Obama Just Partially Repealed Obamacare, Proving Republicans Can Succeed
(A version of this Health Alert was published by Forbes.)
Since the election, there has been a lot of sturm und drang around what the alternative to Obamacare will look like. It looks like we can be highly confident the Republican-majority Congress will repeal Obamacare very quickly starting in January. However, there is some question about what exactly will be repealed.
Last year’s repeal bill, H.R. 3762, repealed Obamacare’s spending and taxes, but not its over regulation of health insurance. Further, Republican politicians have promised not only to repeal Obamacare, but replace it with a better payment system than existed previously. People’s primary concern about the previous system was that people in the individual market could be denied coverage for pre-existing conditions or charged higher premiums as a result of underwriting.
Politically, it would not be possible for Republicans to walk back from this commitment. According to the Kaiser Family Foundation’s November tracking poll:
Among those who want to see the ACA repealed, 38 percent (meaning 10 percent of the public overall) change their opinion after hearing the argument made by proponents that repealing the ACA would mean that insurance companies would be able to deny coverage to people with pre-existing conditions.
Trump voters react similarly, with a larger share changing their opinion after hearing that repealing the ACA would mean that insurance companies would be able to deny coverage to people with pre-existing conditions (27 percent) than changing their opinion after hearing that more than 20 million Americans could lose their coverage (8 percent).
The economics of health insurance make this very difficult to achieve without some sort of mandate or penalty for not maintaining coverage, which is politically unpopular – and especially toxic to Republicans. This poses a challenge; and we all know Republican politicians have promised to solve this for six years without result. Fortunately, we also have recent evidence that Republicans can lead and succeed on complex health reform legislation.
Way back on September 22, I encouraged President Obama to exercise leadership to ensure the passage of the 21st Century Cures Act, a law which fundamentally reforms the Food and Drug Administration by allowing new research methods and statistical analyses that will speed drugs to patients (as I described in a previous column).
President Obama never really did provide leadership, but he got on the train before it ran off the rails and waved from the caboose when it finally reached its destination, signing the bill on December 13. In a gracious and heartfelt speech, he awkwardly attempted to connect the 21st Century Cures Act to the 2010 Affordable Care Act, which gave us Obamacare.
Nothing could be further from the truth: The Affordable Care Act was rammed through Congress on a highly partisan basis before the politicians even read it. The 21st Century Cures Act originated with Representative Frank Upton (R-MI) Chairman of the House Energy & Commerce Committee. As far back as April 2014, Rep. Upton collaborated with his Democratic counterpart, Rep. Diana DeGette (D-CO) on a commitment to develop broad-based, bipartisan legislation to advance medical innovation.
For one year, the Energy & Commerce Committee travelled the country, openly gathering input from scientists, patients, and others. By May 2015, the Committee had written the bill and voted unanimously (51-0) to advance it bill to the House floor.
Because of this transparency and deliberation, the final version of the bill passed the Senate 94-5 and the House 392-26. Of course, any legislation that gets so many votes will likely have picked up some unattractive elements along the way, and the 21st Century Cures Act is no exception.
One conservative activist group labelled the bill a “Christmas tree,” festooned with ornaments and presents scattered underneath it. I have previously criticized gimmickry in the bill’s financing. Nevertheless, the bill’s spending component is just $6.3 billion over ten years on research committed to three areas: The National Institutes of Health, the Cancer Moonshot, and the opioid epidemic.
These are hardly hills for a fiscal conservative to die on. Further, the bill makes two big steps towards repealing Obamacare. It is largely paid for by repealing $3.5 billion of Obamacare spending on a poorly defined “Public Health and Prevention Fund.” Republicans also managed to add an important improvement in Health Reimbursement Arrangements (HRAs) to the bill. Small employers’ contributions to workers’ HRAs will be exempt from Obamacare’s burdensome regulations.
The passage of the 21st Century Cures act is a very good sign for Republican leadership on post-Obamacare health reform.
It makes a big difference on how you ask the question. They should ask if young poor healthy families should be able to get discounts for health insurance so they are not uninsured.
What about FREEDOM in America! Should we take away the FREEDOM for healthy people to get discounts in Life Insurance?
When you are in America longer you will start writing about FREEDOM John.
Most young poor healthy families would be more interested in free money to pay rent than in free money to buy insurance.
…And when on the road I see a tire fail killing a whole bunch of people I think maybe we should pay for tires. The trade offs are all over the place, but the one place where the product is worth less than we pay for is healthcare. That is because we are using other people’s money and third party payer is one of the major causes.
john,
I am sure this article is a lead in to what you are going to post next week. The only relevant part was the end of the article. ” HRAs will be exempt from Obamacare’s burdensome regulations” you can spend the next year writing just about this one point. Its the first step in the long awaited demise of employer based benefits.
