This Isn’t the Obamacare Repeal You’re Looking for

 

After years of dawdling, we finally have an “official” rough draft by Republican House leaders for repealing and replacing Obamacare. I thought I’d share my take (I work in regulatory affairs for the pharmaceutical industry) — especially since there seemed to be a fair deal of uncertainty among Ricochet members about what this bill really means. Instead of getting into too many nitty gritty details, I’ll use some broad brushstrokes to illustrate my opinion.

As the title of this post says, this bill is definitely not what most conservatives probably have in mind when they imagine “repeal” of Obamacare. Now technically, that was never the intention: because of the filibuster, Congressional Republicans always planned on using the reconciliation process to eliminate specific crucial, budget-related provisions of Obamacare. And since the law resembles something between a Jenga tower and a Rube Goldberg machine, this strategy should eliminate enough key pillars to render the rest of the law unsustainable or irrelevant. So did Congress succeed?

Before we begin, a quick reminder about what Obamacare was actually supposed to do: it’s main goal was to improve the individual health care market by (a) completely reforming it, and (b) throwing a truckload of money into Medicaid to absorb people who still couldn’t afford the individual market. And while its proponents and detractors spend 90% of their time arguing over the reform of the individual market (topics like the individual mandate, essential health benefits, etc.), the majority of people who gained coverage from Obamacare did so through the Medicare cash giveaway.

And when it comes to the Medicaid expansion, the draft bill introduced yesterday is actually something of a success: it greatly curtails the amount of federal spending on Medicaid by linking it to a defined, per capita grant instead of the open-ended Obamacare spending formula. So chalk this up as a partial win.

However, when it comes to the other major branch of Obamacare, the law is an utter disappointment. And while we could go through the negatives each individual aspect, there’s a much simpler – albeit deeper – explanation as to why.

The most important element of Obamacare, in my opinion, is not the visible moving parts – like the individual mandate, contraception mandate, essential health benefits, etc. – but the invisible underlying mechanism. The most fateful decision made by its drafters was to force insurance companies to cover any and all comers regardless of their liability, through the mechanisms known as “guaranteed issue” and “community rating”. Since such a policy would obviously bankrupt insurance companies within minutes, Obamacare had to include numerous provisions to force other people to overpay for health insurance in response: hence the individual mandate, the employer mandate, individual subsidies, essential health benefits, Cadillac taxes, insurance company subsidies, etc.

So here’s the kicker: Republicans have pledged not to repeal guaranteed issue or community rating! Once this decision is made, the rest is inevitable: Republicans just have to find some other method of getting other people to overpay for insurance, and then use hand-waving to pretend their mechanisms are more “patient-centered” and “freedom-enhancing.” Thus, instead of “subsidies” we have “refundable tax credits,” and instead of the “tax penalty for no insurance” we have a “premium penalty for no insurance.” But those details really don’t matter: as long as we continue to force insurance companies to lose money on the most expensive patients, we must encourage (i.e., force) others to reimburse those same companies for their losses, lest an insurance price death spiral leave individuals in certain jurisdictions without any options.

TL; DR: Forcing health insurers — who, for better or worse, are the oil which keeps our health care motor running — to insure millions of unprofitable patients is the key mechanistic feature of Obamacare, and leaving it intact renders any claim of “repeal” laughable.

In fact, I would say that Paul Ryan and his colleagues have been less conservative in drafting this “repeal” than Gruber, et al, were in drafting the original Obamacare. One major conservative tenet is that every decision is a trade-off: in Obamacare, the trade-off for sick people being able to buy underpriced insurance is a combination of overpriced insurance and odious regulations for everyone else.

Congressional Republican leadership wants to keep the good part with no trade-off in return. That’s not only doomed to fail, it’s an embarrassment to their supposed conservative heritage.

Published in Domestic Policy
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  1. Sabrdance Member
    Sabrdance
    @Sabrdance

    Yes.  My first read is that we’re going to have a Democratic policy with a Republican flag over it.

    Whatever.  The barbarians will sort it out…

    • #1
  2. Quake Voter Inactive
    Quake Voter
    @QuakeVoter

    Brilliant, depressing distillation.

    And, let’s remember, the GOP Senate is already on record that it won’t sign on to any of the “crueler” provisions of a House bill.

    And yet Donald J. Trump is the avatar of the betrayal of conservative principles.  The Voldemort of populist house Slytherin.

    Without DJT, the GOP House and Senate would be preparing a free market, small guvmint, you-and-your-doctor hammer blow to socialized medicine, right?

