The first thing to understand about the GOP healthcare bill is that it is not merely Obamacare-lite or a bad “replacement” bill. It doesn’t repeal the core of Obamacare in the first place. In fact, the few parts that it repeals or tweaks within a few years will actually intensify the death spiral of Obamacare when mixed with the core regulatory structure, exacerbated by the subsidies that they do keep. And this time, the GOP will own it politically. All of it.
The most dangerous myth about the GOP plan is that it repeals Obamacare. At least if GOP leadership would be honest and say they are too scared to repeal the ACA and are just tweaking it a few years from now (after the death spiral is made worse), then we can blame the Democrats for voting for it. Now that a bill codifying Obamacare in the worst possible form is being sold as “repeal and replace,” Republicans have bailed out Democrats from their most toxic political issue without securing a single concession.
Regulations, spending, mandates, subsidies, and taxes
The basic structure of this plan is what I outlined last week after the first draft was leaked to the media. There is no discussion of lowering prices, fostering a revolution of choice, competition, portability, cost-consciousness, or breaking down the barriers between consumer and provider. That is because most of the regulatory structure and the exchanges are left in place.
There is no innovation, and no way to lower costs. While some of the regulations are tweaked with more flexibility, the 800-pound gorilla in the room — guaranteed issue mixed with community rating (which is responsible for almost all of the premium hikes) — is left in place. Nor does this bill repeal the mandated essential benefits, which require insurers to cover a specific number of people and sex change operations, maternity care for men, etc.
And even the repeal of actuarial value “metal” requirements (platinum, gold, silver, bronze) — the most positive of the outlined changes — would not take place until the 2020 plans.
Amazingly, while the “American Health Care Act” blows up the insurance market in order to mandate coverage of the sick, it still throws a whopping $100 billion at states in order to further subsidies to the poor and the sick (on top of Medicaid expansion and exchange subsidies).
Furthermore, the existence of the exchanges and the subsidies being steered to those exchanges will force insurers to continue competing for government-run health care that is actuarially insolvent. This continued structure will ensure that startup companies — which lack economies of scale to operate within this rigid (albeit slightly relaxed) structure — cannot enter the market. That is the core of what ails the health care industry.
On top of leaving the regulatory regime and the rigid exchanges, this House bill replaces the income-based subsidies with age-based subsidies – ranging from $2,000 for younger people to $4,000 a year for older enrollees, and as much as $14,000 for a family. It is a massive new entitlement for middle-income and lower-income Americans. It would apply in full for families earning up to $150,000, and then phased out $100 per thousand dollars earned over that threshold. Thus, a family could theoretically get some sort of subsidy well into the $200,000-plus income level.
As for Medicaid, the draft plan grandfathers in the entirety of the Obamacare expansion. Worse, it doesn’t freeze future enrollment for another two years, which will incentivize states to massively expand Medicaid before 2020. It also throws another $10 billion to states that never expanded Medicaid.
Between the regulatory structure, subsidies, and Medicaid expansion, this bill is Obamacare. Literally.
But, in fact, the GOP bill is actually worse than Obamacare for two reasons: 1) It will exacerbate the death spiral of fiscal insolvency; and 2) It will destroy the employer market.
The one part of the bill that does actually immediately repeal an Obamacare provision is the immediate elimination of the individual mandate and the employer mandate that requires individuals to purchase and employers to provide health insurance.
By leaving the price-hiking regulatory and subsidy structure in place, yet repealing the individual mandate, this bill will exacerbate the death spiral because people like myself — who are getting crushed with ridiculous premiums — will dump their insurance. Likewise, employers who are now forced to provide insurance will quickly dump their employees from their plans.
This is what happens when Republicans focus on coverage numbers at the expense of lowering costs through the regulatory structure. They achieve neither. While the individual mandate is replaced with a provision mandating that insurance companies charge individuals who dropped their insurance an extra 30 percent when reenrolling, that provision doesn’t take effect until 2019. The adverse selection and death spiral will be terminal by then ; the employer mandate is not replaced at all.
Also, the 40 percent Cadillac tax on more expensive health plans is delayed from 2020 until 2025, but not repealed.
Thus, House Republicans have replaced the notorious taxes, regulations, subsidies, and mandates of Obamacare with … taxes, regulations, subsidies, and mandates. Except, this time, Republicans will own it. And that is exactly what the lobbyists for the status quo wanted.
Now that Republicans will have their reputation tethered to Obamacare, they will be forced to consistently continue the hospital bailout program, otherwise known as Medicaid expansion. They will constantly be forced to re-up the individual and corporate cost-sharing subsidies to make up the gap from getting rid of the employer and individual mandates.
This is not a half a loaf, it’s a poisonous loaf
House leadership will tell its members, “Look, this isn’t perfect, but isn’t it better to take a half a loaf than no loaf at all?” In reality, this is a poisonous loaf. Again: It doesn’t repeal Obamacare, will exacerbate the death spiral, dump people off employer-based insurance, and force Republicans to own it this time.
Yes, this is one of the rare instances when it’s better to do nothing if they don’t want to do the right thing. There is no upside for a conservative to sign onto this, and only downside. Also, remember that the Senate GOP is even more liberal than the House GOP, so this is the opening bid that will invariably get worse.
Big picture: The result of this bill is that insurance companies will continue to look to government to regulate and subsidize. Thus, insurers will continue to run health care based on government and lobbyists to keep the gravy train rolling, and box out competitors instead of being forced to compete directly with new insurers for consumer business.
Under the guise of promoting expanded coverage rather than decreasing costs, this plan will exacerbate both. Well done, Republicans.
If nothing else, this is a vindication of those who warned during the primaries that Republicans were lying to us all along.
It’s time for President Trump to lead, or this is over.