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Obama challenges GOP to offer a “demonstrably better” health plan. It sounds simple. It isn’t.

Who decides what “demonstrably better” means?

Sarah Kliff and I interviewed President Obama this morning about Obamacare (you can watch the whole interview here). During the conversation, Obama made this promise to Republicans: “I am saying to every Republican right now, if you in fact can put a plan together that is demonstrably better than what Obamacare is doing, I will publicly support repealing Obamacare and replacing it with your plan. But I want to see it first.”

The key here, of course, is a plan that is “demonstrably better than what Obamacare is doing.”

Obama to GOP: Make a better Obamacare!

Obama’s challenge is for Republicans to create a bill that achieves Obamacare’s coverage levels at lower costs. That’s what he’s saying he would support. But Republicans disagree that Obamacare’s goals are the right ones. The problem is they haven’t laid out — or even figured out — what their alternative goals actually are.

What Republicans hate about Obamacare and what voters hate are different

When I talk to Republicans about the health care law, they’re quick to criticize its coverage standards. They believe Obamacare earmarks too many benefits insurers need to include and sets too high a standard for the percentage of average health costs that needs to be covered (a number known as “actuarial value”).

But in the next breath, they also criticize the insurance offered under Obamacare for its narrow networks, its high deductibles, and its overall stinginess. They make those criticisms for good reason: The high deductibles, narrow networks, and high copays are what voters actually dislike about Obamacare.

“Since ObamaCare’s passage,” wrote Sen. Marco Rubio, “many Americans have seen the law transition from a political mess to a personal disaster. Some have lost access to their doctors or the insurance plans they were happy with. Many have been forced to pay higher premiums and higher deductibles.”

The trade-off here is sharp. One way Republicans could achieve the same coverage levels at a lower cost is to allow insurers to offer stingier, sparer products. But those products would mean more people lose access to doctors they were happy with, and more people end up in plans whose deductibles they can’t actually afford.

That’s bad politics. Good politics is doing what Trump did and promising that voters "can have their doctors, they can have plans, they can have everything.” The problem is that’s a promise that zero of the GOP replacement plans keep.

The same is true on coverage. Republicans could decide that their Obamacare replacement will be cheaper because it will cover fewer people. And, to be fair, there are a number of Republican replacement ideas floating around, and all of them would leave millions uninsured compared with Obamacare.

But taking away insurance people already have is — as the Obama administration already learned — wildly, wildly unpopular. And Republicans know that too. On Monday, Kellyanne Conway, one of Trump’s top advisers, said, “We don’t want anyone who currently has insurance not to have insurance” — a principle that disqualifies every Republican repeal plan, including Trump’s own.

The same dynamic reasserts itself on deficits, spending, and taxes. Republicans often criticize Obamacare for increasing the deficit — which it actually doesn’t do. More fairly, they criticize it for raising taxes and cutting Medicare spending, both of which it really does do. Voters also dislike Obamacare’s tax hikes and spending cuts. But to the extent that you repeal Obamacare’s pay-fors, you increase the debt.

On health care, Republicans know what they hate. But they don’t know what they want.

Before Republicans can agree on an Obamacare replacement plan, they need to decide what their replacement plan is trying to do. Trump, for his part, has promised to “repeal and replace with something terrific,” which I think is actually a pretty good statement of GOP intentions right now. The problem comes when you try to create something that voters will think is terrific and that costs less, and requires less government involvement and lower taxes, than Obamacare.

This stuff is hard, and the trade-offs are brutal. The Affordable Care Act has failed to meet many of Obama’s goals. It’s not truly universal coverage — about 10 percent of the population is still uninsured. It didn’t let everyone who was happy with their insurance keep what they had. It hasn’t led to robust competition in every county. It’s not as affordable as the law’s name promises.

But Obamacare’s goals were, at least, popular. It’s not clear that the Republican Party’s goals actually are popular. Do people abstractly support fewer Americans having health insurance? Or more high-deductible plans? Or changes to the tax code that would begin to weaken the link between employers and health coverage? This is, in reality, why Republicans are so cagey about their replacement plans: They’re not sure the country will like what they offer.

As long as you’re working with private insurance, you run into what I call the iron law of private sector health reform (catchy, right?): You can have any two of good insurance, low premiums and deductibles, or low taxes. But you can’t have all three.

The way to get more coverage than Obamacare currently offers at a lower price is to move toward a single-payer system that negotiates costs with providers. One feature shared by Obamacare and the various conservative alternatives is they try to cut costs primarily by changing the way insurance and medical care are delivered.

Other countries — and, to a lesser extent, Medicare and Medicaid in this country — take a more direct route. They use their size to directly negotiate down prices. If you want to sell a drug in the UK or Canada, you have to come to an agreement with the government on how much it’ll cost. If you want to sell the same drug in the United States, you can charge whatever you want. As you’d expect, drugs in the US cost much more than they do in other developed countries.

Sarah asked Obama why Obamacare didn’t do more to push on prices, and his answer was revealing:

Well, look, this is the irony of this whole debate, is the things that people are most dissatisfied with about Obamacare, about the Affordable Care Act, are things that essentially in other countries are solved by more government control, not less. And so Republicans are pointing at these things to stir up dissatisfaction, but when it comes to, all right, what’s the solution for it, their answer is less government regulation and letting folks charge even more and doing whatever they want and letting the marketplace work its will.

I think that there are strengths to our system because we have a more market-based system. Our health care system is more innovative. Prescription drugs is probably the best example of this. It is true that we essentially come up with the new drugs in this country because our drug companies are fat and wealthy enough that they can invest in the research and development. They make bigger profits, which they can then plow back into drug development. And essentially we have a lot of other countries that are free riders on that system. So they can negotiate with the drug companies and force much lower prices, but they generally don't have a drug industry that develops new drugs.

The argument Obama makes there is fundamentally the conservative case against single-payer: Yes, we could make health care cheaper by negotiating prices, but if we did, we would lose the medical innovation furnished by the market. I have some quibbles with this argument, but there’s definitely a lot of truth to it.

The problem, though, is it leaves us where both Obama and the Republicans are now: Health care is very expensive when what people fundamentally want is for it to be cheap. You can hide its cost by having the government pay for it or by having employers pay for it, and you can lower its cost by making it harder for people to afford expensive care, but you can’t just wish away its cost. And that’s a reality that doesn’t leave you with many good options for crafting health reform plans. Obama learned that, and the Republicans are going to learn it too.

By the way, you can watch our whole interview with Obama here: