.

Obamacare famously prohibits insurers from denying coverage to those with pre-existing coverage. Rubiocare would repeal this mandate and replace it with subsidized high-risk pools for those who can’t find coverage elsewhere. The plan would prevent taxpayers from being “asked to bail out an insurance company that loses money, as is currently the case under Obamacare.”

Notably, the plan would gradually reduce the value of the tax exclusion for employer-sponsored insurance, placing it “on a glide path to ensure that it will equal the level of the credits at the end of the decade.” That’s a bold move by Rubio, one that few Republicans have been willing to tackle since then-Senator Obama defeated John McCain’s 2008 proposal to replace the exclusion in its entirety with a uniform, universal tax credit.

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A few concerns

On the whole, Rubio’s framework goes in the right direction. But there are a few things he’d need to tighten up in order to achieve real entitlement reform.

Per-capita caps have become popular in certain Republican circles as an alternative to block-granting Medicaid, because “block grant” has become a toxic phrase on the left, whereas per-capita caps were first proposed by a Democratic President. But per-capita caps could badly backfire on conservatives. They create a huge incentive for states to entrap more people into Medicaid, because states would receive more federal funding if more people sign up.

As John Goodman has pointed out, high-risk pools—another popular idea in certain GOP camps—creates as many market distortions as does Obamacare-style guaranteed issue for pre-existing conditions. “Price setting errors that government makes in the market for risk,” notes Goodman, “will invariably be worse than in just about any other market.” As with public-sector pensions, politicians will have a perverse incentive to expand high-risk pools, knowing that their successors will be stuck with the bill. And insurers will have a perverse incentive to deny even more people coverage, safe in the knowledge that the high-risk pools will pick up those denied customers.

Finally, Rubio’s crusade against the alleged “bailout” of health insurers is not what it seems. A taxpayer-funded insurance company bailout would be bad news indeed. But that’s not what happened.

To the degree that taxpayers have lost money subsidizing insurance companies in Obamacare’s exchanges, it’s not because the insurance companies were irresponsible. It’s because the Obama administration suddenly changed the rules by which those exchanges operated, in response to political blowback about health plan cancellations. The taxpayers weren’t forced to bail out the insurance companies, they were forced to bail out the Obama administration. But Rubio decided that attacking insurance company bailouts would be more attractive.

Rubio stays silent on a key question

A key aspect of the Rubio plan is what it left out. The most important debate going on right now in conservative health policy circles is the question of how health insurance tax credits should be structured.

Obamacare’s tax credits are means-tested; i.e., the tax credits gradually recede in value as you go up the income scale. The Burr-Hatch-Upton replacement plan for Obamacare employs a similar approach, as does Transcending Obamacare. The difference between Obamacare and these replacement plans is that the replacement plans don’t force you to buy insurance using an individual mandate; also, the replacement plans liberalize the insurance market such that you can buy a very broad range of products, in contrast to the ACA.

As noted above, John McCain proposed offering every American the same tax credit, in dollar terms, to purchase health insurance. This is an approach supported by a number of other conservatives, including the editors of National Review, who express concern that decreasing the tax credit as you go up the income scale would discourage people from seeking more work.

But the uniform tax credit is flawed as a matter of both policy and politics. It would reduce the number of Americans with health insurance, by as many as 6 million, because it would reduce subsidies for the low-income population by more than $2,000 a year, while increasing subsidies for the high-income population by a similar amount.

It’s a debate that matters. You could say that Rubio is smart not to pick a side in that debate—for now. But he’ll have to at some point in the future. If he’s the GOP nominee, Hillary will push him on just this sort of question. So buckle up!

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READ AVIK’S HEALTH-REFORM PLAN, Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency. Follow @Avik on Twitter, Google+, and YouTube, and The Apothecary on Facebook. Or, sign up to receive a weekly e-mail digest of articles from The Apothecary.

INVESTORS’ NOTE: The biggest publicly-traded players in Obamacare’s health insurance exchanges are Aetna (NYSE:AET), Humana (NYSE:HUM), Cigna (NYSE:CI), Molina (NYSE:MOH), Anthem (NYSE:ANTM), and Centene (NYSE:CNC), in order of the number of uninsured exchange-eligible Americans for whom their plans are available.

I am Forbes' Policy Editor, and president of a non-partisan think tank, the Foundation for Research on Equal Opportunity (, which focuses on expanding economic

I am Forbes' Policy Editor, and president of a non-partisan think tank, the Foundation for Research on Equal Opportunity (, which focuses on expanding economic opportunity to those who least have it. I'm on Twitter at @Avik. My work has also appeared in The Wall Street Journal, The New York Times, The Washington Post, USA Today, The Atlantic, and other publications. I'm often on cable news; you can find a collection of my TV clips at