I already have 6 appointments set up for after the first of the year to take out small groups and free the employer and employees from the burden of benefits. Make America Great Again!
Lee, John is such a Canadian, he can’t imagine making America Great again.
MY GRANDDAUGHTER IS DAR AND John DOESN’T KNOW WHAT THAT MEANS.
Don’t let John brainwash you into employer-based benefits.
You busted me. But it won’t be next week. I’ll be away for Christmas.
Lee, I would be interested in knowing more about the Small Business HRA’s that were in the recent bill.
Let’s say that today an employer offers a traditional group plan and pays at least half the employee share of the premium.
The premium may or may not be community-rated.
In your alternative, does the employee go out and buy their own health insurance? Then the employer reimburses them up to the new HRA limits.
You kind of imply that the insurance the employee buys for themselves is less burdened by regulations and thus cheaper than traditional group insurance.
Can you give an example?
I am not attacking, I am interested. I just do not know of any less-regulated policy that an employee can buy.
Bob, what traditional group plans today are not community rated? Was this merely hypothetical?
“The economics of health insurance make this very difficult to achieve without some sort of mandate or penalty for not maintaining coverage”
The easy way out for government is always to use a mandate backed up by the army. It makes people unwilling to do what they were thinking of doing and puts them back in their place as servants to the government.
But, “Fortunately, we also have recent evidence that Republicans can lead and succeed on complex health reform legislation. ” We can if we are not tripped up by those that constantly yell, ‘That’s impossible’!
Health insurance must be separated from welfare. Once that is done the road is clear.
“Politically, it would not be possible for Republicans to walk back from this commitment. According to the Kaiser Family Foundation’s November tracking poll:”
Push polls are designed to prove to the voters the rightousness of an opinion the pollster’s employer has. Risk based insurance doesn’t mean a person cannot be insured. It only means that person may not be willing to pay such an amount for insurance or that the person doesn’t have that amount. That can lead to other legislation. After all supposedly those on Medicaid can’t afford insurance so this is not a problem that hasn’t been faced before.
Ask the young guy cleaning the showers at the millionaire’s country club if he should be paying $5,000 more for his premiums to reduce the premium cost for the millionaire member and he will invariably say no.
Amen. The ACA authors were apparently more interested in what percentage of income everyone should have to pay to “purchase affordable coverage” than they were in maintaining a viable health care economy.
Polls by Kaiser is news? With so much vitriol flying in every direction these days about fake news, Russian propaganda, misinfo and disinfo, it’s crucial to acknowledge and understand the fact that there is a definitive science to distorting reality and manufacturing public consent. Many of the deliberate techniques of this form of social mind control are well-documented, having been revealed by industry insiders, experts, and content manufacturers.
If Putin can pick our President we should be upset with 8 years of Obama.
The strange thing is that some people are buying the idea that Putin swung the election to Trump. Why would he? A major factor in Russia’s economy (and his own bank account as well) is oil. Under Hillary we would not aggressively be extracting oil from the ground. That would increase the price of oil helping Russia. Under Trump we will likely pull out all stops in developing new oil resources and perhaps even compete with Russia in supplying oil to Europe. That would badly effect Russia’s economy.
Who is bribeable? (That is a Russian way of doing things) Hillary. In fact she sold Russia some of our own uranium. The Clinton Foundation and Bill seemed to benefit. Talk about buying the rope to hang them with seems to be a Hillary reality.
Obama says he told Putin, “Cut it out,” over election hacking. That sounds like a another lie to me.
Putin made Hillary’s schedule and sent her to AZ instead of WI. It’s not Hillary’s fault she lost.
Russian hacking merely to gather intelligence would not have interfered with our election. Only the releasing of the information could have that effect.
What if there were no hacking involved, and the information was obtained through more legitimate means? Would publishing that information still have been considered “interference”? At what point does it cease to be fair game?
It seems funny that no one is claiming that the published information is untrue. Only that the voters shouldn’t have been allowed access to it.
You are right. IMO the most likely entity to release this information to the press was a disgruntled Bernie Sanders supporter. After all the emails revealed how the Clintonista’s wouldn’t permit a fair nomination proces and how dismisie they were of anyone not in their circle.
The Democrats are in the process of trying to delegitimacize Trump when they are the ones that have been lying and cheating. They will make some headway with some Democratic voters because that group doesn’t have the intellect to use fact to help them draw a conclusion.
The alternative to penalties for not maintaining coverage would be rewards or incentives for maintaining coverage, so long as the coverage is of the type that doesn’t exclude preexisting conditions.
