Magazine August 14, 2017, Issue

System Failure

(Roman Genn)
How Republicans are botching health care

Nothing has been as good for Obamacare’s reputation as the Republican attempts to replace it. Republican health-care legislation has been consistently and extremely unpopular, usually below 20 percent approval. During the time Congress has been considering it, Obamacare has finally gotten majority support. If you’re a supporter of Obamacare, the moral seems clear: As specific alternatives to it have come into view, its advantages have become more evident to Americans and its defects have been put in perspective.

There’s a different way of looking at it. The public has long been extremely wary of proposals by politicians that could disrupt their health care and health insurance. That sentiment helped to defeat the Clinton administration’s efforts to change health care, and it was a major obstacle to the Obama administration’s as well. That’s why President Obama took such pains to say that under Obamacare you could keep your insurance plan if you liked it.

Today this public impulse, which had been a problem largely for Democrats, has become one for Republicans. On this reading of public opinion, the Republican legislation is unpopular not because people have come to like Obamacare. Obamacare is suddenly popular because people are afraid of Republican legislation.

It may be, then, that no sweeping proposal from Republicans would ever have found public favor. But there are additional reasons that what they have proposed has gone over so badly.

One is that no faction of the party has gotten all that it wants in the legislation. Different groups of Republicans have held different views of what is wrong with Obamacare and therefore of what health policies should succeed it. The Republican legislation has not reflected any of these groups’ views completely, and the process by which it was devised and has been considered has not been well designed to generate consensus among them.

Many libertarians and conservatives have rejected Obamacare because they do not believe that government should pursue the goal of increasing the number of people with health coverage. This group further subdivides. Some of them think that Republicans should have simply repealed Obamacare and not replaced it with anything. Some of them think repeal should have been coupled with the elimination of the tax break for employer-provided health insurance and the expansion of health savings accounts. Either way, Republicans would have been telling the public: We just don’t believe it’s the federal government’s job to help people get health insurance.

A second group of conservatives did not object in principle to federal subsidies to help people buy insurance — or, rather, considered that principle to have been abandoned a very long time ago. The federal government had for decades before Obamacare been subsidizing the purchase of health insurance for the poor (through Medicaid), the elderly (through Medicare), and those who get insurance through their employers (through the tax code). This system of subsidies left out a significant fraction of Americans and even raised the cost of coverage for them. Many Republicans, including President George W. Bush and then–backbench congressman Paul Ryan, had proposed ways of rectifying this anomaly before Obamacare was enacted.

Their proposals would not, however, have worked the change that Obamacare accomplished: making the federal government the chief regulator of health insurance. The Republicans aimed at enabling people to buy cheap, renewable insurance that would cover catastrophically large medical expenses. Obamacare effectively outlawed such insurance, requiring that all policies cover routine preventive care. For these conservatives, it was Obamacare’s regulations that chiefly needed to be swept away; and by enabling lower-cost policies, eliminating regulations would also allow federal spending to come down.

A third group of Republicans, more moderate, had less defined views. They thought Obamacare was too expensive and too regulatory but did not have specific alternative policies in mind. They did not want to take Obamacare subsidies away from millions of people or to end Obamacare’s popular regulatory protections. At the same time, though, they said they shared the party’s goal of “repealing and replacing” the law.

The legislation that congressional Republicans have put forward this year disappoints all of these groups. The first group never had a serious chance of succeeding. Essentially no Republicans in Congress want to eliminate the tax break for employer-provided coverage, which would disrupt the health arrangements of most Americans. Repeal-only would have flown in the face of what Republicans had been promising from the moment Obamacare was enacted. The reason they always said they wanted to “replace” the law as well is that most elected Republicans understood both that Americans did not love the pre-Obamacare system and that simply taking away insurance subsidies in a way that left millions of people uncovered again would be politically untenable.

The second group did not get its way either, for two reasons. The first is that changing Obamacare’s regulations has been thought to require 60 votes in the Senate. Democrats had exactly 60 votes when they imposed those regulations, but Republicans are eight short now even if they stand together. The second reason, which has proved more important, is that many Republicans do not want to pay the political price that taking on many of Obamacare’s regulations would entail.

Obamacare requires insurers to offer the same policies at the same rates to people with chronic health conditions and those who are perfectly healthy. By itself, that policy tends to keep healthy people out of the insurance market, since it allows them to wait until they get sick and then buy a policy. To avoid the collapse that would ensue in insurance markets, Obamacare includes a fine on people who go without insurance. Conservative health-policy specialists would prefer to take care of people with chronic conditions a different way. They would require insurers to let people renew their health policies after getting sick — a protection that would give healthy people an incentive to buy insurance rather than to forgo it; give people tax credits to enable them to act on that incentive; and offer high-risk pools to take care of sick people who cannot obtain insurance even under this new system.

But these alternatives to the Obamacare approach have never really gotten a public hearing. Most people like the sound of the Obamacare policy, and many people with chronic conditions — a significant number in every congressional district in the country — consider it a lifesaver.

