The health-care deal Democrats should offer Republicans
Three words: Regulations for spending
TrumpCare is headed for the finish line in the Senate. But it may drop dead first.
Sen. John McCain (R-Ariz.) told CBS on Sunday the bill is "probably going to be dead." No one sounds terribly confident that Senate Majority Leader Mitch McConnell (R-Ky.) can wrangle the 50 votes he needs from the 52 Republicans in the chamber. And the more time the GOP burns on this issue, the more precarious tax reform and the budget showdown become.
So if Democrats want to get out ahead of events and offer the GOP a bipartisan health-care deal, now would be the time to do it. Their position should basically be this: We will acquiesce to scrapping some of the ObamaCare regulations you hate most if you agree to more spending.
Such a deal would have eight key aspects:
1. Which regulations stay, which go? Republicans hate ObamaCare's regulations, and they hate its spending. But some regulations can be scrapped without harming vulnerable Americans, if spending is increased in the right ways.
The key for Democrats is protecting the right regulations. For instance, guaranteed issue — the rule that insurers must offer coverage to everyone, pre-existing conditions or not — must stay. And the GOP has already conceded as much: It's still in TrumpCare. Meanwhile, the rules that insurers must charge the same premiums to healthy and sick people alike, and that they can only charge older people three times as much as young people, are just stealthy redistribution: They lower premiums for the old and the sick by raising them for the young and the healthy. Those two regulations can go.
2. Make the subsidies way more generous. The reason those two rules can be sacrificed lies in how ObamaCare's subsidies are designed. No matter how high your premium is, the subsidies ensure you only pay a certain portion of your household income to cover it. So even if deregulation causes premiums to rise for the old and sick, the design of the subsidies will protect them financially.
The Senate version of TrumpCare kept this setup, but only by making the subsidies less generous. The trouble is, ObamaCare's subsidies are already too stingy. While the subsidies keep poor people in the exchanges, they don't give nearly enough support to lower-middle and middle-class households.
So Democrats' big demand here should be more generous subsidies: Households should have to pay even less of their own income. The phaseout for subsidy eligibility should also be raised, from 400 percent of the federal poverty level (where ObamaCare put it) to 600 percent or more.
3. What about deductibles? ObamaCare's subsidies are also pegged to premiums for plans that cover 70 percent of the care costs for their risk pool. You can buy a stingier plan if you want, but you still get subsidies designed for the 70-percent plans. But that still leaves customers fronting the other 30 percent, on average. So deductibles and other forms of cost-sharing in ObamaCare plans are already painfully high.
Republicans want to make this even worse, by pegging the premiums to plans that only cover 58 percent of expenses.
Democrats could hold the line on 70 percent or they could allow the 58-percent peg while insisting that people be given enough cash assistance to cover their deductible. Everyone on an ObamaCare plan could be given a health savings account, annually pre-stocked by the government with enough money to pay the deductible for that year. Conservative health wonks have already pitched this idea. For lower-income Americans, they'd need their deductible covered to the last cent. But for middle-class and higher-income households, you could slowly phase the contribution out. (That said, dealing with health savings accounts is a bureaucratic horror show. Lawmakers would need to dramatically streamline them for consumers.)
4. Protecting the essential health benefits (EHBs). Those are the services and procedures — like hospitalization, maternity care, prescription drugs, and more — that ObamaCare requires every health insurance plan to cover. The GOP really doesn't like these.
On first blush, I'd say the Democrats should insist on drawing a line in the sand around the EHBs. Even if you can get an affordable plan, it does you no good if it doesn't cover the hospital stay or drug treatment you need.
But there's a possible compromise here. It's somewhat similar to a proposal by Sen. Ted Cruz (R-Texas), which would allow insurers to offer plans on the exchanges that aren't compliant with ObamaCare's standards as long as they offer at least one plan that is. Democrats could do that. But they'd need to make sure the fully compliant plans are available to everyone. More importantly, the subsidies need to be pegged to the fully compliant plans. So once again, people could buy the stingier plans if they want. But the subsidies would always guarantee that a full-boat coverage plan is an affordable option.
5. What about the individual mandate? Republicans want to kill it. But its purpose is to keep young and healthy people buying coverage and to thus avoid a death spiral in the insurance markets. Yet the mandate is already very weak. It's conceivable the improved subsidies discussed above would go a long way towards encouraging people to stay covered. So far, the GOP's replacements for the mandate have been sloppy and poorly designed. But since the mandate is already in trouble, Democrats could negotiate changes for a king's ransom. They would have to secure a very big win indeed, though, to scrap it.
6. More cross-state competition. This is another long-standing Republican priority. And interestingly, the original version of ObamaCare that Democrats wrote in the House actually called for one single national exchange. If Democrats were feeling really ambitious, they could consider resurrecting that idea. In fact, ObamaCare already allows states the option of banding together into single multi-state exchanges. Lawmakers could at least try making that process easier and more attractive.
7. Kill the tax break for employer-provided coverage. It's a massive giveaway for the upper class, and it encourages an awful price-inflating mess in the health-care markets. Neither party has had the courage to eliminate it or significantly scale it back. But if they both hold hands and jump together, maybe the Democrats and Republicans can finally do it.
8. Those horrifying Medicaid cuts. This is the elephant in the room. But the thing is, the American health-care system is fractured between multiple systems: Medicaid, Medicare, ObamaCare's exchanges, employer-provided coverage, etc. That's not good, and Democrats should be working to get everyone into the same comprehensive system. If properly improved, ObamaCare's exchanges could be one such comprehensive system.
Right now, a household has to make at least 100 percent of the federal poverty line to qualify for ObamaCare's subsidies. That's because Democrats assumed the Medicaid expansion would cover everyone below that. But an interesting thing the TrumpCare bills do is drop that income threshold to zero. They clearly mean to wind down Medicaid and replace it with private plans through the insurance exchanges.
It's just that, on their own, Republicans haven't made those plans humane and affordable. But the above changes would get us a lot closer to that goal, while giving the right a lot to be happy about too. With TrumpCare on the ropes, Democrats might just be able to force the GOP's hand.