Politics & Policy

It’s Time Republicans Abandoned the AHCA

House Speaker Paul Ryan presents the AHCA bill in March. (Reuters photo: Eric Thayer)
There’s a smarter way to repeal and replace Obamacare.

After seven years of the Affordable Care Act, health-insurance premiums continue to rise, individuals remain reluctant to sign up, and many insurers are pulling out of the marketplace altogether. Congressional Republicans promised wholesale reform, but the budget-reconciliation process confined them to the basic framework established by the ACA. As a result, the bill they proposed, the American Health Care Act, was profoundly unpopular, and the scramble for votes is only making it more so. Republicans rightly wish to restore actuarial pricing to health-insurance markets while subsidizing the plans of the chronically ill who need greater assistance. But a combination of unilateral executive actions and bipartisan incrementalism is likely to be far more effective in achieving those ends than reconciliation legislation would be.

The core provision of the ACA prevented health insurers from pricing plans in proportion to individuals’ expected costs of care. This has meant that insurers are paid inadequately to cover the costs of the chronically ill, and has forced healthy beneficiaries to pay far more in premiums than they are likely to need in care — producing a dysfunctional market that works well for neither buyers nor sellers.

To advance an ACA-replacement proposal that Democrats could not block with a filibuster, the Republicans sought to use the reconciliation process, which the Senate has traditionally permitted only for matters of direct spending and taxation. Through reconciliation, the GOP can unilaterally alter the ACA’s penalties for those failing to purchase insurance, as well as its cost-sharing and premium subsidies. But these essentially serve as buttresses to the ACA’s insurance-market reforms, which reconciliation can do nothing to change. In short, reconciliation allows the GOP to further undermine the stability of the ACA’s insurance market, but not to remedy its fundamental structural flaws.

That explains why the House GOP’s AHCA has run into so much trouble. By eliminating the individual mandate without repealing the ACA’s premium regulations, it reduced the number of healthier Americans that would purchase plans. To entice these newly uninsured individuals back into the market, it proposed giving them each a subsidy of $2,000 to $4,000. This left a shortfall of funds needed to cover the increased costs faced by those remaining in a risk pool that had become sicker, to the point where the CBO estimated that 64-year olds with an annual income of $26,500 would see average net annual premiums soar from $1,700 to $14,600. Rather than improving the efficiency with which public subsidies were targeted at chronically ill individuals unable to afford insurance in an actuarially priced market, the AHCA thus made the distribution of subsidies even less focused than under the ACA.

By leaving a dysfunctional regulatory apparatus intact, driving up premiums, and increasing the number of people entitled to subsidies while reducing the number of people covered, the AHCA’s insurance reforms managed to alienate both liberals and conservatives. Only 17 percent of Americans approved of the proposal. A reasonable case was made that even though the bill was imperfect, it contained many worthy reforms to Medicaid and its insurance provisions could be improved in the Senate. A pivotal group of House Republicans rejected it anyway, despite warnings from Speaker Ryan that this would leave Obamacare as the law of the land.

The amendments proposed over the past month have done much to vindicate the holdouts. Every change advanced has made the proposal less attractive to major beneficiary groups, its sprawling subsidies have become more entrenched, and the bill has lost more supporters than it has gained. The House GOP remains far from agreement, despite a majority of 45. In the Senate, reconciliation procedures would empower Democrats to force Republicans to vote on dozens of politically painful amendments in full view of TV cameras. With a Republican majority of only two, it is hard to predict the shape in which a bill would eventually emerge from the upper chamber.

House Republicans are right to ask why they should vote for a bad bill that won’t make it into law anyway. Instead of straining with reconciliation to patch the fissures in the insurance market, the GOP should employ the regulatory powers of the Department of Health and Human Services to fix it. By repealing an October 2016 regulation that was used to prevent the sale of actuarially priced “short-term” insurance, Secretary Tom Price could reestablish a market in which health insurance is competitively priced in proportion to most individuals’ health-care needs. This would relieve the exchanges and their subsidies of much of the burden placed on them, repurposing them as a targeted safety net for the chronically ill.

The president’s party usually loses dozens of congressional seats in midterm elections. The congressional GOP must extricate itself from the debacle of the AHCA before it makes things worse.


Republicans’ Obamacare Policies Don’t Match Their Promises

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Republicans’ ‘Repeal & Replace’ Becomes ‘Repeal vs. Replace’

Chris Pope — Chris Pope is a senior fellow at the Manhattan Institute.

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