Moderate Republicans in Congress weren’t happy either. Opponents of the latest Senate bill, for example, said it was too stingy and cruel, and the moderates, lacking any particular goals for health policy, conceded that it went too far. Obamacare allowed states to expand Medicaid to cover able-bodied people above the poverty line, with the federal government picking up almost the entire cost. The Republican bill would have the federal government pay a little more than half the cost. Governors of states that had expanded Medicaid, including Republican governors, said that it was an outrage to threaten the program’s new beneficiaries this way — by which they meant that it was an outrage to ask their states to pay for a significant fraction of the cost. Moderate senators from those states decided that the governors had a good point.

If congressional Republicans as a group had been working for the past few years on Obamacare-replacement legislation, they might have been able to hash out some of these issues and been prepared for controversies. They might, for example, have been familiar with the trade-offs among various ways of providing health care to people with chronic conditions. With a few exceptions, though, they kept deferring that work, partly because they considered vagueness more attractive than a specific plan, partly because it would have been work.

This year, Republican leaders have tried to act speedily. Their original plan was to start the year by passing a bill that repealed Obamacare’s taxes and spending effective two years from now. They would use the intervening time to come up with a replacement. This plan had largely been devised years earlier. It would have worked at the start of a Romney administration in 2013, before much of Obamacare had been put in place. Republicans soon realized it would not work now.

But still they wanted to move fast. They did not want health care to eat up time they would rather spend on issues they like better, such as tax reform. And they thought that repeal and replacement would inevitably be unpopular, which meant both that it should be done as early as possible and that lingering over the details would only make things worse. So House leaders sprang a bill on the world without having consulted with almost anyone and then tried to rush it through. Senate leaders consulted only a little more widely and have also repeatedly set ambitious timetables.

It has taken longer than Republican congressional leaders or the Trump White House wanted. It is possible that their bills would have been less unpopular — although it is likely they would still have been unpopular — if a more deliberative process had been followed. Because both the House and the Senate have moved bills produced by the Republican leadership for the entire congressional party, those bills have had no specific sponsors who are invested in explaining their benefits and batting down the attacks. Because the process has been rushed, Republicans have looked like they are trying to get away with something. (There’s a reason the phrase is “pulling a fast one.”) And they have fueled a hysteria that might have dissipated over time.

The public’s overall impression is that Republicans would take insurance away from a large segment of the population: Twenty-two million is the most widely quoted figure. This is not true. It is a distortion of a finding by the Congressional Budget Office that is itself dubious. The CBO has indeed projected that ten years from now, 22 million fewer people would have insurance if the Senate bill passed than if it did not. But it has also found that 16 million of those people would voluntarily forgo insurance. The Senate bill ended Obamacare’s fines for people who go without it. There are excellent reasons to doubt the CBO’s number — its belief in the power of those fines to change people’s behavior has been immune to empirical disproof — but even if it is right, we’re not talking about 22 million people “losing” their insurance or having it “taken away.”

It could fairly be said that the CBO found that the Senate bill would cause 6 million people to lose their insurance. But this estimate, too, seems much too high. It assumes that no states will expand their Medicaid programs even if the federal government is paying more than half the costs. It assumes that some state governments will kick people off Medicaid even when those governments will pocket less than half the savings. But very few Republicans have made any of these points.

Some conservatives, unenthusiastic about the bill and convinced it is unlikely to pass Congress, have talked up the possibility of instead going back to the original plan of repealing Obamacare’s taxes and subsidies. Republicans had sent such a bill to President Obama, who vetoed it. They sent it to him to symbolize their opposition to Obamacare. As actual legislation, though, it appeals even less to the moderates than the bill Congress has been considering. It would leave about 10 million more people without insurance. In large part that is because they would have to pay prices inflated by Obamacare’s regulations, but without the help of the subsidies that both Obamacare and the Republican bills of the past few months have provided. The embattled Senate bill at least relaxed some of those regulations.

The bill would have reduced premiums, especially in those states that most took advantage of the freedoms it afforded. It would have ended the fines for going without insurance. If the CBO is to be believed, that would have made 16 million Americans better off by their own lights. The Republican bill would have allowed insurers to offer young people deeper discounts than Obamacare does and would thereby have brought more of them into the individual insurance market of their own volition. It would have kept subsidies from going to insurance plans that cover abortion. And it would have restrained the growth of Medicaid while giving states new incentives to find efficiencies within that program and to focus it on its traditional clientele of the poor and disabled.

The unpopularity of the bill, meanwhile, may have misled Republicans about its ultimate political impact. If it had passed, Republicans would, as the politicos say, “own” the health-care system, and every dissatisfaction with it would have become a complaint about them. But they will have at least part ownership of the system even if they do not pass a bill, since they control Congress and the White House. Democrats, the press, insurers, and hospitals will still blame every health-care problem on a lack of funding for Obamacare. If millions of people really left the health-insurance rolls, it would make for some tough headlines for Republicans — but they would leave voluntarily. And even in a worst-case scenario, the Medicaid reforms were too slowly implemented to have any near-term negative effect. The reductions in payments to Medicaid-expansion states, for example, would not happen until after the next presidential election.

The bill could have stood to be improved in some respects. It would be better to do more to help people leave Medicaid for private insurance — by giving them pre-funded health savings accounts, for example. But Republicans had too negative a view of the bill’s merits and of its political effects. This debate has engendered a lot of hysteria, and some of it is inside the Republican Congress.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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