    Let’s criticize DJT, but at least by dint of temperament and bravado and business common sense he might attempt something more decisive than these cowards.

    Might even be conservative.

    • #2
  3. Dave Sussman Member
    Dave Sussman
    @DaveSussman

    After reviewing several articles on this, we can only hope this proposal was a test and only a test of the emergency broadcast system. Maybe they felt they had to get something out while they toil away behind closed doors realizing this will take much longer than promised (“day one there will be a repeal and replace”).

    People forget (or never knew) the ACA architects created so many trap doors the law itself could not be removed by a future antagonist administration. I hope they find a way to junk the entire engine and start over, otherwise, we will be all riding in the third row, facing backward in the same awfully overpriced car with a new paint job and duct taped Pinto engine.

    • #3
  4. TheRightNurse Member
    TheRightNurse
    @TheRightNurse

    Dave Sussman (View Comment):
    People forget (or never knew) the ACA architects created so many trap doors the law itself could not be removed by a future antagonist administration.

    I think this is more the issue.  I don’t think that conservatives are particularly thrilled about the government being overly involved in personal health as it is.  Since we cannot kill the beast, we should weaken it until, hopefully, it dies on its own.

    Obamacare was intended to fail.  It was an enticement to single-payer.  People have enjoyed the sample.  Now it’s hard to go back.  Indeed, in order to not fail outright, many of these provisions had to be included until another bill could be arranged that would be more fiscally responsible and able to mitigate much of the O-Care harm.  Given how the bill was designed, this will be markedly difficult.

    In the meantime, however, it needs to look like something is being done without taking away the benefits that people now believe they deserve.  Without it, there won’t be another chance to fix the slide to single-payer.

    • #4
  5. Valiuth Member
    Valiuth
    @Valiuth

    Betrayal of their conservative heritage? What!? I would like to point out that it is the Republican Party, not the Conservative Party. They are populists now and so will give the people what they want, and what the people want is Obamacare without any of the bad stuff.

    • #5
  6. Mendel Inactive
    Mendel
    @Mendel

    Dave Sussman (View Comment):
    Maybe they felt they had to get something out while they toil away behind closed doors realizing this will take much longer than promised (“day one there will be a repeal and replace”).

    There was a good article in the Federalist a few weeks back delving into this topic. The author claims that there is simply no way for a genuine repeal/replacement of Obamacare to be hashed out before August, but that for parliamentary reasons (which I admittedly don’t quite get), something has to be done on Obamacare before any of Trump’s and the Republicans’ remaining legislative agenda can move forward. Thus, passing anything quickly frees them up to get other things accomplished (while of course making it less likely they’ll ever actually revisit Obamacare).

    Dave Sussman (View Comment):
    People forget (or never knew) the ACA architects created so many trap doors the law itself could not be removed by a future antagonist administration.

    In fairness, I think a lot of the trap doors were also inevitable components of the system, and its framers actually did a decent job of staying consistent to their original vision. In order for the system of publicly-mandated private insurance to work, lots of moving parts needed to be integrated with each other. Once those connections were made, it becomes nearly impossible to change any one component without sending the entire system out of whack.

    So the fact that it’s so difficult to amend Obamacare can be viewed as a happy (for its framers) side effect of its necessary complexity.

    • #6
  7. Mendel Inactive
    Mendel
    @Mendel

    TheRightNurse (View Comment):
    Obamacare was intended to fail. It was an enticement to single-payer. People have enjoyed the sample. Now it’s hard to go back. Indeed, in order to not fail outright, many of these provisions had to be included until another bill could be arranged that would be more fiscally responsible and able to mitigate much of the O-Care harm. Given how the bill was designed, this will be markedly difficult.

    I don’t think it was “designed to fail” as much as it was designed to fail safe – in other words, it was supposed to work, but if it did go off the rails, the natural tendency would be toward more state intervention.

    But in any case, it really doesn’t matter what its designers motivations were – we know what the bill does, and we’re stuck with it.

    Where I agree with you, and think many on the right have a hard time accepting, is that it’s not enough to have an endgame vision of what our ideal healthcare system would look like; we also need a game plan to get us where we are now to where we want to be. And that game plan has to ensure that people currently receiving care are covered in some way during the transition phase – if not, political support for even the best system would drop faster than Congressmen can run in front of the next camera.

    That’s why I wince everytime I hear a conservative say “it’s really so simple” when it comes to healthcare reform.

