In the aftermath of the recent election, virtually all commentators were quick to conclude that ObamaCare has been saved. The health reform law can now go forward and Republicans are powerless to stop it. 

The trouble is: ObamaCare is a deeply flawed piece of legislation. Its defects are so huge that Democrats are going to want to perform major surgery on it in the near future, even if the Republicans stand by and twiddle their thumbs. 

That raises this question: What changes need to be made in the legislation to turn it into a health reform that solves existing problems without creating even more serious new problems? Here are six essential short term fixes:

Nothing stays the same…It’s coming around again.

Subsidize all insurance the same way

The way the government subsidizes health insurance under the current system is arbitrary and unfair. Employees with employer-provided insurance get that benefit tax free — a subsidy that is worth almost half the cost of the insurance for middle-income families. However, there is almost no subsidy available for people who must purchase insurance on their own. They must pay taxes on their income and then buy the insurance with what’s left over.

Under ObamaCare the subsidies become even more arbitrary. Although the new law creates generous tax credits for low and moderate income families who must buy their own insurance in newly created health insurance exchanges, the subsidy in an exchange can be as much as $12,000 higher than the same family will get if the same insurance is obtained through an employer!

This is why so many hotel and restaurant companies are considering making all their low-wage employees part-time — so they can escape the requirement to provide insurance and make their employees eligible for insurance in the exchanges at the same time.

Even more bizarre, for higher-income employees, the arbitrariness goes in the opposite direction. They get the current law’s generous tax subsidies at work, but no subsidy in the exchange.

ObamaCare will force an entire restructuring of American industry unless its subsidy structure is radically changed. And the change that is needed is easy. All insurance should get the same tax relief, regardless of where it is obtained.

Make the subsidy a fixed sum tax credit

Under the current system, there is no limit on how much health insurance we can buy through an employer with untaxed dollars. And the last dollar of frivolous coverage is subsidized just as generously as the first dollar of catastrophic coverage. Most of us get insurance because we want protection against very large medical expenses. But once we have that, we face a perverse incentive to get additional — even wasteful — coverage because Uncle Sam is paying half the extra premium we must pay.

ObamaCare leaves these perverse incentives at work in place and creates similar incentives in the health insurance exchanges.

There is a better way. Make the subsidy a fixed sum tax credit. For example, we could offer a $2,500 refundable credit against the first $2,500 of health insurance premiums. For a family of four, the credit would be about $8,000. These credits would be refundable, so that people would get the subsidy even if they did not owe any income taxes.

With this subsidy system, the health insurance marketplace would change radically — almost overnight. Whereas the typical large employer family plan now costs about $16,000, alternative plans (with fewer benefits and fewer provider options) would soon be selling for $8,000 instead.

Create and fund a safety net option

Under ObamaCare 30 million people are expected to remain uninsured. What happens to them? The new health law could make their problems worse, especially as it withdraws uncompensated care money from hospitals (on the theory that they won’t need the funds if everyone has health insurance!). There’s a better way.

If people turn down the offer of a tax credit, make that credit available to safety net institutions in the areas where the uninsured live. If the uninsured can’t pay their medical bills, these funds would be there as a backstop. Under this arrangement, money follows people. If everyone in Dallas, Texas, opts to be insured, all the tax credits will be claimed and used to pay insurance premiums. If everyone in Dallas opts to be uninsured, those same funds would be available to safety net institutions to pay for uncompensated care.

Restore the cuts in Medicare to reform Medicare

ObamaCare is not paid for — at least in any practical political way. Over the next 10 years it will require about $716 billion in reduced spending on Medicare. Yet the Medicare Office of the Actuaries has made abundantly clear, these spending reductions will exact a heavy cost for Medicare enrollees. One in seven hospitals is expected to leave the system over the next eight years and seniors will have increasing difficulty finding doctors who will see them, as they become less attractive to doctors than welfare mothers from a financial point of view.

Most people inside the Washington Beltway think that this will never happen. Future Congresses will not be able to withstand the political pressure from elderly voters and will act to prevent them from taking place — just as Congress has done repeatedly with reductions in doctor fees legislated years ago. Moreover, even if the spending cuts are possible, the savings will be needed as part of an essential effort to fundamentally reform Medicare.

Don’t let people game the system

ObamaCare has a requirement to obtain health insurance (a mandate) enforced with a fine. However, the fines are small relative to the cost of the insurance. Plus there is not much the IRS can do by way of enforcement. The IRS cannot garnish wages or attach assets, for example. About the only enforcement tool it has is to withhold refund payments. To make matters worse, the agency has announced it has no plans to vigorously enforce the mandate.

This will leave individuals with strong incentives to game the system by remaining uninsured while they are healthy, obtaining insurance after they get sick, and then dropping coverage after the medical bills are paid and they are healthy again. Clearly if large numbers of people do this, insurance will become prohibitively expensive.

The ideal answer here is to give people a one-time opportunity to obtain insurance on a guaranteed issue basis, without regard to health condition. But if they turn down that offer and subsequently apply, insurers should be able to medically underwrite and charge a premium that reflects full expected health care costs.

Get rid of the health insurance mandate and the fines for being uninsured.

With the first five fixes in place, there is now no need for a mandate. Nor is there any need to impose fines on people who disobey the mandate.

What we have instead is a strong financial incentive to obtain health insurance. Government offers everyone a generous subsidy to buy health insurance in the form of lower taxes. If they turn down the subsidy, they will pay higher taxes. The flip side of a subsidy is a penalty. Put differently, not getting subsidy is a penalty. That’s not different in principle from the current system, except that the reform suggested here would make that arrangement much more rational.

John GoodmanJohn C. Goodman is President of the National Center for Policy Analysis, Research Fellow at the Independent Institute, and author of the bookPriceless: Curing the Healthcare Crisis. The Wall Street Journal and the National Journal, among other media, have called him the “Father of Health Savings Accounts.” Dr. Goodman’s health policy blog is the premier right-of-center health care blog on the Internet. It is the only place where pro-free enterprise, private sector solutions tohealth care problems are routinely examined and debated by top health policy experts across the ideological