Compromise and Conceit

What the American people have to look forward to

We’re a week away from the inauguration of the 45th President, but the Senate and House seats have changed so that the Republicans now control both houses of Congress, and one of their first actions has been to begin repealing Obamacare. They’ve been salivating over this prospect for six years and making a big fuss about it, as have all their adjutants in think tanks and conservative media, so you would think they would be ready to roll with a coherent plan. Unfortunately it appears that they don’t, and the first week of their attempts to begin the process have been rather shambolic. Since they don’t control 60 Senate votes they are trying to enact the repeal through some arcane process called reconciliation, but that is just the start of the rolling drama that is coming; Vox has an explainer about the whole process, and is running a fairly good series of articles watching as the Republicans attempt to wreck Obama’s signature achievement.

The Republicans’ first plan seemed to be “repeal and replace”, in which they would unravel all the key parts of Obamacare now but put some kind of deadline on when they would take effect, then begin working on a replacement plan in the meantime. Unfortunately this was patent madness, that they were warned about for months, which would tip many insurance markets into a death spiral and create chaos for both insurance companies and millions of insurance holders. Trump stepped on this with the announcement that repeal and replacement would happen simultaneously and soon, which is something of a problem for the Republicans since they don’t have a plan and working one up in a couple of weeks is going to be kind of challenging (Obamacare took about 15 months to happen, I think). Even more challenging for the Republicans is their lack of a filibuster-proof majority in the Senate – they can repeal the law’s components with 51 votes, but they can only put in place a replacement with 60 votes. If the Democrats decide to act in exactly the same way that the Republicans have for the past 6 years, they will prevent any replacement plan for the next two years, and unless the Republicans can hold them responsible in the mid-terms, potentially kill any future replacement. This would be a disaster for the Republicans, since they would create an insurance death-spiral with no ability to legislate a repair, and go to the mid-terms with several million people suddenly losing their insurance. Given this their choices all seem very unpleasant.

This is incredibly irresponsible politics. Health care reform has been a Democratic party priority – and part of national debate – since the 1990s, and Obamacare was passed in 2010. The Republicans have had 25 years to think about this stuff, and have tried more than 50 times to repeal Obamacare while they were in opposition, yet over that whole time they haven’t come up with a single plan that will do anything to improve health insurance coverage. One Republican even admitted that the plans they have tried to pass during Obama’s administration were only pushed because they knew they wouldn’t get passed – they aren’t serious plans. Paul Ryan has been saying the Republicans will release a plan “soon” for years, and although there are a couple of different ideas floating around out there none of them is near the level of a properly designed plan – and none were pushed during the election. The Heritage Foundation was able to scour the whole country looking for complainants in a Supreme Court case – and fight that case – to gut one part of Obamacare, but didn’t appear to have time to come up with an alternative plan that was worth putting to Congress. The Republicans have known this day is coming for at least six years and they have nothing coherent to offer the American people. We all know the reason for this, of course – Republican political ideology simply cannot produce a reform of the American healthcare system that will give more people affordable coverage, because the Republicans’ fundamental position is that government should not be interfering in healthcare markets, and it is impossible to make healthcare affordable and accessible without extensive government interference in markets.

As if that were not bad enough, their president-elect campaigned on a promise not to cut medicare or medicaid, and recently his spokesperson said that no one would lose their existing plan (a promise that has been held against Obama by Republicans for six years!) Trump has also said he likes Obamacare’s provisions on pre-existing conditions. So now the Republicans have to come up with a free market plan that somehow keeps Medicaid in place, doesn’t take away anyone’s insurance, and forces insurance companies to cover pre-existing conditions, while bringing prices down and giving individuals greater choice (the latter two points being raised by Paul Ryan recently as part of what he described as a “rescue mission” to make health care more affordable than it is under Obamacare). And if they follow Trump’s timeline they have to do it in a few weeks or months.

It’s not clear what colour everyone’s unicorn will be, but we know it will be a free market unicorn.

So what can we expect this plan to contain? It’s not clear, because there have been multiple Republican “plans” or “policies” in the past couple of years, but based on the major ones that have floated around and some of the major policy discussions we have seen, the plan will likely include some or all of the following.

