Four Minefields In The Repeal Of Obamacare And How To Avoid Them

By Dr. John C. Goodman

Originally posted at Forbes, January 2017.

When it comes to Obamacare, Republicans in Congress don’t have a big problem with Democrats. They have a problem with other Republicans. It’s been almost seven years since the passage of the Affordable Care Act and in all that time Republicans have been unable to find a replacement plan they can agree on.

There are four minefields that are preventing Republicans from successfully replacing Obamacare. Here is how they can avoid them.

Don’t Repeal and Delay

Donald Trump thinks we should be able to replace Obamacare on short notice. But the leadership in both houses is now saying they are not ready – despite telling the whole world last spring that they had a replacement plan. The current plan is to use “reconciliation” (a procedure that requires only 51 Senate votes) to defund Obamacare, just as republicans did last year when they knew Obama would veto their effort. But this time, they plan to delay the actual defunding for 3 or 4 years while they come up with replacement plan.

There are three bad things about this strategy:

  1. This is an obvious attempt not to do anything. At the end of the four years, they are likely to say they need four more years and the delay will go on forever. This is not just my prediction. Here is liberal writer Jonathan Chait in New York Magazine predicting the exact same thing under the heading “Repeal and Delay is Forever.”
  2. The insurance companies, which have been losing huge amounts of money, will not want to deal with this uncertainty. Why should they invest millions more with no idea where everything will end up? They won’t. They will simply bail.
  3. In the meantime, once Republicans do anything, they will own Obamacare. As the exchanges go into death spirals and insurance companies leave, Democrats will claim everything going wrong is the Republicans fault. This type of rhetoric on the left has already started with President Obama leading the charge.

Some parts of a Republican replacement will take time to phase in. But that is not a reason to delay passing a bill. And the bill doesn’t have to be perfect. While it is phasing in there will be plenty of time to make improvements.

Don’t’ Give Away the Obamacare Money

Some purists on the right think that “repeal” has to mean repeal of all the revenue that funds Obamacare. This would be a huge mistake. Once Republicans vote to repeal all the revenue (even with a four-year delay) they will never vote to replace those revenues with a $2 trillion tax increase. That means there will be no way to fund an Obamacare replacement. That means Obamacare will never go away.

Almost all of the revenue that funds Obamacare comes from special interests who agreed to be taxed or agreed to take lower fees.

  • The AMA agreed to lower doctor fees.
  • The AHA agreed to lower hospital fees.
  • AARP agreed to Medicare cuts over all (about $850 billion over the next ten years).
  • The insurance companies agreed to be taxed.
  • PhRMA agreed to be taxed and to take lower fees.
  • Big business and big labor agreed to be taxed.
  • The device industry at least didn’t object to their new tax, which is my book is the same thing as agreeing to it.

These are the people who gave us Obamacare. They agreed to pay for Obamacare because they expected to profit from it. One large drug company estimates the annual cost to it of Obamacare is about $1 billion a year. But they are not asking for their money back. In fact, most of the groups above are not asking for their money back.

The amount that the conspirators contributed to Obamacare didn’t really come out of their pockets. It came out of the pockets of ordinary people, just as did the profits they expected to gain from health reform. But there is no way to even begin to determine what’s your share or my share of the loot.

So, what is the most conservative thing you can do with $2 trillion, given that it is impossible to identify the original sources of that money (the victims) one by one? Answer: Have a tax cut. Give money to the people. But it needs to be a tax cut tied to healthcare.

Don’t Impose a Cadillac Tax

After they repeal all of the Obamacare revenues, many Republican replacement plans (including Paul Ryan’s Better Way) turn to a Republican version of the Cadillac plan tax for desperately needed replacement revenue. This is a terrible idea. The current Cadillac tax is hugely unpopular – hated by business and labor alike. Even Hillary Clinton opposes it. Every Republican in the House is on record as being against the idea.

Remember: Donald Trump promised a tax cut for the middle class, not a tax increase.

Don’t Ignore the Employers.

Virtually all new government spending for private health insurance under Obamacare is going to what has become the most dysfunctional part of the healthcare system – the individual market. This is where premiums are spiraling and there is a race to the bottom on quality and access to care. Almost every Republican plan to replace Obamacare, makes the same mistake. But why throw good money after bad?

Almost 30 million Americans are still uninsured (largely because the products in the Obamacare exchanges are so expensive and unattractive) and 85% of these live in a household with someone in the labor market. A tax credit that could be used by employers to help employees enroll in a group plan would give them access to lower premiums and better coverage. This would be a welcome improvement on what we have now, especially in states where the individual market is in a death spiral.

How to Move Forward

The only Republican plans that (1) are shovel ready, (2) meet Donald Trump’s objectives, (3) avoid serious economic problems and (4) avoid impossible political obstacles are a bill by Sen. Bill Cassidy (R-LA) [with 12 Senate co-sponsors] and a bicameral proposal by Rep. Pete Sessions (R-TX) and Sen. Cassidy. I believe these bills can get Democratic support as well.

This article was originally published at Forbes on January 4, 2017.