Serious political debate in Republican circles over the substance, scope, and scale of what should “replace” the Affordable Care Act (ACA) has been more or less frozen in suspended animation since its enactment in March 2010 for three reasons. (1) Grassroots activists focused on outright repeal as a common unifying goal. (2) Elected GOP officials and other Republican candidates for office scrambling to stay in front of the energetic parade opposing ObamaCare found it much easier to hope that the Supreme Court would do most of their work by ruling the Affordable Care Act unconstitutional and invalid in its entirely. (3) Developing a coherent and popular replacement plan is a much heavier lift, particularly once one tries to move beyond the facile rhetoric and sound bites of past proposals that dodge the difficult policy complexities and political tradeoffs of sustainable health reform.

This short-term equilibrium will end, one way or another, after the Supreme Court announces its decision later this year, most likely in mid- to late-June after three days of oral argument in late March. Whether the Court leaves nothing standing in the ACA, affirms it across the board, or provides a split decision (such as invalidating the individual mandate but leaving portions of the health law in place), the political climate will change. Republican members of the current Congress, let alone the GOP presidential nominee and Republican leaders of the next Congress, will need to outline and articulate their own basic visions of health policy that go beyond “none of the above” or “back to the future.” And they can do better. Repeal of the current health law is a necessary, but not a sufficient, part of fixing our health care system.

A credible “Replace” proposal needs to deal with a number of important issues:

· Restructuring the safety net,

· Protecting vulnerable Americans at risk for serious pre-existing health conditions,

· Refocusing Medicaid to become more accountable, effective, and sustainable,

· Creating a different, competition-based regulatory regime for private health insurance,

· Limiting and re-targeting open-ended taxpayer subsidies for health care services,

· Helping to connect consumers to real health care markets and better health care products,

· Managing the evolution from a dominant employer-based private insurance market toward one based on choice and competition across a more level playing field,

· Developing new pathways to seek and find better value in health care options,

· Preparing the structural underpinnings for long-overdue Medicare reform, and

· Accounting for the challenges of timing and transition in inter-related health policy reforms.

Past Republican proposals on Capitol Hill have hit the above targets only partially at best and far from dead center; mostly because the political marketplace did not yet ask them to do much more. This will change somewhat in the second half of 2012 – particularly during the campaign season, and even more so in the next Congress and presidential administration starting in January 2013.

A real Replacement program does not have to invent new ideas and find imaginary friends. It can build on many policy proposals waiting on the shelf, such as:

· Extending HIPAA incentives for continuous insurance coverage to the individual market;

· Funding robust high-risk pool protection for those facing serious health risks who experience difficulty finding affordable insurance coverage;

· Taking Medicaid off ACA-injected steroids, delegating most of its operational policies to the states (with negotiated standards of accountability for outcomes), and mainstreaming more beneficiaries in the below-65, non-disabled population into private health insurance coverage options;

· Fostering responsible competition in insurance regulation among the states and transitioning to an information-based approach to regulation;

· Moving to defined contribution financing of taxpayer subsidies for health care across all coverage platforms (primarily Medicare, Medicaid, and employer-sponsored health insurance);

· Limiting any benefit standards to the most flexible and minimal levels possible

· Assigning state governments the task of ensuring that their reformed insurance markets will guarantee that willing buyers can find willing sellers (e.g. non-“exchange” mechanisms that rely on competition, consumer choice, and enhanced information assistance -- instead of proscriptive regulation);

· Avoiding policy bias between employer-sponsored insurance and individual insurance, without dictating the speed or direction of changes in the mix of coverage;

· Building a necessary information infrastructure for pluralistic competition in provider performance measurement and consumer assessments of health care value;

· Instituting premium support and competitive bidding as structural building blocks for Medicare reform, before determining what level of assistance future taxpayers can and will support; and

· Acknowledging that better incentives, information, choices, competition, responsibilities, and trust in individuals – rather than top-down mandates and arbitrary budgetary formulas – must drive sustainable health care change.

