Senate Republicans are planning to replace ObamaCare with ... ObamaCare
There's only one way to build a market-based solution that will keep everyone insured
In their effort to repeal and replace ObamaCare, Senate Republicans appear to have finally landed on a market-based solution that will keep everyone insured: ObamaCare.
Well, when the House GOP passed its health-care reform bill earlier this month, even most Republican senators considered it too draconian. Among other things, many are reportedly concerned that the bill's flat tax credit to help people afford premiums would leave millions of Americans without coverage. So instead of taking up the House bill at all, Republican senators are starting from scratch and reportedly coalescing around a refundable tax credit that adjusts up and down in response to household income.
This is precisely what ObamaCare already does. If your household is at or below 400 percent of the federal poverty line, you get a refundable tax credit to help with premiums. And the poorer you are, the bigger the credits are to make sure you spend a smaller portion of your income on health coverage.
There's a lesson here.
Republicans like to talk about ObamaCare as if it was an ideological exercise that created higher insurance costs just to punish job creators. In fact, ObamaCare was the result of a long and arduous process of exacting policy design. It was also a genuine attempt at bipartisanship. ObamaCare was not the Democrats' ideal health-care reform. They thought of it as a compromise.
Take those pesky tax credits. House Speaker Paul Ryan's motivation for the flat tax credit — which adjusts for age, not income — wasn't completely crazy. If your tax credit phases out as you make more money, that might discourage you from taking a higher-paying job. But some people face insurance premium burdens that are way higher than others. So a flat tax credit would have to be big enough to cover the worst cases, and then you'd have to give it to everybody. Spending would be way higher.
Republicans, of course, hate big spending and deficits, and many Democrats agree with them. So ObamaCare went with income-adjusting tax credits, because they still give the poorest people the most help, but save money on people who need less help.
By contrast, Ryan and the House GOP resolved this dilemma by making a flat tax credit that's way, way too stingy. Lots of low-income Americans, as well as older Americans and people in rural areas — who both face higher premiums than usual — would be badly hurt by their plan.
Realizing this, Senate Republicans seem to be gravitating back to the ObamaCare model. "To do health-care reform and yet people may not have the means to actually purchase health insurance policy doesn't seem to me to take us anywhere," said Sen. Bob Corker (R-Tenn.).
This same dynamic is likely to pop up elsewhere.
Republicans, for instance, hate ObamaCare's individual mandate. But the mandate counterbalances another aspect of ObamaCare: the rules forbidding insurers from denying coverage to people with pre-existing conditions, or from charging them higher premiums than healthy people. Those latter rules are insanely popular. But on their own, they will also bankrupt insurers. So you need the mandate to force healthy people to buy coverage and keep the insurers' revenue stream higher than their costs.
To avoid the mandate, House Republicans decided to penalize people for letting their health coverage lapse instead. If you go without insurance under their bill, you're held harmless. But if you try to buy coverage again, you get hit with a big extra penalty. This punishes lots of people who lose coverage through no fault of their own. And unlike ObamaCare, the House GOP plan could encourage people to stay uninsured — they don't pay the price until they get coverage again, after all.
Ryan and company also tried attacking this problem at the other end: They want to allow insurers to charge higher premiums to people with pre-existing conditions. This is, of course, political poison. But Republicans say they have an answer: High-risk pools, which are essentially special subsidy programs aimed specifically at sicker people who are costlier to insure.
But this doesn't actually change the cost problem. ObamaCare lumped sick and healthy people into the same insurance pool, so the cost of caring for sick people got spread across the premiums of everyone else. The law then provided subsidies to everyone to cover those premium hikes. Quarantining people with pre-existing conditions into their own insurance pool does keep premiums for healthy people lower, so you can save money by giving them lower subsidies. But then premiums for sick people skyrocket, and you have to subsidize them way more. You don't save money: You just reshuffle the route it takes from point A to point B.
Once again, House Republicans solved the problem by just not giving the high-risk pools nearly enough funding.
Republicans want to allow insurers to offer skimpier coverage packages and charge people high out-of-pocket costs like deductibles and copays. But while that lowers premiums and thus the cost of premium subsidies, it obviously raises out-of-pocket costs and thus the need for out-of-pocket subsidies too.
Senate Republicans are also terrified of the House's massive cuts to Medicaid. Conservative health wonks say the cuts wouldn't result in benefit losses: By giving the states more flexibility, people could have the same coverage at lower costs. But ask them what sort of innovations states could try, and the first thing they mention is (wait for it) higher out-of-pocket costs. Well, how are poor people on Medicaid supposed to afford higher deductibles and copays? They're poor!
I trust you get the point.
If you want universal health care for all Americans, but you also want to keep private insurers and private insurance markets around, you're inevitably thrown back onto some version of ObamaCare. The only way to avoid it is to simply abandon the idea of universal coverage altogether — which is effectively what the House GOP did.
But as former George W. Bush speechwriter David Frum pointed out: "The trouble for Republicans is that the principle of universal coverage has now been accepted by a majority of Americans." So unless Senate Republicans want to follow their House comrades into political oblivion — or unless they want to do something really radical and propose single-payer — they're about to learn a very hard lesson: All roads lead back to ObamaCare.