• Abolishing the mandate: The mandate is the Obamcare rule that hits people with a tax penalty if they do not take out health insurance, in an attempt to force young and healthy people to take up insurance. This mandate is key to Obamacare, since forcing young and healthy people to take up insurance will ensure that the insurance risk pools are large enough to keep costs down and keep insurance companies viable. The mandate hasn’t been as successful as its planners envisaged, probably because the plans young people are likely to choose to take up are “Bronze” plans with very poor benefits, and many young people probably don’t think they’re worth the effort of filling in forms, given the size of the tax penalty. Republicans hate the mandate and want to get rid of it but of course don’t have an alternative method for forcing people to take up health care. If you abolish the mandate but force insurance companies to cover people with pre-existing conditions then they have to raise prices for everyone else – which means the care won’t be affordable, a key goal of Ryan’s “rescue mission.”
• Deregulating insurance markets: Trump was big on allowing insurers to operate across state lines, and most Republican plans want to see some kind of reduction of conditions on insurers. In the repeal of Obamacare this will likely involve removing the restrictions placed on plans that can be marketed on exchanges – when Obamacare was introduced, a set of minimum standards was established for insurance plans which guaranteed people buying them would get a certain minimum level of benefits, and enabled people to choose between plans that were rated as either Bronze, Silver, Gold or Platinum. By deregulating markets and the rules on how insurers market their plans, the insurance companies will be able to return to the pre-Obamacare era of selling absolutely shonky packages at a low price – which, if they’re required to offer coverage to people with pre-existing plans, is the only way they’ll cover their costs. Many Republicans also think insurance companies should be able to compete across state lines, ostensibly because this will increase competition in smaller states and rural areas where currently only one insurer operates, and also to allow more mergers. This is unlikely to encourage competition in the long-term, but will lead to large insurers merging and creating multi-state monopolies – monopoly pricing being another way to cover costs. There is no universal health coverage system in the world which operates successfully with a deregulated private market, and it’s not going to magically happen in the USA.
• Reforming subsidies: Another aspect of some Republican plans has been to change subsidies so that they are not income-based. Currently under Obamacare anyone with income below a certain level receives a subsidy towards the cost of their health insurance, with the subsidy growing as income decreases, to ensure the plan remains affordable. This is the natural compensation for the mandate, and is one of the pillars of Obamacare. Republicans like Tom Price have proposed replacing these income-based subsidies with age-based subsidies, which means Bill Gates gets the same subsidy as a minimum-wage 61 year old labourer in Louisiana. This policy is part of a new rhetoric the Republicans are developing based on “equality of access” rather than equality of coverage. The natural consequence of this will be that poor people will decline to take up insurance, since the subsidy won’t be enough for them – especially in a deregulated market with no mandates.
• Block-granting medicaid: As part of Obamacare the Medicaid program was expanded, with states being offered financial support to extend Medicaid to a larger pool of people (Medicaid is the USA’s free health coverage for very poor people). Republicans hate this because it’s straight-up welfarism, and the Heritage Foundation ran a successful challenge in the Supreme Court that enabled states to refuse the expansion. Unfortunately for the Republicans a lot of states – including some Republican-ruled swing states – took the expansion, and about 5-12 million people gained health coverage through it (estimates vary). If the Republicans take away this expansion they will piss off a lot of people, including people in Republican swing states that could damage them in future elections, so they need to find a way to take away the Medicaid expansion from safe Democrat and safe Republican states, and enable swing Republican states to keep it. Their answer is block-grants, in which the money for Medicaid is granted to the states but not earmarked for Medicaid only. Since some deep Republican states like Kansas and Louisiana are in big financial trouble, they can then use the Medicaid money to bail out their failing state finances, and pare back Medicaid in their states; while swing states can keep using the money for Medicaid and avoid creating a large pool of angry voters. Even then it is likely that the block grants will be smaller than the funds currently available so all states will have to cut Medicaid coverage or reduce the quality of care offered – but the Republicans don’t care because Medicaid is for poor people, so just need to make sure they don’t cut it away from so many people that it swings an election.

Any single one of these reforms in isolation would probably be enough to radically roll back recent gains in insurance coverage in the USA, but it’s likely that whatever misbegotten, evil plan the Republicans come up will have all of these reforms to some extent. This is why Republicans have started talking about equality of access rather than coverage, because if everyone theoretically has a subsidy and the right to purchase healthcare, then you can blame them if they decide they can’t afford it. In this rhetorical model they will force insurers to cover people with pre-existing conditions, abolish the mandate, deregulate the market in such a way that insurance companies can offer absolutely shonky products at inflated prices, cut subsidies so that no one takes them, and then blame poor people for “choosing” not to take up the healthcare they had “equal access” to.

It remains to be seen whether the Republicans will be able to get away with this – either because Trump takes a personal interest in a reform that actually works, and vetoes anything they offer, or because the Democrats drag out the replacement strategy until they can again win control of Congress. In any case it’s going to be fascinating to watch the Republicans try to behave like responsible adults now that they have the levers of power, even though for the past six years they have shown themselves pathologically incapable of dealing with the contradictions and challenges their ideology has thrown up.

Of course, what’s “fascinating” to those of us who live in countries with sane governments and universal health coverage, is going to be very terrifying to a very large number of poor and chronically ill people in America. Good luck to all of you!