There are many important policy details and implementation options within the above policy reforms, and some of us have examined them in greater depth elsewhere. The political calendar dictates that it’s too soon to legislate a replacement package in 2012 but it will be too late to consider it after 2013. The best way to prepare for this narrow window of opportunity would be for House Republicans to schedule a series of “soft” hearings on replacement concepts that introduce them for substantive criticism, feedback, and refinement. The best surprise in 2013 would be “no last-minute surprises” as Republicans build greater support for a newer approach to health policy that reinforces unifying visions and values.

Fortunately, this question was answered a year ago at a Capitol Hill briefing with representatives from the National Center for Policy Analysis, the American Enterprise Institute, the Cato Institute, the Heritage Foundation and other organizations. Here is a brief summary:

There are 10 structural flaws in the Affordable Care Act (ACA). Each is so potentially damaging, Congress will have to resort to major corrective action even if the critics of the ACA are not involved. Further, each must be addressed in any new attempt to create workable health care reform.

1. An Impossible Mandate

Problem: The ACA requires individuals to buy a health insurance plan whose cost will grow at twice the rate of growth of their incomes. Not only will health care claim more and more of every family's disposable income, the act takes away many of the tools the private sector now uses to control costs.

Solution: 1) Repeal the individual and employer mandates, 2) offer a generous tax subsidy to people to obtain insurance, but 3) allow them the freedom and flexibility to adjust their benefits and cost-sharing in order to control costs.

2. A Bizarre System of Subsidies

Problem: The ACA offers radically different subsidies to people at the same income level, depending on where they obtain their health insurance - at work, through an exchange or through Medicaid. The subsidies (and the accompanying mandates) will cause millions of employees to lose their employer plans and may cause them to lose their jobs as well. At a minimum, these subsidies will cause a huge, uneconomical restructuring of American industry.

Solution: Offer people the same tax relief for health insurance, regardless of where it is obtained or purchased - preferably in the form of a lump-sum, refundable tax credit.

3. Perverse Incentives for Insurers

Problem: The ACA creates perverse incentives for insurers and employers (worse than under the current system) to attract the healthy and avoid the sick, and to overprovide to the healthy (to encourage them to stay) and underprovide to the sick (to encourage them to leave).

Solution: Instead of requiring insurers to ignore the fact that some people are sicker and more costly to insure than others, adopt a system that compensates them for the higher expected costs - ideally making a high-cost enrollee just as attractive to an insurer as low-cost enrollee.

4. Perverse Incentives for Individuals

Problem: The ACA allows individuals to remain uninsured while they are healthy (paying a small fine or no fine at all) and to enroll in a health plan after they get sick (paying the same premium everyone else is paying). No insurance pool can survive the gaming of the system that is likely to ensue.

Solution: People who remain continuously insured should not be penalized if they have to change insurers; but people who are willfully uninsured should not be able to completely free ride on others by gaming the system.

5. Impossible Expectations/A Tattered Safety Net

Problem: The ACA aims to insure as many as 34 million uninsured people. Economic studies suggest they will try to double their consumption of medical care. Yet the act creates not one new doctor, nurse or paramedical personnel. We can expect as many as 900,000 additional emergency room visits every year - mainly by new enrollees in Medicaid - and 23 million are expected to remain uninsured. Yet, as was the case in Massachusetts, not only is there no mechanism to ensure that funding will be there for safety net institutions that will shoulder the biggest burdens, their "disproportionate share" funds are slated to be cut.

Solution: 1) Liberate the supply side of the market by allowing nurses, paramedics and pharmacists to deliver care they are competent to deliver; 2) allow Medicare and Medicaid to cover walk-in clinics at shopping malls and other unconventional care - paying market prices; 3) free doctors to provide lower-cost, higher-quality services in the manner described below; and 4) redirect unclaimed health insurance tax credits (for people who elect to remain uninsured) to the safety net institutions in the areas where they live - to provide a source of funds in case they cannot pay their own medical bills.

