It's no secret that ObamaCare's health insurance markets aren't doing great. Premiums have gone up and a few major insurers have pulled out, leaving some states and counties with few (or no) options. The Republican Party, from President Trump on down, insists that repeal and replace is the only way to save Americans from an ObamaCare collapse.
But now a delayed vote has thrown the future of the Senate version of TrumpCare into doubt.
According to Politico, Senate Majority Leader Mitch McConnell is giving his colleagues a stern warning: Pass TrumpCare, or ObamaCare's ongoing troubles will force Congress to enact a "large bailout of the insurance industry that would be supported by moderate Republicans and Democrats." Basically: If you think passing the Senate's health-care bill will be politically difficult, just wait until you have to negotiate with Sen. Chuck Schumer (D-N.Y.) and the hated Democrats in a repeat of 2008's poisonously unpopular bailout of the banking industry — except this time for insurers.
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That argument might bring some GOP holdouts around, particular among conservatives. But it's also utter nonsense.
First off, it's actually highly debatable whether or not ObamaCare will collapse. The Congressional Budget Office thinks the markets will stabilize. And if they don't stabilize, one culprit will be the GOP for deliberately sabotaging them. Plus, Republicans have already included "bailout" funds for the insurance industry in the Senate bill, to the tune of about $50 billion over several years. (That's after they stripped similar funding from ObamaCare, on the grounds that it's, well, a bailout for insurers.) So the Republican argument involves a comic level of chutzpah.
But the fact is ObamaCare's original design also has inherent problems.
Left to their own devices, health insurers like to avoid covering sick and old people. They cost insurers a lot of money, which forces them to raise premiums, which can drive away younger and healthier customers. Alternatively, insurers will just charge the sick and the old unusually high premiums, so they can keep everyone else's prices low.
ObamaCare put a stop to all that. It forced insurers to offer everyone generous coverage, and at the same price for the healthy and sick alike. Insurers can still charge old people more, but only within a limited scope. All that has been enormously popular, but it did drive up premiums — conservatives aren't wrong about that. If it had only done those things, young and healthy people would've just not bothered getting coverage, bringing in even less money for insurers and forcing them to hike premiums more. The dreaded death spiral would've resulted.
ObamaCare's solution was two-fold: First, it penalized anyone who didn't buy coverage — the infamous individual mandate. But it's never been clear if the penalty has enough teeth to work. The second solution was to give people subsidies to help them afford those higher premiums. Unfortunately, ObamaCare's subsidies were never generous enough. So a lot of younger and healthier people stayed away, premiums still rose, and some insurers still had a hard time finding business. The fact that ObamaCare didn't clamp down enough to prevent high deductibles didn't help either.
So, yes, one solution to this problem is to "bail out" the insurers by injecting government money directly into their business models. Then they wouldn't have to raise premiums as much (or deductibles) and the markets would stabilize.
But the equally obvious alternative is to just "bail out" insurance customers. Give Americans more money, and they'll be able to afford the higher premiums. The young and the healthy will still buy insurance, and the markets will stabilize that way too.
If TrumpCare fails and the Republicans are forced to negotiate with the Democrats, they could just make the subsidies more generous. Adjust them so eligibility extends higher up the income ladder. ObamaCare subsidies are also designed to make sure households don't spend more than a certain percent of their own income. So adjust them to provide people even more protection than before.
That would involve a lot of new spending. Which the Republicans obviously would hate. But could they get something else out of this deal?
Well, ObamaCare has two basic forms of regulations: The ones that force insurers to offer everyone generous coverage, and the ones that force them to charge certain people certain prices. Democrats would have to hold firm on the first set, but they might give ground to Republicans on the second: As long as the subsidies remain indexed to household income, and as long as they minimize how much households have to spend on insurance out of their own income, Americans should be okay.
Conservatives also believe that higher deductibles and out-of-pocket costs are actually good: They force people to shop for better deals in care, which keeps prices down. I'm very skeptical of that argument. But if the GOP wants to stick with encouraging high-deductible plans, they could protect people by also giving them health savings accounts. Each year, the government would stock those accounts with enough money to cover the yearly deductible. And like the subsidies, those money injections could phase out for household's with high enough incomes.
More regulation or more government spending is really the great trade-off in health insurance policy. And it's where a workable compromise between the two parties could land.
What's telling is that McConnell finds the idea of more cash assistance so horrifying and inconceivable that he immediately jumps to assuming a bailout of insurers will be next. In their ideal world, Republicans may oppose spending money both on struggling Americans and on powerful corporations. But if they have to spend money on someone, they clearly prefer the corporations.
So the Senate bill tries to have its cake and eat it too: Less generous subsidies that phase out earlier, and deregulation that will drive up costs for the sick and the old. That, along with the bill's Medicaid cuts, is why TrumpCare stands on the verge of failure to begin with.
Workable left-right policy compromises on health care are possible. But the great obstacle is and always has been the Republicans' economic ideology.
