Last week, the House GOP revealed their highly anticipated proposal to repeal and replace Obamacare. Needless to say, the plan has sparked controversy and debate across the ideological spectrum. Healthcare policy is complex on its own merit. With so many policy options, opinions, moving parts, and uncertainties surrounding the repeal and replace debate, this has been a difficult subject to follow. We hope that this brief explainer will help you parse out how we got here, where things are going, and what matters most to future generations. Restore Accountability will be providing further information on federal costs of healthcare in a future post.
How did we get here?
Even before Obamacare was passed, it is important to note that the federal government was already a major player in healthcare. Between Medicare covering the elderly ($650 billion annually), Medicaid covering the poor and disabled ($350 billion annually), and tax provisions subsidizing employer provided insurance ($270 billion annually), the federal government’s footprint on the healthcare landscape is massive and expensive. In inflation-adjusted dollars, the federal government spent the same amount on healthcare programs over the last four years as we spent during the four years fighting World War II (approximately $4.4 trillion each).
The area where the federal government was not involved prior to the passage of Obamacare was for Americans who are not eligible for federal insurance programs and do not get insurance through their employer. Obamacare tried to fill that void by creating and subsidizing marketplaces for individual insurance and expanding the eligibility of Medicaid to cover a larger population of lower income Americans (the Supreme Court later made this expansion optional for states).
The attempt to expand coverage to more Americans also came with a set of complex regulationsthat included a limit on price differences among age groups, coverage requirements for those with preexisting conditions , and a mandate that requires people to purchase insurance. Coverage has expanded by about 13 million people since the passage of Obamacare, but this overhaul was disruptive to many who already had insurance coverage with many seeing their premiums skyrocket, out-of-pocket costs increase and their choices limited. To this day, the survival of the Obamacare marketplace exchanges is still in doubt.
What is currently going on?
As you’ve seen over the last decade, Obamacare has been politically divisive, and has caused contentious debates with loved ones, community leaders, and elected representatives. However, disdain for the law does not fall just within party lines. Many Democrats, Republicans, and Independents are unhappy with the current system, and wish to see Obamacare replaced, repealed, improved, or a combination of all three.
It could be said that Obamacare started off on the wrong foot by becoming the first major piece of legislation passed without the support from a single member of the minority party. Our founders constructed Congress to force members to work together. By bypassing normal legislative procedures, Obamacare was passed without voices from many parts of the country.
How did so many voices get left out of the debate?
When Obamacare was signed into law in March 2010, the Democratic party controlled the White House, had a majority in the House of Representatives, and had 60 Democratic/Independent members in the Senate (In order for most legislation to pass the Senate, 60 votes are needed), creating a Democratic Congress that could pass anything without the fear of being stopped by the minority party. Now, Republicans are in a similar situation with control of the White House and House of Representatives, but Republicans lack the 60 members the Democrats had in 2010.
Currently, Republicans are in the process of trying to repeal and replace Obamacare, but the lack of 60 votes in the Senate limits the scope of changes that can be made without opposition. Further, it turns out there are some popular provisions in Obamacare that Americans want to keep.
What is the GOP replacement plan?
Last week, the House GOP released and President Trump endorsed the American Health Care Act (AHCA). This bill would repeal some of the central elements of Obamacare while replacing it with alternative policies to support health care in the individual market. The bill would repeal some of the central elements of Obamacare but cannot repeal the entire bill due to the constraints of Senate rules and the threat of a Democratic filibuster. The AHCA would replace these parts with a combination of tax credits and alternative policies that incentivize people to obtain continuous health insurance coverage and help them to afford it. The ACHA also includes major Medicaid reforms.
What was the big CBO news?
Last Monday, the Congressional Budget Office (CBO) released their analysis of how the GOP plan would impact the federal budget and the amount of people covered by insurance.
CBO projected that the GOP plan would result in a reduction of 14 million insured next year and 24 million 10 years from now as compared to current law. It also projected the combination of policy reforms and tax reductions would result in more than $300 billion in deficit reduction over the next 10 years. So instead of the national debt being $24.9 trillion in 2027, it will merely be $24.6 trillion. From a budgetary basis, this bill does little to solve our national debt problems and continues to kick the can down the road. To be fair, this bill is not being sold as a deficit reduction plan – but there are still missed opportunities to tackle the debt at the same time as reforming health care policies.
The controversy about the CBO numbers comes from its projections that the passage of the GOP plan will lead to 24 million less people – nearly the population of Texas – receiving coverage in 10 years as compared to current law. While we will not jump into the validity of CBO’s methodologies, it is important to highlight that these coverage projections are simply an educated guess based on what we know now. Defenders of the House plan point outthat CBO was way off on their coverage projections for Obamacare exchanges (11 million signed up instead of 18 million) and that the assumptions they are using are not realistic. As college basketball fans that have already seen their brackets busted can relate to – modeled projections are not the same as actual results.
Democrats will categorically oppose the effort to repeal and replace Obamacare. Congressional Republicans have a wide spectrum of concerns and the tiniest margin for error. They can lose about 20 House members and only two Senators. More than that have already expressed concerns with the initial proposal.
Conservatives are apprehensive about or already in opposition to the current plan because they believe that the tax credits are the same as a new entitlement, the Medicaid reforms do not go far enough, or because the bill does not do enough to repeal the Obamacare regulations.
Moderate Republicans have also been hesitant about supporting the ACHA approach, predominantly because the Medicaid reforms could reduce federal funding for states that chose to expand Medicaid coverage and because the tax credits are not valuable enough to cover the costs of older, lower-income Americans.
There are ongoing conversations about what changes are needed to the current proposal to garner enough votes to get it through Congress and onto the President’s desk for signature. The stakes are high and the cost of failure for the Republican party is grave.
As this debate unfolds, there are two important takeaways. The first is that our nation’s healthcare costs are intricately tied to our nation’s abysmal budget trajectory. Any changes that will reduce the rise in health care costs will benefit younger Americans by reducing the debt burden associated with federal spending on healthcare. One major reform that was included in a draft version of the bill but was later dropped is to curtail the tax subsidy for employer provided insurance – which is a primary driver of overutilization of healthcare and spending increases.
We are on the verge of crossing the $20 trillion national debt threshold without any semblance of a plan to prevent us from getting to $30 trillion. This is an embarrassing moment in American history. Healthcare reform is primarily about getting America’s healthcare system fixed, but Congress should keep in mind that the secondary effects that will have on federal spending are immensely important to younger Americans that will have to pay for the debt.
The second lesson is to observe the political difficulty of eliminating any benefits once they are delivered. For example, a popular provision requiring insurers to take up those with pre-existing conditions requires a policy to ensure that people do not wait to get coverage until they are sick – otherwise there would be no healthy people purchasing health insurance as they would rationally just wait until they are sick. Moreover, generous marketplace subsidies and expansive Medicaid coverage are expensive but will lead to more coverage – at least as projected by CBO. Rolling back these expansions and benefits will not come easy for some elected members.
Likewise, Social Security and Medicare benefits are widely popular amongst the recipients. But in order to save them from insolvency, there will have to be reforms enacted that may prove unpopular in public polls. The longer Congress waits, the more drastic and unpopular the actions are required. Politicians do not like telling constituents things that they do not want to hear. But, the American people need to know the truth about the tradeoffs in public policy and Congress needs leaders from both sides of the aisle to stand up and be honest about our fiscal woes.
Restore Accountability will continue to attempt to shine a bright light on the facts so that a better-informed electorate can be educated and ready to understand the choices.