Congressional Republicans on Monday unveiled the main thrust of their health-reform effort. It amounts to a two-front assault on Obamacare: the taxing side on one hand, and the spending on the other. Both will end up in budget-writing instructions though the process known as reconciliation, which is the way Democrats secured final passage of Obamacare in the first place as well as the only way Republicans can repeal and replace it since they lack 60 votes in the Senate.
Initial reactions to the plan varied from noncommittal to preliminary support to disdain, and that was just on the right. My early advice is two-fold: Beware of anyone who already claims to know exactly how the plan would work in the real world — and expect this plan to be the starting point for negotiations, given that the “noncommittal” I mentioned came from the White House. There is some good in it, and some much less-than-good, and we’ll get to that in a moment.
But the debate on the right is not the only thing to be mindful of here. You can also expect unadulterated hostility toward the bill from the left, because that’s what you would have seen no matter what the bill said. Democrats sense blood in the water regarding this administration and, consequently, Republicans in Congress. Given the goings-on of the first six weeks of the Trump administration, maybe that’s understandable. But it also means there will be no restraint from liberals and progressivists in declaring a Republican health-care bill to be — pick your word — dangerous, cold-hearted, irresponsible, even deadly.
Keep in mind, they will make these claims and throw up their parliamentary obstacles to a GOP bill in defense of a law that has been falling apart before our eyes. The individual-market exchanges, which represent one of Obamacare’s two biggest elements, are undergoing a not-so-slow-motion collapse. Insurers are leaving, consumer options are dwindling, and enrollment in exchange plans is even down from 2016. Democrats tout the number of people who have gained insurance due to Obamacare, but what’s amazing is how the number of uninsured Americans remains twice as large as the number who have gained insurance. This, in spite of a legal mandate to buy insurance and financial penalty (tax) for not doing so. Democrats made it illegal not to have insurance, and yet almost 30 million Americans still go without it. What’s more, the bulk of the people who have gained insurance did so because of the Medicaid expansion, which has worked comparatively better only because it is funded through billions of dollars in deficit spending. That program is at least as unsustainable as the exchanges; it’s just that its debt-fueled collapse can be put off longer.
Into this turbulent atmosphere is born the new Republican plan. It aims to replace a patently failing law, but it must do so within the limitations imposed by a sure Democratic filibuster in the Senate and a volatile, if Republican, occupant of the White House. The result is a plan whose authors seem afraid both to rock the boat too much and not to.
The specter of someone, somewhere, losing insurance appears to have been too much for congressional Republicans. A good plan wouldn’t have sought out to take insurance away from anyone, but it would have recognized that the means by which Washington tries to guarantee coverage now are the primary reasons it is priced beyond some people’s reach. The financial problem with health insurance isn’t that it needs to be subsidized for more people, but that the current array of subsidies have distorted the price (and content) of insurance so that it can’t be bought without subsidies. Yet the politics of health insurance dictate that subsidies can’t be removed or even reined in. So the GOP plan eliminates subsidies with one hand and re-creates them in the form of tax credits with the other. This might be an acceptable way of dealing with the problem if the result were level tax treatment for those with employer-based insurance and those without it, but the early signs are that this isn’t the case. The test for this part of the plan will be whether the other elements can drive prices down so that the subsidies become less costly (and thus less market-distorting) over time. It’s way too early to say.
Then there is Medicaid. On one hand, there are some good adjustments: moving to a per capita system of funding to open the door for innovation by the states; and dialing back “presumptive eligibility,” which drove up expenses without verifying patients’ need. On the other hand, the plan’s treatment of the Medicaid expansion looks like a resigned effort to split the baby. Republican-led states that expanded Medicaid have been battling behind closed doors with those that didn’t, and the schism left Congress unsure of which side to take. So it looks to have tried taking both. States can continue enrolling people in Medicaid under the more generous terms of the expansion, but only through 2019. After that, the old terms of Medicaid apply to new enrollees. I wouldn’t expect Republicans on either side of this debate to be happy with this outcome. Nor am I sure that this approach will save money, or lead to smart reforms of this broken program, anytime soon.
On the bright side, an array of taxes imposed by Obamacare are being eliminated. But it’s unclear right now whether spending is being cut in like proportion. There is not yet a scoring of the plan by the Congressional Budget Office. (This is the part of the post where I should remind you that all of the accounting gimmicks used to make Obamacare appear to save money will appear to show an equal and opposite loss of money when they are removed. Those “savings” were false, so these “costs” will be, too.)
A full appraisal of this plan will take more time and, as I wrote above, you can expect the plan to change as it moves through the legislative process. But keep in mind, there has rarely been a time when the definition of politics as “the art of the possible” seemed like such a low standard to meet.