Relief From Obamacare Finally On The Way?

Messy legislative process ahead before a real cure can reach President Trump.

House Republicans have finally released their legislative blueprint for repealing and replacing Obamacare. President Trump has indicated his support of the proposed legislation, while leaving the door open for negotiations.

Key changes involving repeal of Obamacare’s Medicaid expansion and the Obamacare subsidies will not take full effect until 2020. However, the proposed replacement for Obamacare provides a path to real reform, while at the same time not throwing out the baby with the bath water. The proposed legislation would preserve the prohibition on denying coverage to people with pre-existing conditions or charging them more for such coverage, and it would preserve the prohibition on capping lifetime coverage. It would also continue allowing young adults up to the age of 26 to remain covered under their parents’ health plans. However, the new American Health Care Act would eliminate some of the most unpopular features of Obamacare. For example, it would repeal the individual mandate to purchase health insurance and the penalties that go with it. And it would eliminate various Obamacare taxes by 2018. Previous proposals to begin taxing employees on a portion of the value of expensive employer-provided health insurance have been dropped from the released version of the proposed legislation. 

The proposed legislation would eliminate Obamacare’s federal top-down standards for baseline coverage that must be provided in all policies. This means that insurance companies can offer a variety of plans, including polices covering only catastrophic expenses, which people can use tax credits to purchase. This fundamental change, along with including a provision to permit competition among insurance providers across state lines, can be expected to drive down coverage costs and increase choices for consumers.

Although the individual mandate would go away, there is a provision allowing insurance companies to add a surcharge for those with a gap of 63 days or more without health plan coverage, in order to discourage people from gaming the system.

The proposed legislation would also replace direct subsidies to lower income persons purchasing health insurance from the Obamacare exchanges with refundable tax credits to help people without employer-provided or government-provided coverage to purchase health insurance. These tax credits would rise with age, ranging from $2,000 per year for people younger than 30 to $4,000 per year for people over 60. However, there is also an income-based component. The full credits are reduced for individuals and married couples with annual incomes exceeding $75,000 and $150,000 respectively.

The proposed legislation would freeze Obamacare’s expansion of Medicaid, with some protections grandfathered for current enrollees. Federal payments to states for Medicaid would be based on a fixed per-person allotment. 

“Obamacare is a sinking ship,” said House Majority Leader Representative Kevin McCarthy (Calif.), “and the legislation introduced today will rescue people from the mistakes of the past.”

Not surprisingly, Democrats are vehemently opposed. The Democratic National Committee wasted no time putting a petition online, which they even sent to me, entitled “STOP THE GOP HEALTH CARE BILL.” Needless to say, I am not signing.

In a statement blasting the proposed legislation, Senate Minority Leader Chuck Schumer (NY) said in a statement he issued, “This bill is a giveaway to the wealthy and insurance companies at the expense of American families, and Senate Democrats will work hard to see that it is defeated.”  

“Republicans will force tens of millions of families to pay more for worse coverage,” said House Minority Leader Nancy Pelosi (Calif.), “and push millions of Americans off of health coverage entirely.”

Recall that Pelosi said back in 2010, before passage of Obamacare, that “we have to pass the bill so that you can find out what is in it.” She and her fellow Democrats in the House, the Senate and the White House ignored the lurking minefields that have blown up and led to Obamacare’s current death spiral since its passage. They ignored predictions of higher premium costs, higher deductibles and co-pays, and reduced choice of health care providers and health insurance plans, all of which have come true. Now they are fulminating at the mouth rather than taking up President Trump’s invitation to work together in a bipartisan fashion to fix the problems that Obamacare has wrought.

Complicating matters are objections also coming from the Republican side of the aisle. Some Republican senators – Robert Portman (Ohio), Shelley Capito (West Virginia), Cory Gardner (Colorado), and Lisa Murkowski (Alaska) - are concerned about the impact on people in their states that have elected to participate in Obamacare’s expanded Medicaid program. From the conservative end of the spectrum, Republican senators Mike Lee (Utah), Rand Paul (Kentucky), and Ted Cruz (Texas), together with some of the more conservative members of the House, object to what they see as continuing entitlements with new packaging. They want to begin with a completely clean slate, insisting on full repeal of Obamacare. The diehard conservatives already have pejorative nicknames for the Republican House proposal, referring to it as “ObamaCare Lite” or “Obamacare 2.0”. 

“We didn’t tell the voters we are going to repeal Obamacare but keep some of the taxes,” former House Freedom Caucus Chairman Jim Jordan (R-Ohio) told the Washington Examiner. “We didn’t tell them we’d repeal Obamacare but we are going to start a new entitlement. We didn’t tell them we’d repeal Obamacare but keep the Medicaid expansion.”

Unfortunately, if too many conservatives in Congress remain steadfast in their opposition to the proposed health care replacement legislation because it is not ideologically pure enough for them, they will end up with the worst of all worlds – the status quo and the wrath of the voters who expected Republicans with control over Congress and the White House to finally eliminate the worst features of Obamacare.

No legislative solution to all of the complex health care coverage issues will be ideal. And questions remain regarding how much the Republicans’ proposed legislation would cost and how many Americans would be helped or hurt by the changes from Obamacare. However, the Republicans’ approach is directionally sound. It would simultaneously eliminate the unprecedented federal compulsory purchase feature of Obamacare that has burdened young, healthy people with having to buy one-size-fits-all coverage they do not need, while providing targeted tax credits to help older people cope with the inevitable increase in health expenses as they age. Insurance companies would have more freedom to market a variety of insurance policies tailored more to meeting individual needs, while still being required to serve people with pre-existing conditions at reasonable rates. People currently enrolled in the expanded Medicaid program will be protected, while the future costs of more and more open-ended expansion will be avoided. Consumers will have more choices on how to use their tax credits and health savings accounts, while still being discouraged from gaming the system. States will have more flexibility in how they spend the federal Medicaid funds they receive, while having to exercise fiscal discipline since the funds they will be receiving will be capped.    

Two House committees are expected to markup and vote on the proposed legislation this week. From there, it will work its way through the messy legislative process in the House and Senate, a process that has been likened to sausage-making. We can only hope that a sensible replacement for the incurable malady known as Obamacare emerges at the end of the process and lands on President Trump’s desk for his signature.