This is America. Does one-sixth of our economy really have to look like the grocery shelves in Venezuela? Are we really condemned to a 2018 market and beyond, as the World Street Journal recently reported, that will consist of fewer insurance options and even higher prices? Well, if the binary political class has their way with their false choice between keeping crushing insurance regulations and … keeping crushing insurance regulations, that will be our future. It’s time for Americans of all stripes — not just conservatives — to rise up and demand better.
For years, and particularly since November 2016, we have been sounding the alarm that Republicans have come to peace with the current Venezuelan system of health care and had no intention of repealing the meat and potatoes of Obamacare. We argued the only debate left between the parties would be the nature of the subsidies (because we are no longer talking about affordable insurance), the requirement to buy, and whether employers must provide insolvent insurance. Which is why Republicans are having such a difficult time at town halls. Nobody is providing their constituents with a vision to break out of this existing paradigm.
Demonstrable proof RINOCare is worse than Obamacare
The central problem with RINOcare is that it never gets rid of the core elements of Obamacare responsible for destroying the insurance market, inflating costs, and creating virtually zero competition in most parts of the country. But it’s even more insolvent than Obamacare because it immediately gets rid of the individual and employer purchase mandates, which means that there will be even less money from healthy individuals being pumped into the system. The death spiral will culminate even quicker than under current law and Republicans will get blamed for it. Even the notional reforms slated to take place after 2020 will never come to fruition because the market and Republican political fortunes will both be dead by that point.
How do we know that keeping the insurance regulations without the individual mandate will exacerbate the insolvency? For starters, common sense. CBO already said that premiums will increase another 15-20% by 2020 on top of the crushing increases slated under the existing policy baseline (which Republicans will own politically as well). But we don’t need CBO to tell us this. Such a collapse already happened in the U.S. territories.
To begin with, the U.S. territories, such as Guam, American Samoa, and the Northern Mariana Islands, unlike the states, were exempt from the individual mandate because of the way Obamacare was drafted. However, they were still subjected to the insurance coverage regulations –— the very combination that would apply to all states if the House GOP bill were to pass. The result? The market was so insolvent all individual insurers left territories such as the Northern Mariana Islands within just two years of implementation. In 2014, the territories petitioned for a waiver from the insurance coverage regulations and were granted a waiver from many of the provisions by Obama’s HHS.
That is the sort of death spiral Republicans will own by keeping the core of Obamacare but repealing the partial funding mechanism of the individual mandate. Worse, by repealing the employer mandate without first healing the individual market, at least seven million people will be dumped from their work plans into the insolvent Soviet-style individual market.
What this lesson from the U.S. territories teaches us is that even the Obama administration recognized the insurance coverage regulations are what’s making insurance more insolvent. Except, contrary to the lies being promulgated by GOP leadership, those regulations could not be repealed administratively for an actual state where they are enshrined into statute. Besides, Secretary Tom Price has already said he doesn’t want to get rid of the regulations. So much for phase 2.
The big lie and the “tweaks” to the bill
This is why any promise of tweaking the Medicaid “reforms” are meaningless and a non-sequitur to the main problem. Long before 2020, Republicans will not only own the death spiral, but the principle of repeal will be seen as responsible for the destruction. The only outcome thereafter will be either single payer or a massive TARP-style bailout of insurance companies. Now Republicans, sensing that prices will never come down, are moving to the left and adding even more subsidies to their bill.
Amazingly, one conservative member told me that leadership is promising a measly 10% cut in premiums AFTER 2020. They obfuscate the first half of the CBO report that projected a 15-20% INCREASE in premiums (on top of existing baseline surge) prior to 2020. They also obfuscate the reason why premiums would hypothetically be lower by 10% relative to Obamacare after 2020 — because the GOP bill actually gets rid of one of the regulations: actuarial value. If conservative members were smart they’d ask Speaker Ryan (R-Wisc.) why all regulations can’t be repealed through the same budget process as actuarial value is repealed in the House version, and why not immediately so that we own a revival of the insurance market instead of a death spiral.
Yes, this is worse than doing nothing
Conservatives are the last people who want to stand idly and do nothing. But if leadership refuses to fulfill its promise, if Trump refuses to follow his own platform, conservatives should not take the bait of supporting “a half a loaf.” It’s a poisonous loaf. As the experience with the U.S. territories demonstrates, maintaining Obamacare without the individual mandate will accelerate the death spiral, but it will be perversely blamed on repeal of Obamacare instead of Obamacare itself. There are no “three phases” to this plan because we already proved that they have been lying about the limitations of the budget reconciliation process. The only three phases are:
- Fake repeal
- Republicans get blamed for insolvency
- Single payer
We can do better, we must do better
It’s sad that Republicans are so incapable of thinking beyond the failed paradigm of Obamacare and its insolvent market that they must make their bill even more liberal with even more subsidies. How about we actually solve the problem so we don’t need massive subsidies outside of Medicaid? How about we make the insurance market great again so that we can reform Medicaid from a position of strength? To that end, here is what conservatives must demand:
- An immediate and complete repeal of all market regulations so that prices can come down and new insurers can enter the market for the 2018 plans. That way, voters will immediately see what a post-Obamacare world looks like.
- To ease the transition as prices come down, we should leave the subsidies AND the individual/employer mandates for 18 months. This is the exact opposite of the GOP approach, but will result in the most stable transition and maximize the lowest prices for consumers.
- Conservatives could compromise on keeping those already under the Medicaid expansion on the program if we immediately freeze new enrollment. By making the private market great again, we will have a few years to work on plans converting Medicaid to private vouchers, an outcome that cannot be actualized without fixing the individual market first.
- Conservatives should also fight to eliminate the cross-state barriers in this round of reconciliation by getting a CBO score showing how this would foster competition and reduce prices. This will free up states to compete and actually tackle the origin sins of health care on the supply side.
- President Trump needs to call all the insurance executives into his office and give them the following certainty. “The era of subsidies and regulations are over. Go out and compete for consumer demand.” He should inform the executives that in the next round of reconciliation they will deal with tax equity through a standard deduction and expanded HSAs, and, if needed even after prices come down, some tax credits for lower income paid against their payroll taxes.
On September 16, 1989, Boris Yeltsin made a high profile visit to Houston’s Johnson Space Center. However, it wasn’t the amazing space technology that impressed him about America and crushed his will to continue pursuing Communism in his home country. It was an unscheduled visit to Randall’s supermarket that shocked his consciousness, according to his autobiography. He reportedly “roamed the aisles of Randall’s nodding his head in amazement,” and told those around him that if Russian supermarkets would look like this “there would be a revolution.” He later wrote of his experience: “When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people.”
That is what it means to be American. The choices of orange juice and Jello on the super market shelves. We love our choices and options, and, in a post-internet world, we love to shop online for the cheapest of those options.
If President Trump truly wants to make America great again, he will join conservatives in making the health insurance market and then the health care market itself look more like the shelves in Randall’s rather than the shelves in Venezuelan supermarkets or the bread lines in the Soviet Union. We can and must do better.