Here's how Trump's HHS pick, Tom Price wants to replace Obamacare

By tapping House Budget Committee Chairman Rep. Tom Price to serve as his Secretary of Health and Human Services, President-elect Trump has added to his team one of the most serious and knowledgeable Republicans on healthcare policy, and in the process pressed his finger on the scales of the internal GOP debate over how specifically to replace Obamacare.

In contrast to many Republicans, who have talked in terms of repealing Obamacare without offering their own vision for the healthcare system, Price, an orthopedic surgeon, has for years been refining his own detailed plan. In fact, he was one of the few Republicans who introduced an alternative bill in 2009, during the actual debate over Obamacare. You can read that version of the "Empowering Patients First Act" in its entirety here.

Given that Trump offered scant details on healthcare during the campaign, Price could have outsized influence on the incoming president's health policy. Price happens to also be close with House Speaker Paul Ryan, who he succeeded as chair of the Budget Committee. Both of the men have similar attitudes on health policy, including overhauling Medicare and Medicaid. During an interview I did with Price for my 2015 book "Overcoming Obamacare," we discussed his basic philosophical approach to replacing the law.

Two things should stand out to those trying to understand the thinking of the next HHS Secretary (assuming Senate confirmation).

Price told me unequivocally that reforming the system has to start with fully repealing Obamacare: "It needs to be fully repealed, because the first step out of the gate for Obamacare is a step in the wrong direction and that is for government control over every aspect of health care, so it's hard to fix the system that they have put in place without ending that premise that government ought to be running and controlling health care."

At the same time, in contrast to some conservatives, Price told me, "Coverage is important, and our bill, the 'Empowering Patients First Act,' we believe provides not just an incentive, but the financial feasibility for every single American to purchase the coverage that they want." He added that "the system doesn't work if people aren't covered."

When it comes to healthcare policy, those on the right have been engaged in a long struggle, which my book detailed, on how to reverse Obamacare. The spectrum of opinion has ranged from a desire to fully uproot Obamacare and fundamentally reject its emphasis on expanding coverage (rather than merely reducing costs) to a preference to reforming it more modestly and perhaps maintain certain provisions. Price falls somewhere in the middle of that spectrum (one also occupied by his ally Ryan). That is, he wants to fully repeal it, but he also thinks it's important to consider policies that would provide broad coverage.

The biggest demonstration of this is Price's preference for offering tax credits to individuals to purchase insurance rather than simple tax deductions. Though it seems like an esoteric argument, it's actually pretty fundamental to understanding the differences on the right on health policy.

Many conservatives prefer offering tax deductions to individuals because they function more like a tax cut – that is, people's tax liabilities are reduced by the amount that they spend toward coverage. However, anybody who supports this view has to be prepared to accept the fact that it will benefit a more limited number of people, because many Americans with low incomes pay little or no income taxes against which to deduct.

Providing individuals with tax credits of a specific amount, regardless of how much they pay in taxes, would benefit that lower-income population. Of course, it comes with a higher cost, as tax credits function more like spending, which is what gave other conservatives pause. Former Louisiana Gov. Bobby Jindal, who was also floated as a potential HHS pick, called tax credit-based plans "Obamacare Lite." Whether Trump realizes it or not, by tapping Price, he is providing a boost to the Price school over others.

"Credits are a challenge for some folks on my side of the aisle, and I understand that," Price told me when I pressed him on the disagreement among conservatives. "But the problem I have right now is that we are imprisoned by a system that doesn't provide high-quality care for many individuals in our society, especially at the lower end of the economic spectrum, because of the rules that have been put in place by the federal government. So, if we freed up the patients to select the kind of coverage that they want, we would get a model and a system that actually worked for them and not for government."

I wrote about the most recent version of Price's plan in detail when it came out last year, but here's how it would basically work.

It would repeal the text of Obamacare, and replace it with a system that would provide tax credits to individuals based on age. Though previous versions had varied the credits based on income, doing so by age is easier to administer (HHS won't get into the problems it's had with Obamacare in terms of verifying income for the purposes of the subsidies) and it also provides more money to those who have to pay more for insurance. In addition, there would be a one-time tax credit to put in a health savings account for routine medical expenses.

Unlike previous incarnations of GOP reform proposals, the plan only modestly meddles with the tax bias in favor of employer insurance, and also encourages small businesses to band together to purchase insurance through trade associations and allows for the sale of insurance across state lines. He also calls for providing grants to states to cover those with pre-existing conditions (one way Trump may square his promises to repeal Obamacare while offering something to those with such illnesses).

Price's plan was very similar to the House Republican plan promoted by Ryan, and as Budget Committee chair, Price embraced Ryan's proposals to block grant Medicaid to states and transition Medicare to a system where seniors would use subsidies to choose among competing private plans. During the campaign, Trump was an opponent of significant entitlement reform, but along with Ryan, an HHS secretary Price would be another voice in his ear arguing in favor of a major overhaul.

All of these grand plans, of course, are just ideas until they grapple with political realities. But given what a blank slate Trump is on healthcare policy, the Price choice would give us the best indication yet of where the administration may be heading.

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