I had a conversation with [mc_name name=’Rep. Austin Scott (R-GA)’ chamber=’house’ mcid=’S001189′ ] last Friday about the new Republican proposed health care legislation to repeal and replace Obamacare.

The legislation is so sweeping that there were really too many topics to cover in one interview, but I believe we hit the important parts.

Obamacare is potentially in trouble, with the Supreme Court set to announce its decision of the key King v. Burwell case that threatens to unravel Obama’s health care legacy.

Many, including [mc_name name=’Rep. Austin Scott (R-GA)’ chamber=’house’ mcid=’S001189′ ], think this is a good thing, and the Republicans stand ready to enact their own health care plan.

This is part 1 of a series of posts on what sets the Republican plan apart from Obamacare.

Obamacare is a ferocious Leviathan that nobody expected to survive for very long.  Its creators knew it was unworkable to force citizens to buy health insurance in a broken market controlled by just a few large players.  But legislators did not read the bill until it was passed.  Like two people deciding to marry after meeting for the first time at a drunken party in Las Vegas, America has awakened in a bed shared with a stranger, a wedding ring and a huge hangover.

Either the country will move to a socialist-inspired single-payer system—a government-controlled universal healthcare system like they have in Canada and Europe—or we will move to a market-based approach that propelled America to its sole spot as the world’s largest economy.

If we do neither, during our children’s lifetime, America will no longer be able to afford to pay its bills, and instead of being the envy of the medical world, our children may find themselves languishing in a second-rate country with second-rate care.

Republicans have been roundly criticized for not fixing our health care system prior to President Obama’s term, and they have been challenged to produce a plan that addresses the skyrocketing cost of health care, onerous regulations, greedy insurance companies and drug manufacturers, and hospitals and doctors forced to provide more and more care for patients who can’t afford to pay.

Earlier this month, the GOP answered the challenge by unveiling the American Health Care Reform Act (AHCRA).

When Obama’s signature health reform, the Affordable Care Act, passed Congress in 2010 without a single Republican vote, [mc_name name=’Rep. Austin Scott (R-GA)’ chamber=’house’ mcid=’S001189′ ], Republican congressman from the 8th district of Georgia, wasn’t yet in office.

In conservative central Georgia, even the incumbent, Democrat Jim Marshall—who lost his seat to Scott that year—voted against Obamacare (a moniker that even the president has acknowledged as the de facto name for the ACA).

Scott was an insurance broker for 20 years before winning his congressional seat, and still maintains his professional license and an alphabet soup of qualifications.  He also maintains his conservative credentials, with a Heritage Action score of 82% (the House Republican average is 69%).

This may be one of the key reasons why the GOP tapped Scott as one of its leaders in finding an answer to Obamacare.  Scott is co-chair of the Republican Study Committee’s Health Care Task force, along with [mc_name name=’Rep. Phil Roe (R-TN)’ chamber=’house’ mcid=’R000582′ ] of Tennessee’s 1st district.

In my conversation with Scott about the proposed GOP health care legislation, he said, “The key to all of it is how many carriers the American citizen has access to.”  For example, in Georgia, the insurance market has been narrowed down, in most communities, to two or three carriers. “That’s not a competitive market,” he added.

A broken market.

Both liberals and conservatives agree that the health care market is broken, but have very different ideas of how to fix it.

Democrats have long sought to move heath care toward a “single payer” system.  First proposed in 1945 by President Harry Truman as “universal” national healthcare, the idea partially became law when President Lyndon B. Johnson signed the act creating Medicare and Medicaid.

Republicans want to restore the health care sector through market-driven principles, which have driven prices down and service levels higher for other sectors of the economy.

Scott believes AHCRA addresses some of the root causes of our failing health insurance market.  “There were problems in the marketplace prior to [Obamacare] passing,” he said.  “The problems today are bigger than they were before.”

The U.S. health care market has always been dominated by a few powerful players.  Since World War II, when the first employer-sponsored plans started cropping up (Kaiser Permanente was birthed from industrialist Henry J. Kaiser’s desire to provide health care for his wartime shipbuilding workers), insurance carriers joined together to form consortia to spread risk and achieve efficient use of capital.

