by From Peter Radford Well, the wait is over. We now know what the Republican health care plan looks like. It’s early days and the inevitable compromises will have to be made, but the Republican seven year crusade is reaching its climax. Or not. The problem is this: as we have discussed many times, any credible health care plan needs a number of key features. Three stand out: You need to ensure the biggest insurance pool you can. In an ideal world this pool would be the entire population of the country. In the US it will be smaller because local ideologies militate against “social” solutions and thus we are prevented from seeking maximum efficiency. Obamacare sought to do this through the so-called “mandate” which penalized people who failed to get insurance coverage. You need to regulate the private insurers to prevent them from discriminating against high risk customers. Obamacare did this by forcing insurance companies to cover people with “pre-existing” conditions, and by limiting the premiums charged to such people. Then you need some form of subsidy so that low wage people can afford to buy insurance. Obamacare did this by providing subsidies and by imposing taxes to cover the cost. The subsidies were linked to income and to the cost of insurance to make them strongly effective.
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from Peter Radford
Well, the wait is over. We now know what the Republican health care plan looks like. It’s early days and the inevitable compromises will have to be made, but the Republican seven year crusade is reaching its climax.
Or not.
The problem is this: as we have discussed many times, any credible health care plan needs a number of key features. Three stand out:
- You need to ensure the biggest insurance pool you can. In an ideal world this pool would be the entire population of the country. In the US it will be smaller because local ideologies militate against “social” solutions and thus we are prevented from seeking maximum efficiency. Obamacare sought to do this through the so-called “mandate” which penalized people who failed to get insurance coverage.
- You need to regulate the private insurers to prevent them from discriminating against high risk customers. Obamacare did this by forcing insurance companies to cover people with “pre-existing” conditions, and by limiting the premiums charged to such people.
- Then you need some form of subsidy so that low wage people can afford to buy insurance. Obamacare did this by providing subsidies and by imposing taxes to cover the cost. The subsidies were linked to income and to the cost of insurance to make them strongly effective.
The success of Obamacare was that it achieved its biggest goal: it vastly expanded coverage, with around 20 million people newly insured at a rough cost of 0.6% of GDP. That cost, in the context of the goal, is low.
So now we have RyanCare.
How does it differ?
Well, it keeps those three main features, so it is not a repeal of Obamacare, it is a new version. The problem is that it waters down all three features and so is almost certainly doomed to failure.
- RyanCare keeps the mandate. This was castigated as the most “unAmerican” part of Obamacare, but it stays in the GOP plan. The issue is that the way the Republicans keep it is that it imposes a penalty on people who have gaps in coverage. In other words if you don’t get coverage there is no penalty. It is only when you get coverage later, after a gap of having no coverage, that a penalty kicks in. This opens the door to a huge increase in adverse selection — this is the fancy name given by insurers to the problem of people only buying insurance because they know they need it. In other words the insurance pool will get a whole lot weaker — basically full of sick folk — and thus premiums will skyrocket.
- RyanCare keeps a form of subsidy, but significantly weakens it. It switches to the provision of flat tax credits that phase out at higher incomes, but which are much lower than Obamacare’s subsidies at the low end. So low wage people will get a lot less help. This will, undoubtedly, end up with many poorer people being forced out of the market.
- RyanCare keeps provisions preventing discrimination against people with pre-existing conditions.
So the basic structure of Obamacare continues. There is no real “repeal and replace”. There is just a lot of heavy handed meddling.
At the end of the day the big issue that confronts the Republicans is that they ave no over-arching strategy for health care. It is not a typical issue they worry about, so there isn’t a deep pool of prior existing thought. This may shock you given the seven years of discontent since the advent of Obamacare, but it seems as if no one in the upper echelons of the GOP ever gave serious thought to what a true Republican plan would look like. So they have been reduced to this botched and cobbled together effort, that pretends to eliminate Obamacare, but which is, in truth, a pale and poor imitation.
An imitation, moreover, doomed to fail.
It makes no mention, yet, of Republican favorites such as allowing the sale of insurance across state lines. It does include typical Republican goodies for the wealthy: they will benefit especially from the elimination of the Obamacare taxes, and form the widening of scope for the so-called Health Savings Accounts [HSA’s] that allow people to accumulate cash tax free in order to cover health care costs. The Republicans present HSA’s as a way for poor people to save to offset the inevitably higher premiums their plan will create. This is absurd because most poor people will not have sufficient cash to save, and most don’t have high enough incomes to take advantage of the tax break: they don’t pay tax to begin with! So HSA’s are yet another giveaway to the wealthy.
Nor is there any word on the impact of the elimination of the Obamacare taxes on the budget. One of the successes of Obamacare was that it brought in a large net inflow of tax revenue. Getting rid of that tax knocks a big whole in the Federal budget. It is surprising that the GOP, long a source of stern opposition to deficit spending during the Obama years [but not, lest we forget, during the Reagan years, or during the Bush’s tax cuts], is suddenly so blasé about the budget.
And then there’s the conservatives. Already, within hours of the plan’s release, the Republican right wing is lining up in opposition to it because it maintains too much of a government presence in health care. It is highly unlikely that the plan, as it now exists, will get sufficient votes to pass. Then, if it does and it arrives in the Senate, there is growing opposition from GOP moderates to its Medicaid features. The plan eliminates the Obamacare expansion of Medicaid by 2020. This will place a huge burden on the states that accepted the Obamacare expansion [not all did], and since many of those states have Republican governors who would then be faced with slashing health care for their own voters, it is understandably an unpopular move.
So: not all is well with RyanCare. And, apparently the Republican leadership realizes this because they are crunching through a voice on the plan without any further consultation and without the usual “scoring” of it by the Congressional Budget Office. It is pretty clear why the leadership wants to avoid seeing the scoring: it will show that the plan throws a lot of people off health care, and that premiums will rise rapidly because of that adverse selection problem.
Ugly all round.
Let’s see what happens from here.