How Trump could stealthily kill ObamaCare

His ObamaCare order might have been more lethal than everyone thought

Slowly but surely.
(Image credit: Photo Illustration by Jackie Friedman | Image courtesy Alexmillos / Alamy Stock Photo)

In a nutshell, the Republicans' ObamaCare problem is "you break, it you buy it." As soon as they pass new legislation, "ObamaCare" will become "TrumpCare," and they'll own the results. Hence the sense of panic and disarray that's now consuming the party on the issue.

But President Trump may have a way out: Kill ObamaCare quietly.

To explain: Insurers charge premiums based on how much they have to spend on health care for their customers — plus a little extra for profit. But in America, for a variety of reasons, the costs of health care are insanely high. That's a problem for insurers, since charging higher premiums drives away customers. And before ObamaCare, they solved it by simply denying coverage to people with pre-existing conditions. That kept the sickest people out of insurers' pools, so they spent less on health care and could charge their customers lower premiums.

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But ObamaCare outlawed the practice, allowing those people to get care. Theoretically, that should have skyrocketed insurers' costs and thus premiums too. But that's where ObamaCare's individual mandate comes in. By forcing everyone to buy coverage, the cost of covering new sick customers is balanced out by additional premiums paid by new healthy customers.

One more wrinkle: Lots of healthy people used to forgo coverage because premiums were so expensive. So ObamaCare also included subsidies to help people afford the premiums.

This clarifies the GOP's dilemma: Every part of ObamaCare balances out the other parts. It's often called the "three-legged stool" — yank out a "leg" you don't like (e.g. the individual mandate) but leave in a "leg" you do like (e.g. the law forbidding denial of coverage based on pre-existing conditions) and the whole stool collapses.

At the same time, the basic problem ObamaCare was trying to solve was that lots of Americans weren't getting the care they needed. Providing that care meant our health care system as a whole — including the public and private parts — would spend more money. Customers obviously don't want to bear that additional burden when prices are already high, so the job fell to the government: It injected the extra money via subsidies. But Republicans hate additional spending, and they hate regulations, so there's no possible solution they can offer that doesn't leave Americans getting less care.

So Trump and the GOP are stuck between a rock and a hard place: Anger lots of Americans by going through with repeal and replace, or anger their own right flank by not going through with it.

But what if you could yank out one of the legs of the stool without looking like you did?

A few weeks ago, the Trump administration issued an executive order instructing government agencies to "take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of [ObamaCare]." The language wasn't specific, and at the time it wasn't clear what it would accomplish.

But now we have a better idea.

The individual mandate is enforced as a tax: People who aren't covered pay an extra penalty. So there's a line on your tax forms where you tell the IRS whether or not you're covered. If you didn't fill that line out, the IRS could reject your form. But on Tuesday, Reason's Peter Suderman reported that, to comply with Trump's order, the IRS will take Americans' tax filings with or without that line filled.

It's hard to charge people a tax penalty for not having coverage when you don't know whether or not they're covered. Instead of passing a law that does away with the individual mandate, the Trump White House just won't enforce it with any serious vigor, which could have much the same effect.

Trump and the GOP's hope might be that so long as they don't actually pass any changes through Congress, they won't be held politically responsible for how ObamaCare evolves. So if they don't enforce the mandate and the insurance markets collapse, voters will just blame Obama and the Democrats for passing a rickety health care law. Then Republicans can step in with their own miserly replacement, and not face the same political backlash, on the logic that no other options are available.

Now, it should be noted that the IRS wasn't already requiring people to fill out that tax form line. It was planning to start requiring that for 2016 tax returns, but then reversed course after Trump's executive order.

In fact, ObamaCare's individual mandate has long been criticized for not being tough enough — the penalty isn't sufficiently intimidating, or there are too many loopholes. The law's subsidies are also far too stingy. Both the carrots and the sticks that encourage healthy people to buy coverage were always somewhat underpowered. That's why ObamaCare's exchanges faced problems well before Trump came along, with premiums jumping and various insurers exiting the markets.

ObamaCare's defenders say this is likely a one-time market correction, and the exchanges will stabilize in the coming years. That's certainly possible. But right now we really don't know. One thing seems certain, though: If ObamaCare's carrots and sticks are big enough to make the law sustainable, they're only just barely big enough.

By getting the IRS to reverse course, Trump could push ObamaCare into collapse.

If this were a homicide case, it wouldn't be like stabbing a healthy person in the back. It would be more like taking someone you already know has a serious drinking problem and a wrecked liver out for a night of binge drinking where you pay for all the cocktails. It's a craftier way to get away with murder, precisely because people might blame the victim for their own predicament.

But the end result might still be the same.

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Jeff Spross

Jeff Spross was the economics and business correspondent at TheWeek.com. He was previously a reporter at ThinkProgress.