Obamacare: A Funny Thing Happened on the Way to Repeal

With control of both houses and a president to match in the White House, Republicans took first steps to sooth a seven-year itch: “The ‘Unaffordable’ Care
Act will soon be history!”, Donald Trump tweeted days before his inauguration.

But the dog that caught the bus soon became the cliché of the moment as Republicans began to realize they were not careful what they had wished for. After all the years since Obamacare was enacted, they have no "replace" to go along with "repeal". How, then, can they sell their base on a repeal that cannot dare do anything of the sort? "Pulling the rug" from under the millions who now have the insurance they never had before would be political disaster.

Confusion reigns. House Speaker Paul Ryan had said that repeal and replace would be concurrent, “without a gap”, which means not for a while, there being no replace at the ready. But in early January Mr. Trump told the New York Times he expected a repeal vote “probably sometime next week” and “the replace will be very quickly or simultaneously, very shortly thereafter”. Ryan obligingly signaled a faster timetable: “Our legislating on Obamacare, our repealing and replacing and transitioning . . . will occur this year". “We are completely in sync,” with the administration, Mr. Ryan said.

That Trump insists on a replacement health bill almost immediately must have come as a shock to House conservatives, who had been thinking replacement would likely take two years, and certainly should be held off until after the 2018 mid-term elections. And there are those, perhaps apprehensive that the Republican plan will prove unpopular, who think waiting until after the 2020 presidential election would be a good idea. Proof that no action was their plan were the 60 or so votes by the House to repeal, the last finally passed by the Senate and placed on Obama's desk (for veto), but with no sign of replacement in sight.

The Affordable Care Act has been deeply unpopular for a number of reasons, not least of which was the commotion when increases in premium costs for 2017 averaging over 20% were announced last summer. This is likely a onetime hit as insurers ratcheted up prices to protect themselves from the loses that caused a couple of big providers to drop out last year. Obamacare gets all the blame, but the fact is that healthcare itself is what is expensive. High premiums and deductibles merely reflect that; American healthcare is more costly than anywhere else in the world.

With the threat that they could lose the health insurance they've acquired for the first time, people are coming to realize that Obamacare is not where the blame lies. For the first time since the law's passage, an NBC News/Wall Street Journal poll says that more people now believe the Affordable Care Act was a "good idea" than those who think it bad — 45% of Americans to 41%.

The Senate and House are resolute nonetheless. Both have both passed a resolution that started committees drafting repeal legislation designed for a process called "reconciliation". The advantage for Republicans is that it's a budget measure and therefore needs only a 51 vote majority by Senate rules and cannot be filibustered. The drawback is that only parts of the Affordable Care Act that involve money can be affected.

But those are the parts that will cripple the health law. Principal among them will be canceling the mandate that requires people to buy insurance or pay a penalty, ending the subsidies that make insurance affordable, and shutting off the expanded Medicaid funding for which over half the states signed on. Without the mandate's penalty, the young and healthy won't buy insurance. Without the subsidies, people will drop out by the millions. That leaves the insurance companies with the less healthy and more costly to pay for. Rates will therefore climb further, driving out all but those in poorest health who must keep their insurance no matter the price, causing insurers to raise premium costs yet again to pay for their care — and so on. The remaining insurance companies will abandon the program and taps will be played.

That scenario has been the Republican dream for all these years, but with no alternative to offer in its stead, the specter of backlash from ripping away the insurance that over 20 million Americans have finally been able to get, has revealed the dream to be a nightmare. Two things are apparent: first, that repeal will be missing in actions, merely symbolic, no more than a promissory note for when Republicans can put together a plan, which leaves them with some tough explaining to their base; and second, how are they going to get that plan past the 60 votes needed to surmount filibustering Democrats without making the plan so like Obamacare that enough Democrats will vote for it?

Tom Price, a doctor and the new Secretary of Health & Human Services, has been a Georgia representative since 2005. He's used his time in the House to develop a plan as far back as 2009. Not just a plan but a fully developed bill which he has reintroduced several times. He has been conferring with House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. Republicans have looked to governors and industry for recommendations. Several, Republican governors included, have voiced concerns to lawmakers about the damage of abruptly scrapping the 2010 law. All are scurrying to finally come up with a plan after seven years of merely having "a lot of ideas" as Ryan said in December.

President Trump will himself present a plan presumably fitting the "something terrific" prediction made shortly after he announced his candidacy. “Lower numbers, much lower deductibles”, he now says. “We’re going to have insurance for everybody,” he told The Washington Post in an interview. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us… It will be in a much simplified form. Much less expensive and much better”. He has offered no details. It may well be that Trump is simply appropriating Price's and other work and declaring it as his own.

Whatever its provenance, it won't come as a surprise. The Republicans' intentions have been in the open for some time and shake down as follows:

 Gone is the mandate that requires people to buy insurance.

