Earlier this week, we warned that absent a major course correction, Republicans plan to keep the insurance regulations — the most onerous part of Obamacare, which is responsible for permanently destroying the insurance market.
Hence there is no repeal of most of Obamacare, just the funding mechanisms, such as the subsidies and the individual mandate. Worse, they are considering preserving some of the tax increases of the law in order to fund “the replacement” of the subsidies with ... subsidies in-all-but-name-only (on top of the $1 trillion we spend on federal-run health care, not including state expenditures).
Earlier today, CQ posted an article which confirms these suspicions — that “Republicans consider keeping some Obamacare taxes intact” (subscription required):
Ways and Means Chairman Kevin Brady, R-Texas, whose committee has jurisdiction over the law's taxes in the House, suggested the issue is part of the ongoing discussion, but that no decisions had yet been made.
"As we look at the deal, as we look at the numbers, and more importantly, the step-by-step approach to make health care more affordable, the taxes themselves become a part of that discussion," Brady said. "Truly, no decisions have been made yet. We're looking at the universe of options there."
A Senate staffer suggested a similar discussion had come up among members this week.
Whether they ultimately keep some of the taxes or give into conservative pressure to include all Obamacare taxes in the repeal bill, the die is already cast on their “replace” bill. It is quite evident that they plan to create a massive entitlement built on top of preserving the insurance regulations and therefore are in need of an enormous pot of savings and revenues to fund the new scheme. The truth is the lobbyists for the health care industry want to continue a massive stream of subsidies and that is driving much of this perfidy:
Several lobbyists indicated that waiting to repeal some of the law's more unpopular taxes, like the Cadillac tax, could entice some interest groups to work more closely on the replacement effort. It would also increase the savings associated with repealing the legislation, which could change the negotiation dynamics.
The mix of not repealing the price-hiking insurance regulations and replacing the existing subsidies with a new form of subsidies is a toxic combination. In fact, it is simply a bait-and-switch of the existing core of Obamacare.
I would define the main component of Obamacare in one sentence as follows: Require that private insurance companies offer coverage that is actuarially insolvent and unsustainably expensive and then offer massive taxpayer subsidies for families to afford those unsustainable plans, which in turn artificially inflates the price of insurance even more, which in turn engenders an even greater need for subsidization.
That is essentially the general cycle of government intervention in a nutshell, most dramatically embodied through Obamacare in particular. And that is essentially what will result from the GOP bait-and-switch plan to maintain the insurance regulations and concoct massive subsidies through refundable tax credits.
This plan will not only raise the cost of health care/health insurance and engender a greater need for government subsidization of unaffordable “private” plans, but it will also distort the health care market in general for the existing government-run programs, such as Medicaid.
The cost of covering an individual in the subpar Medicaid program was $3,247 per individual in 2011 before Obamacare was enacted. In 2015, according to data from the Department of Health and Human Services, the cost of enrolling an individual in Medicaid doubled to $6,366 per individual. And that is only for the second year of implementation. The cycle of regulation, public funding, overutilization, and lack of ability to peg the cost to the service has created a circuitous death spiral of unaffordable costs and unsustainable subsidies.
This cycle of failure is nothing but a handout to hospitals and insurers. Anyone concerned with helping the most people and creating a sustainable pro-growth economy would focus on lowering costs through deregulation, limiting subsidization, restoring insurance to its original purpose, and empowering individuals to have portable control over their own destiny through expanded HSAs.
Yet, Republicans are pursuing the elusive utopian goal of universal coverage (Obamacare in-all-but-name-only) because that has long been the official position of K-Street and the Chamber of Commerce. A more efficient socialism is good for their clients.
Nothing about this past election has changed the political barometer and priorities of GOP leaders in Congress. It’s one big bait-and-switch. It is now up to the president-elect and his likely influential vice president to make good on their promise to fully repeal Obamacare and replace socialism with the free market.