    • #7
  8. 9thDistrictNeighbor Member
    9thDistrictNeighbor
    @9thDistrictNeighbor

    “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”

    ~Ronald Reagan

    • #8
  9. Quake Voter Inactive
    Quake Voter
    @QuakeVoter

    Valiuth (View Comment):
    Betrayal of their conservative heritage? What!? I would like to point out that it is the Republican Party, not the Conservative Party. They are populists now and so will give the people what they want, and what the people want is Obamacare without any of the bad stuff.

    Now, Valiuth?  What were they in 2003 when they voted 207-19 for Medicare Part D?

    Was the GOP any less “populist” when Reagan signed the largest Medicare expansion in a quarter-century in 1983?

    But if only we had elected a Reformicon in November…

    In fairness, Mendel opposes this bill to the GOP’s “supposed” conservative heritage.

    • #9
  10. TheRightNurse Member
    TheRightNurse
    @TheRightNurse

    Mendel (View Comment):
    I don’t think it was “designed to fail” as much as it was designed to fail safe – in other words, it was supposed to work, but if it did go off the rails, the natural tendency would be toward more state intervention….

    Where I agree with you, and think many on the right have a hard time accepting, is that it’s not enough to have an endgame vision of what our ideal healthcare system would look like; we also need a game plan

    That is where I think you are wrong.  The healthcare plan was never tenable.  It was intended to be solvent for a short period of time.  The numbers never worked, even if people were paying their penalties as intended.  People would come to rely on the government more.  Single-payer is a dirty word.  If they could get people to single-payer as a logical conclusion to the failure of OCare, all the better.  This is how it was designed.

    Process is always important.  Healthcare is never simple.  People are individuals and as long as the government functions like an insurer, it is taking away individuality, choice, and diversity of medical care.  The endgame is important, sure, but how we get there matters.  If we are hurting people in between, it has to be less hurt than previously.  After the increase in coverage/guaranteed government goodies, it is harder to go back and to understand that the pain is growing pains.

    • #10
  11. Dave Sussman Member
    Dave Sussman
    @DaveSussman

    Mendel (View Comment):
    There was a good article in the Federalist a few weeks back delving into this topic. The author claims that there is simply no way for a genuine repeal/replacement of Obamacare to be hashed out before August, but that for parliamentary reasons (which I admittedly don’t quite get), something has to be done on Obamacare before any of Trump’s and the Republicans’ remaining legislative agenda can move forward. Thus, passing anything quickly frees them up to get other things accomplished (while of course making it less likely they’ll ever actually revisit Obamacare).

    Thought we had enough of watching ‘politics trump policy’ for the last 8 years. I get that messaging is critical but isn’t it still secondary to sound legislation? A polished turd still stinks.

    • #11
  12. DocJay Inactive
    DocJay
    @DocJay

    It’s what I expected and I don’t expect it to work.

    We should get some positives out of the changes  Not enough to save a dying system though , not even close.

    • #12
  13. Mendel Inactive
    Mendel
    @Mendel

    TheRightNurse (View Comment):

    Mendel (View Comment):
    I don’t think it was “designed to fail”

    That is where I think you are wrong. The healthcare plan was never tenable. It was intended to be solvent for a short period of time. The numbers never worked, even if people were paying their penalties as intended.

    The main reason I don’t think it’s framers intentionally designed it to fail is because they were mostly academic/think tank types whose egos and reputations relied more on being correct than on playing a Machivellian game, and who also genuinely thought they were smart enough to design a system that everyone else could see was destined to failure.

    But in any case, this topic is now academic (pardon the pun). Obamacare is what it is, regardless of why.

    • #13
  14. genferei Member
    genferei
    @genferei

    Mendel: Republicans have pledged not to repeal guaranteed issue or community rating!

    An honest reform would move these costs directly to the government. If ‘the people’ want certain members of society to receive subsidised health coverage, then ‘the people’ can pay for it. And decide if the price is too high…

    • #14
  15. Joe P Member
    Joe P
    @JoeP

    So, if I understand this correctly, we’re going from a system where if I don’t have employer-provided health insurance, I must purchase it and pay a much higher price than the free market price, to a system where I still must purchase it at a higher price, but the government gives me the money with which to do the purchasing in the form of a “tax credit,” instead of to only poor people in the forms of “subsidy” and “Medicaid expansion.”

    Why do we bother with this stupid pretense anymore? I don’t want to be playing any more stupid shell games. Just let me keep my money and leave me alone.

