Obamacare Update At The End Of 2017

Since we did our analysis of how Obamacare works there has been a lot of activity in Washington, D.C., but relatively little change. Literally from the day the bill was passed the Republican party in the U.S. made it their top priority to repeal it, and said so at every opportunity. Of course, as long as Obama was President they could not do it since they never had enough votes to override his veto. They passed repeal bills annually, if not more often, but none of them went anywhere. But when the Republican candidate, Donald Trump, won a surprise victory in the 2016 election, there was no longer anything to stop them. Trump had run on, among other things, promising to repeal Obamacare, and from the moment he was inaugurated he proclaimed his signature pen was ready as soon as a bill was passed. And that is when things got tricky for the Republicans. As you may recall from our previous analysis, Obamacare was a finely balanced combination of measures that had at least something that each party wanted. And as the Republicans started trying to craft measures to repeal the legislation opponents of all kinds came out of the woodwork. It turned out insurance companies favored keeping it, the majority of doctors favored keeping it, the people who were insured favored keeping it, and even some Republicans turned out to have reservations about repeal.

  • Insurance companies – The Insurance companies had done reasonably well out of Obamacare since it provided an increased number of people they could insure and make money from. They had made all of the adjustments they needed to make by 2017 and now saw the Obamacare landscape as a known environment they could make money in. Repeal would take them into the realm of the unknown because it would inevitably mean something different from just returning to the status quo ante of 2008.
  • Doctors – The majority of physicians wanted to keep Obamacare because it increased their pool of customers. The American Medical Association came out in strong opposition to repeal of Obamacare.
  • Hospitals – They opposed the repeal because it would make their financing more fragile. Hospitals liked Obamacare because it significantly reduced their cost for “uncompensated care”, i.e., patients who receive care but cannot pay for it. It did this in two ways. First, more people with insurance policies purchased through the exchanges meant in essence more paying customers. Second, Obamacare included a provision for individual states to expand Medicaid, the program for providing health care to people too poor to afford coverage on their own. This Medicaid expansion was very significant since it provided to coverage to the very people most likely to receive uncompensated care in the absence of this program.
  • Patients – The majority of patients liked Obamacare by the time we got to 2017, and that made repealing it more difficult. This increase in support was slow but consistent from the initial passage in 2010, when on balance more opposed it than supported it, to 2017 where that was reversed. I think the best explanation for this is that as people saw how the program worked they could see the benefit, and learned that the overblown rhetoric (e.g. “death panels”) was not really true.
  • State governments – Many states had expanded Medicaid under Obamacare and did not want to give up that benefit. This even included a number of states under Republican government (e.g. Ohio) that essentially broke with their Republican colleagues over this. This is something that would complicate the repeal process all year.

So, with all of this opposition, why was repeal being pursued at all? Normally, you would expect a measure this unpopular to be quietly dropped. But that is not what happened at all. It was pursued with an intensity that was really quite remarkable. But it would appear that several factors were at play here. First, the Republican party had made this the centerpiece of their platform for 8 years. They had elevated this to the status of a moral crusade against evil, and sold that idea to their constituents, and were now expected to deliver to their base. One useful way to look at the election of 2016 was that it was a reaction against politicians who say one thing to get elected but do something different once they are in office. Because the Republican politicians had made this so central to their election platform, they felt compelled to deliver. As Dave Brat, a Republican Member of Congress said

“If we don’t get healthcare, none of us are coming back,” he said in a brief interview. “We said for seven years you’re gonna repeal Obamacare. It’s nowhere near repealed.” (https://www.theguardian.com/us-news/2017/jun/26/koch-network-piggy-banks-closed-republicans-healthcare-tax-reform)

The next reason has to do with donors who fund the Republican party. They had made it clear that either the Republicans delivered or they could forget getting campaign contributions. For instance, a major Koch network donor in Texas named Doug Deason said

“Get Obamacare repealed and replaced, get tax reform passed,” Deason said in a pointed message to GOP leaders. “You control the Senate. You control the House. You have the presidency. There’s no reason you can’t get this done. Get it done and we’ll open it back up.” (http://www.foxbusiness.com/politics/2017/06/26/gop-donors-close-checkbooks-frustrated-with-lack-progress-on-taxes-health-care.html)

Well, they tried. First, the House of Representatives pulled a bill together in spring, but Paul Ryan pulled it from the floor on March 24 because he did not have the votes. The bill was being opposed by centrists who said it went too far, and by conservatives who said it did not go far enough. Then a couple of months later they managed to pass a bill and send it to the Senate. That opened a different can of worms, since the Republicans in the Senate had a very narrow 52-48 majority, and would face a Democratic filibuster. They had to use a special parliamentary provision called reconciliation that would let them pass the measure on a strict majority of 51 votes. That was possible, but only under restrictive circumstances that meant that the bill they got from the House would not work. So they started on their own bill designed to “repeal-and-replace”, but that got shot down when several Republican senators said they opposed the measure. This was followed by a straight repeal measure, and that failed on July 28 when three senators opposed the bill. One last effort was made in September, but again failed when three senators opposed it. And by now they had run out of time. Reconciliation had to be completed by September 30, and that was the end.

Then in the Tax measure they did the one thing that had some popularity, and that was to eliminate the Individual Mandate that said people had to either purchase insurance or pay a fine. The Supreme Court had ruled that this was a tax which made it practical to repeal in a tax measure. So that aspect of Obamacare is now removed.

So, where are we at the end of 2017? First, and perhaps most important, Obamacare is still more popular than you think from all of the Republican rhetoric. The Trump administration cut the enrollment period in half, cut the publicity budget by 90%, and still enrollments were very healthy. 8.8 million signed up through the Federal marketplace, only 4% below the 2016 number. http://fortune.com/2017/12/21/obamacare-enrollment-surge-despite-trump/

But how will the repeal of the Individual Mandate affect the marketplace? The fear is that we could have a real problem of adverse selection. Younger, healthier people might opt to go without insurance, and then as soon as they have a serious injury or illness sign up for it. The Obamacare provision that prevents companies from denying coverage for pre-existing conditions is still the law, and this could make premiums skyrocket. Paradoxically, repealing this measure has caused the Federal government’s health care bill to go up. As premiums increase, the subsidies paid on behalf of low income people also increase, so the government ends up paying more. There is no free lunch in all of this, someone somewhere is paying the bills, the argument is really over who it will be.

My personal view (shared by many) is that the Republicans are, despite what they think, pushing us in the direction of a completely government funded health care system, though how it might resemble other countries is yet to be determined. As Paul Waldman said

“But those with low incomes will be getting free or low-cost insurance courtesy of the government, which everyone else will continue to notice. We wind up with a system made up of 1) people who get coverage from the government and are happy with it; 2) people who get coverage from their employers, and like the coverage but don’t like the cost; 3) a small number of people who pay the full cost of private coverage, which is increasingly unaffordable; and 4) people who are uninsured and wish they could get on a government plan such as Medicare or Medicaid.” (https://www.washingtonpost.com/blogs/plum-line/wp/2017/12/27/republicans-failure-on-health-care-is-even-greater-than-they-realize/)

In the final analysis, Obamacare was the most moderate plan the Republicans could hope to get, and they rejected it. It was devised by Republicans initially, implemented by a Republican governor, and was the alternative to anything more radical. But I think we will see the more radical solutions going forward. Bernie Sanders put down a marker in the 2016 race, and you will certainly see Democratic candidates putting forth plans that move us to single payer as they jockey for position in the 2020 race.

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