The reward approach is less intrusive because it’s not necessary to outlaw non-compliant coverage; it merely requires associating the reward exclusively with compliant coverage. And the reward approach is arguably fairer because it reimburses healthy participants who choose to pay more than their actuarial cost for compliant coverage.
There appears to be universal agreement that forcing private insurers to cover pre-existing conditions in the individual market is tremendously difficult, maybe impossible.
My own solution would be to allow the persons in that predicament to join Medicare. (By ‘predicament’ I mean having an existing chronic illness and not having access to group coverage.)
The person joining Medicare would receive a subsidy, just as if they were in the regular ACA.
The Medicare actuaries would supply an age-rated total premium for a reference point. For example, the premium might be $800 a month for 60 year olds.
The 60 year old with a pre-existing condition would pay a portion of the $800, depending on their income.
For this they would get a reliable policy with a low deductible and very wide access to doctors.
Medicare is designed to absorb risk. Medicare accepts millions of new 65 year olds every year and never asks a single question about their ‘pre-existing conditions.”
Medicare can afford to lose money by doing this. Private insurers refuse to lose money covering people who are already sick, and I do not blame them.
One of the main reason we passed Medicare in 1965 was that private insurance for older people was spotty, expensive, and in some cases downright fraudulent.
It is time to try a Medicare buy-in.
Bob – Even within Medicare, the healthiest 50% of seniors account for only 4% of the program’s costs in any given year. So, if total Medicare spending averages roughly $12,000 per year, the healthiest 50% of seniors will spend only about $1,000 per year on average and the sickest 50% will spend $23,000. If only those not yet eligible for Medicare who can’t find reasonably priced insurance in the private market are allowed to buy into Medicare, it implies that they would be in the sickest group and their premium would need to be at least $23,000 per year if they have a similar cost profile to the sickest 50% of existing Medicare beneficiaries. Indeed, they may have an even sicker profile. So, just as with the high risk pools that I’ve discussed over and over, it would be enormously expensive to subsidize their buy in to Medicare even if we require them to pay 10% of MAGI toward their premium. Covering sick people is an expensive proposition any way you slice it. That’s what makes it so hard. It’s a cinch to cover healthy people at an affordable premium that allows insurers to make money if they’re allowed to underwrite and decline to cover sick people.
Going back to myself as an example again, a relatively healthy year for me may still mean around $3K in healthcare costs including about $1K for generic drugs that I have to take for the rest of my life. For a healthy person, by contrast, a low cost year for him might mean zero healthcare costs or, at most, a few hundred dollars. The expensive years for the older and sicker population can be frightfully expensive and it doesn’t take too many of them as a percentage of the total insured population to break the bank.
Good comments, but my buy-in option does not assume that all the under-65 buyers will be sick.
I am driven to look at Medicare because in many death-spiral states, NO ONE over about 55 can get reasonably priced insurance if they make too much for subsidies.
A 60 year old in Omaha must pay about $1100 a month for a crappy policy with a $6650 deductible and 50% coinsurance after that.
If their personal income is $50,000, then their after tax monthly income is about $3500 at best.
So their health insurance is one third of their income for next to nothing. Medicare at 10% of income would be better even for a very healthy person.
“Medicare is designed to absorb risk.”
Wait a minute, Bob. Insurance companies absorb risk. They can do that is because they have the incentive to set their prices to provide adequate income in aggregate. That is NOT what Medicare does. It has the power to tax. It does not depend on a willing buyer. Therefore Medicar has little incentive to “absorb” risk.
As a result, Medicare has unfunded liabilities amounting to more than $85 trillion. Whatever that is, it’s not “absorbing” risk. It’s passing the cost along to future generations.
http://www.ncpathinktank.org/pdfs/A_Bleak_Future.pdf
“Medicare can afford to lose money by doing this.”
Rilly? It’s not Medicare’s money to lose. It’s not even our money – it’s our children’s money, and their children’s, and their children’s, and their children’s, and so on until the end of time.
In fact, I think Medicare was designed to spend the money of future generations so that today’s politicians can claim they have provided us something worth more than we are paying for it.
That’s a scam. A private company that defrauded its customers the way Medicare defrauds America would be out of business, and its officers prosecuted.
$85 trillion in ’08. The unfunded liabilities with the Medicare ponzi scheme (scam) is much larger now.
There are numbers so large they don’t have names.
I do not accept that Medicare has any unfunded liabilities.
If the taxpayers of 2040 want to cancel Part B, or cancel Parts A and B, that would reduce or cancel any ‘liabilities.’
See the attached:
http://www.theatlantic.com/business/archive/2012/11/is-our-debt-burden-really-100-trillion/265644/
Bob, I read your stupid article. It’s pure BS.
