Did Senate Republicans really need to spend a month behind closed doors, incurring the ire of the American people, just to copy and paste Obamacare? Are all these senators too old to know where the copy/paste functions are?
There will be tremendous acrimony between the two parties in the ensuing days over Obamacare, because they both need to play to their constituencies and continue the binary fight club racket reminiscent of WWE. However, in reality, nobody is repealing Obamacare, nobody is addressing the core health care issues in America, and nobody is offering a vision of freedom, prosperity, and a solvent health care and health insurance market. Everything is working within the confines of the most extreme socialist baseline from the Obama era.
What is Obamacare?
Obamacare comprises five core elements related to health insurance (putting aside the burdens on health care itself): actuarily insolvent regulations; open-ended, means-tested subsidies; Medicaid expansion; the employer and individual mandates; and the tax increases.
Regulations: The foundation of Obamacare are the two dozen or so actuarily insolvent regulations designed to “cover everyone” but that in turn have tripled premiums and are now destroying the entire individual market.
Subsidies: Because the regulations make insurance unaffordable, anyone below a certain income level is subsidized to purchase medical insurance. This, in turn, inflates the cost of insurance even more.
Medicaid expansion: In addition to subsidizing non-Medicaid patients to purchase unaffordable medical insurance (thanks to the regs), Obamacare dramatically expanded both the eligibility and the federal subsidy rate to the states for the program. 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 funding mechanism of tax increases: In an attempt to make the government spending and the regulated private sector solvent, Obamacare levied over $1 trillion in tax hikes (over 10 years). Also, in order to ensure that younger individuals don’t game out the system by not purchasing insurance but then taking advantage of the new regulations forcing insurers to provide for those who already got sick, Obamacare enacted the individual mandate to force everyone to purchase insurance up front. It also forced all employers of large businesses to provide insurance plans so that more money would flow into the system. However, the regulations have been so insolvent that these mandates proved insufficient to fund the Ponzi scheme.
What’s in the Senate AHCA?
Which brings us to the Senate bill. The Senate bill is essentially a more liberal version of the House bill, which, in itself, was a more insolvent version of Obamacare that Republicans will now own.
The bill does not repeal the actuarily insolvent regulations, the core element of what has destroyed insurance in America. Even the few minor regulatory reforms or state waivers that are in the House bill were stripped out. The bill merely loosens existing waiver authority up to the discretion of HHS for a few regulations, a provision that will not be strong enough to signal flexibility to insurers enough to reduce premiums. I’ll have more on this point in a later post.
We could end our analysis right now. Once the market is not healed, competition is not restored, and prices don’t come down, the rest is a chain reaction. Republicans will now own all of the vices of Obamacare, enacted, disgustingly, under the false pretense of repealing Obamacare. Nobody will be able to afford insurance, and everyone will need subsidies or Medicaid. Indeed, that is why the entire discussion and debate that will ensue will all revolve around the subsidies and Medicaid: because the bill doesn’t repeal the regulations.
This is why the GOP bill replaces Obamacare subsidies … with more subsidies. First, the bill retains all existing subsidies until 2020. In addition, it codifies Obama’s illegal cost sharing subsidies (to discount deductibles and co-payments) into statute through 2019. Then, after 2020, it adopts the House version’s age-rated subsidies but also keeps much of the income-based subsidies.
But as we pointed out with the House bill, we will never actualize even the modest reforms post-2020. By that point, given that the bill keeps the price-hiking regulations and subsidies with no insurance or supply side reforms, the entire system will collapse, Republicans will own it, and we will have a single-payer system: entire government takeover of medical care.
But even if we assume these “reforms” will go into action, the rate of subsidization would merely be reduced to those earning up to 350 percent above the poverty line instead of 400 percent. And actually, it would expand subsidies to those below 100 percent above the poverty line who are currently not eligible for ACA subsidies (only Medicaid).
Thus, the subsidies and their open-ended market distortions remain in place. Given that the subsidies cover almost all the cost for so many people, it encourages insurers (along with the regulations) to raise premiums to $50,000 and beyond, knowing government will just cover it for all those who aren’t high-income or who get their plans from work.
As for Medicaid expansion, it continues not just existing enrollment but even adds new enrollees through 2020. This will incentivize states to flood the zone over the next three years. It then phases down the expansion subsidy rate through 2024 and converts the program to block grants thereafter. There is no way that even the modest cuts will be enacted in 2021 or that the reforms after 2025, as stated in the draft bill, will ever come to fruition. What a joke! We will all be on Medicaid or single-payer by that point, given that the core of Obamacare is not repealed.
As I’ve warned before, Republicans have not only accepted Obamacare but believe it is essential. The only difference between them and Democrats is that Republicans want to fund it with deficit spending rather than tax increases.
Moreover, as with the House bill, the Senate version immediately repeals the employer and individual mandates. While, in a vacuum, conservatives don’t like these ideas, they are necessary to keep Obamacare afloat once you agree to the premise of maintaining the regulations. By immediately repealing the mandates, but doing nothing to change the price-hiking regulations and subsidies, the system will collapse even quicker, because now all the businesses and young individuals will be free to drop the plans that are unaffordable.
The big question nobody in leadership will answer is this: Once we are already throwing $1.6 trillion at health care and insurance, and are keeping Medicaid expansion, and are funding high-risk pools plus bailout fund, why do we need to regulate and subsidize the remaining small free market?
Answer: They don’t believe in any semblance of a free market.
Taken in its entirety, this bill will create a permanent cycle of bailouts, price increases, lack of choices, and endless debt – all blamed upon the free market and leading to single-payer.
Where conservatives go from here
The sad reality is that given the complexity of health care, facts and details don’t matter. Republicans will take this Obamacare bailout bill and call it “repeal” of Obamacare. They will isolate the few brave conservatives who don’t want their brand attached to a more insolvent version of Obamacare and shame them into playing team ball. They will contend that this is the only chance to repeal it, even though the bill actually bails out Obamacare.
As I noted last week, conservatives need to completely disown this and introduce their own bill. Either way, Obamacare is not getting repealed at this point, so we as may as well stand for a long -term vision of freedom, prosperity, choice, competition, and cutting lobbyists and government out of health care. It’s time for conservatives to place a full repeal bill on the table, along with numerous free market health care reforms that actually create a functioning market. They should demonstrate how Obamacare and its predecessor interventions are the source of the pre-existing condition problem and how free markets would fix the problem.
As late as 1987, long after the enactment of the Great Society, at a time when Reagan thought our government was way too large, the federal government only spent $85 billion on health care. Now, we spend close a $1 trillion (plus state expenditures), yet Republicans want more without ever addressing the source of the problem. After a half-century of price-hiking interventions, regulations, and subsidies, we have nothing to show for our $1 trillion in federal spending other than record high prices and an industry that bears no resemblance to any other marketplace, whose insolvency itself will engender further subsidies in the coming years that dwarf current spending. Isn’t it time for a bold change rather than the faintest of faint echoes?