6. Impossible Benefit Cuts for Seniors

Problem: The ACA's cuts in Medicare are draconian. By 2017, seniors in such cities as Dallas, Houston and San Antonio will lose one-third of their benefits. By 2020, Medicare nationwide will pay doctors and hospitals less than what Medicaid pays. Seniors will be lined up behind Medicaid patients at community health centers and safety net hospitals unless this is changed. Either 1) these cuts were never a serious way to fund the ACA, because Congress will cave and restore them, or 2) the elderly and the disabled will be in a separate (and inferior) health care system.

Solution: Many of the cuts to Medicare will have to be restored. However, Medicare cost increases can be slowed by empowering patients and doctors to find efficiencies and eliminate waste in the manner described below.

7. Impossible Burden for the States

Problem: Even as the ACA requires people to obtain insurance and fines them if they do not, the states will receive no additional help if the estimated 10 million currently Medicaid-eligible people decide to enroll. Although there is substantial help for the newly eligible enrollees, the states will still face a multibillion dollar, unfunded liability the states cannot afford.

Solution: States need the opportunity and flexibility to manage their own health programs - without federal interference. Ideally, they should receive a block grant with each state's proportion determined by its percent of the nation's poverty population.

8. Lack of Portability

Problem: The single biggest health insurance problem for most Americans is the lack of portability. If history is a guide, 80% of the 78 million baby boomers will retire before they become eligible for Medicare. Two-thirds of them have no promise of postretirement health care from an employer. If they have above-average incomes, they will receive little or no tax relief when they try to purchase insurance in the newly created health insurance exchange. To make matters worse, the ACA appears to encourage employers to drop the postretirement health plans that are now in place.

Solution: 1) Allow employers to do something they are now barred from doing: purchase personally-owned, portable health insurance for their employees. Such insurance should travel with the individual - from job to job and in and out of the labor market; 2) Give retirees the same tax relief now available only to employees; and 3) Allow employers and employees to save for postretirement care in tax-free accounts.

9. Over-Regulated Patients

Problem: The ACA forces people to spend their premium dollars on first-dollar coverage for a long list of diagnostic tests. Yet if everyone in America takes advantage of all of the free preventative care the ACA promises, family doctors will be spending all their time delivering care to basically healthy people - with no time to do anything else. At the same time, the ACA encourages the healthy to over consume care, it leaves chronic patients trapped in a third-party payment system that is fragmented, uncoordinated, wasteful and designed for everyone other than the patient.

Solution: 1) Instead of dictating deductibles and copayments, give patients greater freedom to save for their own small dollar expenses in health savings accounts, which they own and control; and let them make their own consumption decisions. 2) Allow the chronically ill access to special health accounts, following the example of Medicaid's highly successful Cash and Counseling program, which allows home-bound, low-income disabled patients to control their own budgets and hire and fire those who provide them with services.

10. Over-Regulated Doctors

Problem: The people in the best position to find ways to reduce costs and increase quality are the nation's 778,000 doctors. Yet today they are trapped in a payment system virtually dictated by Medicare. The ACA promises to make this problem worse by encouraging even more unhealthy government intervention into the practice of medicine.

Solution: Providers should be free to repackage and reprice their services under Medicare. As long as their proposals reduce costs and raise quality, Medicare should encourage resourceful, innovative attempts to create a better health care system.

Given how little Speaker John Boehner, Senate Minority Leader Mitch McConnell, House Majority Leader Eric Cantor and other top Republicans have done on this issue, one can only speculate on what a GOP replacement plan would look like. The Republicans have not devoted any time or effort to making health care more affordable or accessible for America's seniors, families and businesses.

Instead they have focused all of their attention on trying to repeal the Affordable Care Act and eliminate Medicare and Medicaid as we know them. From the little we've seen of actual proposals, the GOP would give our health care back to the insurance companies so they can deny our care and jack up our premium rates whenever they want – and stick struggling families with the tab. Apparently, if the Republicans have their way, consumers will be able to cross state lines to buy policies that provide less care and leave them with huge medical bills. Regardless of what the Supreme Court does, I'm not expecting much from the GOP.