This led to a very narrow and unregulated market for consumers, which the government attempted to correct by exempting insurance companies from the Sherman Act, which prohibits monopolies and price-fixing.  The McCarran-Ferguson Act of 1945 granted individual states the right to regulate their own insurance markets, and that’s the system we have today.

Scott said his bill eliminates the anti-trust exemption for health insurance companies.  “It’s not about breaking up the insurance carriers,” Scott said. “The goal [is] to create a scenario where the marketplace functions the way a marketplace should,” where smaller and midsize companies can enter the market.

Medicare and Medicaid will be 50 years old on July 30 of this year, and have become a giant sinkhole for government expenditures.  The Heritage Foundation cited Congressional Budget Office statistics showing that in 2014, Medicare consumed over 14 percent of the federal budget, and combined with Medicaid and Social Security entitlements, makes up a full 49 percent of our federal spending, up from 44 percent in 2003.

The CBO projects that major health care program expenditures will grow by 32% by 2024, making those programs by far the fastest growing segment of the federal budget.

Obamacare greatly expanded Medicaid by incentivizing states to offer Medicaid to low-income families earning 138% of the federal poverty level.  In some places, such as Connecticut and Washington D.C., families earning over $40,000 per year can qualify for Medicaid under Obamacare.

The AHCRA repeals Obamacare’s Medicaid expansion, along with its IRS-enforced mandate to purchase health insurance.  “The bill would repeal all of the mandates [of Obamacare],” Scott said.  “It repeals not only the mandates on the contracts, but it also repeals the mandates to purchase.  And it repeals the expansions of Medicaid.”

No silver bullet.

Opening competition between insurance carriers across state lines is one of the GOP’s healthcare reform proposal’s central features.

By ending the anti-trust exemption for health insurance companies, Congress would re-assert its right (affirmed by the Supreme Court) to regulate the insurance market under the Constitution’s commerce clause.

The Republican Study Committee (RSC)’s report on the bill stated, “Americans residing in a state with expensive insurance plans are locked into those plans and do not currently have an opportunity to choose a lower cost option.”  This is especially true for Americans with pre-existing health conditions that can cause premiums to skyrocket.

AHCRA “replaces Washington mandates with interstate competition,” according to the RSC report.  Consumer protections against fraud and abuse will be preserved based on the consumer’s own state regulations.

“Allowing competition to come from other states—which I don’t think is a silver bullet,” Scott said, adding “But I do think it puts competition back into the marketplace.”

AHCRA provides $50 million in state grants to help establish standardized “transparency plan” portals. According to the RSC, “These portals would serve as a resource for providing standardized information on certified health insurance plans available in that state as well as price and quality information on health care providers.”

Consumers could not use these portals to enroll in a plan.  The Republican plan would kill the ill-fated healthcare.gov website, which has been riddled with bugs and delays since its introduction.

The GOP plan abolishes the Federal Coordinating Council on Comparative Effectiveness Research that Republicans accuse of being a “death panel.”  The RSC report stated that this keeps the federal government out of decisions “to ration care based on cost of treatment.”

Small businesses will be given the ability to pool their expenses and risk through Association Health Plans, while states will receive $25 billion from the federal government over 10 years to re-establish their high risk pools.  Obamacare allows insurance carriers to “surcharge” premiums for certain high risk conditions—up to 900 percent of the base premium—but AHCRA would limit high risk premiums to 200 percent of the average premium charged in a state.

The plan would also protect former employees from having to exhaust their COBRA coverage through their former employers (which can be prohibitively expensive) before applying to a state’s high risk pool program.  Americans with pre-existing health conditions would also gain other new protections from being denied coverage if they had a substantial period with no health insurance.

Obamacare currently requires everyone to purchase health care coverage or face penalties, and requires insurance carriers to accept all applicants, even those with high-risk pre-existing health conditions.  These requirements would be repealed.

Part 2 will cover how the Republicans plan to address the rising costs of health care, making insurance plans affordable to the average American, and the possible outcome of the Supreme Court’s upcoming decision.

(crossposted from sgberman.com)