    • #15
  16. Fritz Coolidge
    Fritz
    @Fritz

    See  http://www.powerlineblog.com/archives/2017/03/are-republicans-blowing-it-on-health-care.php

    (Edited for 250 word limit)  . . . politicians don’t …understand …insurance is. … service that pools money …  from … individuals … to provide protection from rare, but financially devastating, contingencies.

    99,500 non-residential … fires in 2014 … In 2012 … there were 5.6 million commercial buildings in the U.S. … assuming no new buildings …between 2012 – 2014, a total of 1.8% . . . hit by fire in 2014. …vast majority … left unscathed… Fires are vanishingly rare. … costs of a fire, however, are extraordinary, …every sentient being, believes, … a business must pay premiums for fire insurance, though the odds are that it will never … suffer a fire.

    … same ought to be true of health insurance.  … a flu shot, …will not lead to bankruptcy. A cancer diagnosis …might… National Cancer Institute estimated 1.685 million new cancer cases … in 2016. …U.S. population is 325.7 million. So …a diagnosis rate of 0.5%. Extremely rare. Extremely costly. Health insurance ought to cover rare, but costly, contingencies.

    But … our tin pot solons …get involved, …from the 1960s to now, “insurance,” … has morphed into a third-party pre-payment plan, wherein simple visits …are covered by the third party payer. …one of …many reasons health care is so expensive. … no idea what an average visit to a primary care physician costs. …removes competitive market forces from the cost equation …allows for an opaque pricing system decided by institutional vendors and remote payers.

    • #16
  17. Quinn the Eskimo Member
    Quinn the Eskimo
    @

    I get the feeling I will not be re-registering as Republican any time soon.

    • #17
  18. Joe P Member
    Joe P
    @JoeP

    Quinn the Eskimo (View Comment):
    I get the feeling I will not be re-registering as Republican any time soon.

    If they don’t change course on this, it’s time to end the Republican party in favor of something else. We might as well leave the fully statist party in charge if we only get to choose between statism and statism.

    • #18
  19. Salvatore Padula Inactive
    Salvatore Padula
    @SalvatorePadula

    Well, Trump warned us that we were going to get sick of winning.

    Great post!

    • #19
  20. MLH Inactive
    MLH
    @MLH

    Mendel: So here’s the kicker: Republicans have pledged not to repeal guaranteed issue or community rating!

    Then it is not insurance but national health care.

    Get rid of “insurance” (you say insurance, i say assurance) and let people pay for their medicalcare. It’ll take awhile to figure out how much to charge and all those medical office administrative assistants will be out of work. . .

    • #20
  21. drlorentz Member
    drlorentz
    @drlorentz

    We are doomed vis a vis healthcare. Once goodies are handed out there’s no taking them back. Besides, the gubmint  took over a big part of healthcare 50 years ago. Full-on socialized medicine is in our future. The Republicans in Congress have no power to stop it. The only question is when.

    • #21
  22. drlorentz Member
    drlorentz
    @drlorentz

    Valiuth (View Comment):
    Betrayal of their conservative heritage? What!? I would like to point out that it is the Republican Party, not the Conservative Party. They are populists now and so will give the people what they want, and what the people want is Obamacare without any of the bad stuff.

    Stop blaming the messengers. This is what the people want.  We have met the enemy and he is us.

    • #22
  23. Amy Schley Coolidge
    Amy Schley
    @AmySchley

    drlorentz (View Comment):

    Valiuth (View Comment):
    Betrayal of their conservative heritage? What!? I would like to point out that it is the Republican Party, not the Conservative Party. They are populists now and so will give the people what they want, and what the people want is Obamacare without any of the bad stuff.

    Stop blaming the messengers. This is what the people want. We have met the enemy and he is us.

    Amen. We want the best health care in the world and we don’t want to face the fact that we have to put in more money to do that.

    • #23
  24. Guruforhire Inactive
    Guruforhire
    @Guruforhire

    That wall had better be visible from the moon.

    • #24
  25. drlorentz Member
    drlorentz
    @drlorentz

    Mendel: the individual health care market

    One quibble with the OP: there is no functioning health care market, nor has there been one in a long time. A functioning market requires that the participants know prices since prices are signals. Patients don’t know the price of services in advance nor are they responsible for paying the total costs. Physicians rarely know the prices of the medications, tests, or procedures they prescribe.