 Gone are the subsidies, paid in varying amounts depending on income, that made insurance affordable for 80% of those who've bought on the ACA exchanges.

 Gone — from Prices' plan at least — is the provision for the young to be covered by their parents' policies until age 26, but Trump has said he wants that retained.

 Gone is any requirement for larger businesses to provide health insurance for employees.

 Gone is federal funding paid to the states for expanding Medicaid eligibility.

All mention of Republican plans boast these two features:

 Instead of subsidies, individuals and families will be given credits against their annual taxes to be used for buying insurance.

 Individuals and families will be encouraged to deposit untaxed income into Health Savings Accounts to be drawn upon for day-to-day health care costs.

As with the ACA, persons with pre-existing conditions will be able to buy policies, except under Price's plan, there are conditions. To qualify, an enrollee must have "at least 18 months of continuous creditable coverage immediately preceding the enrollment date". (Given this rule, how and where did applicant find such coverage?) Once entered on, a policy cannot be cancelled, but there remains the question of whether insurers will again be free to impose the annual or lifetime caps that were banned under Obamacare.

There has been repeated mention of high-risk pools, seemingly for the very ill who do not qualify under the continuous coverage rule just mentioned. But nothing specific about how this would work has been spelled out.

Medicaid funding would be replaced by block grants which would give state legislatures and governors funds to do with as they please. Disbursed into 50 states, oversight of how the money is actually spent will be difficult.

Questions await answers:

How will a health savings account benefit a family that doesn't earn money enough to set aside? What then prevents that privilege from being regressive, with the greater a family's income meaning the more it is able to set aside without paying taxes, whereas those with too little income to set aside get no benefit at all?

Will the tax credit be an outright payment to the over 40% of Americans who make so little in income that they pay no income taxes from which to deduct a credit? That seems to be what Trump is talking about when he says, "if you can’t pay for it, you don’t get it [is] not going to happen with us".

But either a payment or a deduction from taxes takes place at tax time a year after the year when the insurance had to be bought. Those with money can finance that purchase up to a year in advance of the tax credit. But money received a year later does no good for those who needed the outright payment a year earlier.

Will either the payment or the credit be issued only upon proof of purchase of insurance? Otherwise, it is a pointless giveaway.

Even if the credits are the equal of the full cost of typical policies — very unlikely — the credit is nevertheless only a deduction reducing the amount of income that is taxed, and no matter one's bracket, the tax savings will come to far less than the cost of the insurance. When Republican planners translate these ideas into actual numbers, won't they find themselves telling people that their insurance will cost a good deal more than under the Obamacare subsidy scheme?

In his Senate hearing, Price repeatedly spoke of people having "access" to health insurance. "Access" would seem to mean not just that anyone can buy health insurance, but that everyone will receive the credit for buying insurance. Recall that Trump said, "Insurance for everybody". Added proof of this grand design is that the credit will not be geared to income, unlike Obamacare which disqualifies those with higher incomes. It will be based on age, with higher credits for the older. Age being the criterion means it will be offered to everyone above a certain age. But "access" only means it will be offered. After hearing "access" once too often, Bernie Sanders interrupted with, "I have access to buy a ten million dollar house, but I don't have the money".

So the question is how big will the credits be relative to realistic health insurance costs? The Republicans have always bridled at the overly elaborate minimally acceptable insurance plans the the ACA prescribes. We can expect their basic plans to be skimpy. The Republican tendency is also to restrict government payout in social programs, suggesting that the credits will offer less money than the Obamacare subsidies. The portents are therefore "much less expensive" policies that Trump has described, but skeletal, with less coverage, and less help paying for it. How will that be the "something terrific" that Trump has promised his supporters?

The Republican plan is all cost. Gone will be the penalty revenue from those who elect not to buy insurance. Gone will be the surcharge tax on high earners. Gone will be the taxes on certain industries such as medical device makers. Gone as well will be the tax on insurance companies in return for the added business Obamacare brought them. With no unified plan having been worked out, the Congressional Budget Office is unable to begin estimating the cost. It has only dealt with the costs of repeal without replacement. So Republicans may be in for a rude and very public jolt when they expose their plan to the accountants.

The money to fund more generous credits is there, but lawmakers won't go near it. It can be found by putting a tighter lid on the entirely untaxed benefits employees receive from businesses that pay for their health insurance. Employees would give up some of their grossly preferential benefits to help others who are left to buy their own insurance. But businesses, unions and conservatives are against, saying it's a new tax. Well yes, it is. It's a tax on income that would begin to match what others must pay on theirs. It would begin to treat people more equitably rather than prejudicially.

Finally, what Republicans have outlined so far won't get needed Democratic votes. Short of Republicans striking down the filibuster rule, Democratic votes will be essential for passage of the Obamacare replacement. If the Republican plan proves as austere as we describe, it will face a certain Democratic filibuster, which by then might be fully supported by an outraged public.