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Commentary: The Republicans' current plan to 'amend' Obamacare will destroy the American economy

President-elect Donald Trump, flanked by his wife Melania and Senate Majority Leader Mitch McConnell of Ky., gives a thumbs-up while walking on Capitol Hill in Washington, Thursday, Nov. 10, 2016, after their meeting. (AP Photo/Molly Riley)

After spending the better part of seven years promising to repeal Obamacare, the top Republicans in the country have changed their tune now that they have the political power to pull it off. Now, Republicans are saying they want to amend Obamacare - and their proposed plan would have a devastating effect on the American economy.

Leading the charge in this regard is President-elect Trump, who now says he is open to "amending" Obamacare — but he is adamant that he wants to keep one of the law's most popular provisions: the provision that prevents insurers from discriminating against those who have pre-existing conditions. Trump is by no means alone, however: Senate Majority Leader Mitch McConnell (R-Ky.) has also indicated that he would no longer repeal Obamacare but rather merely amend it, while keeping the pre-existing conditions provision in place. If this provision is removed from the overall structure of Obamacare, it would inevitably destabilize the entire healthcare industry and lead inexorably to a single-payer healthcare system, as well as a major economic recession in this country.

Prior to the passage of Obamacare, insurers could refuse to cover pre-existing conditions unless the insured had been continuously insured for twelve consecutive months. Under provisions of the Health Insurance Portability and Accountability Act (HIPAA), the law sought to strike a balance between allowing insured persons the ability to change jobs without fear that their new health insurance would refuse to cover their conditions, and preventing uninsured persons from bankrupting the entire system by waiting until after they got sick to purchase health insurance — an especially attractive financial option for health insurance consumers under the age of 30.

The passage of Obamacare, however, required insurers to cover patients with chronic, prohibitively expensive conditions like cancer or diabetes regardless of whether they had health insurance coverage at all. The massive influx of people into the healthcare system who previously were considered too expensive to insure is one of the reasons insurance companies have already faced financial ruin, and also one of the reasons for the ongoing massive premium spikes that have affected Americans under Obamacare.

Theoretically, Obamacare was supposed to help insurance companies absorb the financial cost of insuring these folks with the individual mandate and the employer mandate — the two provisions of the law that are the least popular aspects of it, and the most likely to face the axe under a Trump administration. In theory, the mandate was supposed to encourage tens of millions of young, healthy consumers to join the system and pay premiums for insurance coverage they would seldom — if ever — use. The basic scheme of Obamacare was for healthy, young people to subsidize the healthcare of unhealthy people.

The failure of Obamacare was that young people turned out to not be so interested in their role as the suckers of the Obamacare scheme. Especially as premiums rise, young people have been increasingly willing to just pay the Obamacare penalty to the government, rather than pay the even more expensive health care premiums for coverage they won't use. As the gap between the penalty and premium prices grows wider, the problem is expected to get worse.

Removing the individual/employer mandate would immediately make the problem worse. The result of such a move would be eminently predictable: no insurance company in the country could survive. The Republicans' scheme would be the equivalent of  allowing people to wait to buy car insurance until after they had a wreck, and then requiring insurance companies to cover even those wrecks that happened before a person purchased coverage.

Immediately, the financially rational decision for everyone would be to cancel their health insurance coverage and just wait until they developed some serious medical condition to purchase it again. In such a world, health insurance companies would immediately go under, leading to a deafening clamor for single-payer health insurance. Worse, the effect on the economy would be astonishingly profound, as health insurance companies represent a major portion of the private economic sector at present.

The only way the Obamacare provision preventing discrimination against consumers with pre-existing conditions "works" is with the individual mandate and the employer mandate. In fact, one of the primary failures of the law, from an economic standpoint, is that the mandate is not effective enough — at least in terms of preventing financial insolvency for health insurance companies.

If the mandate is kicked out (as it should be), then the entire Obamacare act has to go with it. Attempting to modify it piecemeal would be worse for the healthcare sector and the economy as a whole than just leaving it alone.

Republicans have campaigned for years on the promise that they would repeal Obamacare wholesale if they ever got the opportunity. They now have it: they don't even need to nuke the filibuster to do so. There are no more political excuses. They should live up to their promises rather than bankrupting the country by trying to please everyone.

One last thing…
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