    A true market in healthcare is a distant memory at best. Any attempt to return to market-based healthcare would meet with fierce opposition from almost everyone, with the exception of a few diehard free-marketeers like me. This is a political nonstarter. The people’s representatives will represent them in any reforms, i.e., they will give the people what they want, good and hard. And we will deserve it.

    All you can ask is that this be done in a way that damages our liberties and the rest of the economy as little as possible. We are in damage-control mode.

    • #25
  26. Quinn the Eskimo Member
    Quinn the Eskimo
    @

    Joe P (View Comment):

    Quinn the Eskimo (View Comment):
    I get the feeling I will not be re-registering as Republican any time soon.

    If they don’t change course on this, it’s time to end the Republican party in favor of something else. We might as well leave the fully statist party in charge if we only get to choose between statism and statism.

    That’s what a lot of people are going to feel.  I know there is a lot more statism than I would like in the country at large, but if both parties are heading in the same direction at different speeds, I would rather occupy myself doing something else.

    In candor, I was one of the people who was willing to dismantle Obamacare a little bit at a time, especially during the Obama years.  Having been told all that time that anything sort of repeal was some kind of betrayal…and here we are.  The failure bothers me, but the overpromising and underdelivering leaves a bitter taste.

    • #26
  27. WI Con Member
    WI Con
    @WICon

    Fritz (View Comment):
    See http://www.powerlineblog.com/archives/2017/03/are-republicans-blowing-it-on-health-care.php

    (Edited for 250 word limit) … to provide protection from rare, but financially devastating, contingencies.

    99,500 non-residential … fires in 2014 … In 2012 … there were 5.6 million commercial buildings in the U.S. … assuming no new buildings …between 2012 – 2014, a total of 1.8% . . . hit by fire in 2014. …vast majority … left unscathed… Fires are vanishingly rare. … costs of a fire, however, are extraordinary, …every sentient being, believes, … a business must pay premiums for fire insurance, though the odds are that it will never … suffer a fire.

    … same ought to be true of health insurance. … a flu shot, …will not lead to bankruptcy. A cancer diagnosis …might… National Cancer Institute estimated 1.685 million new cancer cases … in 2016. …U.S. population is 325.7 million. So …a diagnosis rate of 0.5%. Extremely rare. Extremely costly. Health insurance ought to cover rare, but costly, contingencies.

    But … our tin pot solons …get involved, …from the 1960s to now, “insurance,” … has morphed into a third-party pre-payment plan, wherein simple visits …are covered by the third party payer. …one of …many reasons health care is so expensive. … no idea what an average visit to a primary care physician costs. …removes competitive market forces from the cost equation …allows for an opaque pricing system decided by institutional vendors and remote payers.

    This. This . This.

    • #27
  28. Lily Bart Inactive
    Lily Bart
    @LilyBart

    Mendel: …. Republicans just have to find some other method of getting other people to overpay for insurance, and then use hand-waving to pretend their mechanisms are more “patient-centered” and “freedom-enhancing.”

    I’m angry and dissapointed, but not surprised.   They don’t want to upset the people who’ve come to believe that healthcare is a right – a right to force your neighbors to subsidize your choices.

    Never forget:  The Government Has No Money.  They have to confiscate other peoples’ money to ‘provide’ anything for anyone else.   Its sad to see so many Americans demanding that their neighbors pay for their lives.

     

     

     

    • #28
  29. Lily Bart Inactive
    Lily Bart
    @LilyBart

    If Republicans have thrown in the towel on this – then healthcare really is now and forever and a human right – to be managed, arranged for, and largely paid for by government.

    Healthcare will be more expense and have no flexibility.

    Quality will decline quickly.

    We will have little say in our own treatment and healthcare decisions.

    Our neighbors will have a financial stake in whether we are treated or given a pill to ease our passing.

    And then, of course, we’ll run out of money and the jig will be up!

    Tell me, where do I go now if I’m yearning to breath free?

     

    • #29
  30. Amy Schley Coolidge
    Amy Schley
    @AmySchley

    Lily Bart (View Comment):
    If Republicans have thrown in the towel on this – then healthcare really is now and forever and a human right – to be managed, arranged for, and largely paid for by government.

    Healthcare will be more expense and have no flexibility.

    Quality will decline quickly.

    We will have little say in our own treatment and healthcare decisions.

    Our neighbors will have a financial stake in whether we are treated or given a pill to ease our passing.

    And then, of course, we’ll run out of money and the jig will be up!

    Tell me, where do I go now if I’m yearning to breath free?

    Well, NASA did just discover a solar system with seven planets; that’s a good sign.

    • #30
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