You are right Bob. Entitlements can be changed at the will of the government. But, future payment was a promise that has to be broken for no liablities to exist. Not having that liability means the federal government has stolen close to $100 Trillion dollars from the taxpayer. Is that the warm fuzzy government you envision?
Tomorrow government can deny you your social security benefits (and Medicare). Think what that would mean to you.
“I do not accept that Medicare has any unfunded liabilities.”
Bob it doesn’t matter what you “accept”. You seem to think if you make a promise, induce people to rely on your promise, then simply refuse to keep your promise, you have no liability.
A Judge would call that fraud.
That’s exactly why a private company that defrauded its customers the way Medicare defrauds America would be out of business, and its officers prosecuted.
These promises don’t need to stay on the books forever. Social Security was changed in several ways in 1983 which included a gradual increase in the retirement age starting in 2003 and ending in 2027 when it finally reaches age 67 vs. 65 when the legislation was passed.
There is nothing wrong with changing the rules for people just entering the workforce at age 21. They haven’t paid into the system yet and have decades to plan based on the new rules. Even people that are within 20 years of retirement have time to adjust their planning.
The unfunded liability numbers usually discussed span a 75 year time period. They can be reduced significantly in a responsible and fair way, in my opinion.
BC, that’s true – but you know that’s a very long way from claiming there’s no unfunded liability – or that the unfunded liability is insignificant.
John — I agree. However, just as small changes in the assumed investment return make a large difference in the magnitude of unfunded pension liabilities, the same is true for variance in the assumed growth of healthcare costs over time. So, I would like to see some data as to how much a one percentage point change in assumed healthcare cost growth would move the numbers up or down. Then we can all make our own judgment as to what the unfunded liability is likely to be assuming no changes in current law.
To supplement that information, let’s see some data around how much various policy changes related to everything from the eligibility age for Medicare to the size of the deductible for Parts B and D to the cost of the Part B premium paid by beneficiaries would move the needle.
My experience from the pension world suggests that relatively small changes in policy can make a big difference in long term liability numbers while, as noted above, a decline in healthcare cost growth relative to current estimates can make a huge difference as well. I’m more optimistic about this subject than most people are.
Anything can change, but your statement “There is nothing wrong with changing the rules for people just entering the workforce at age 21. They haven’t paid into the system yet…” is meaningless since to date the intent has been to tax the 21 year and use that revenue to pay off the older group even though that 21 year old receives nothing in return.
This idea of pretending no one is being hurt promotes poor fiscal planning. The amounts of money we are discussing in this case far exceed the lesser amounts the marketplace would impose as direct costs on patients. In the later case your usual response is ‘impossible’, but the impossible becomes possible when it doesn’t involve your pet project.
They are getting something in return when they retire though perhaps it won’t be as good a return on their investment as the previous generation got. By the same token, the return on investment from social security is smaller for our generation than the previous generation got. So what. The total amount of revenue raised by the federal government averaged 18% of GDP since the end of World War II. If you look at federal taxation in the aggregate, nobody is being screwed. Income taxes were much higher in earlier years than they are now so things tend to balance out overall.
“They are getting something in return when they retire”.
Great logic. Next time you are working on pensions pay everyone off with one dollar and tell them they are getting something in return when they retire.
Things change, but in this case they don’t balance out except by accident. Is that your method of financial planning for the nation? ‘Don’t worry, things will balance out”. With type of statement to SEIU workers you probably will never make it out the door.
Of course we will have to lower amounts and/ or raise the age, but knowing that we shouldn’t have to live with things that aren’t really true or meant to confuse. You are sounding like Andy Slavitt while he produces more garbage for consumption.
Plus the 21-year old is not educated in what is going on. So he is subject to the fiscal abuse by politicians.
Bob
Wtf. SMH
That has got to be the most ridicules statement and artical
ever posted on this blog.
If our economy grows at 2 % over the next 75 years it will be a 66 trillion economy so it will be enough to pay off the liabilities. Really 😂 No really 😂 So we can be the first county to have a quadrillion of unfounded debt in 75 years and not have to worry?
Bob go to the back of the line No Soup For you 👅
If you’re citing Kaiser News, why not pick this one apart:
http://khn.org/news/without-aca-guarantees-52-million-adults-could-have-trouble-buying-individual-plans/
“More than 1 in 4 adults younger than 65 live with conditions that private insurers could have declined to cover in some policies prior to the Affordable Care Act, according to an analysis by the Kaiser Family Foundation.”
It seems at odds with the figures previously tossed around here and elsewhere.
There is a lot of BS thrown around here to promote socialized medicine. The socialists have even changed the meaning of health insurance. To the non socialist their idea of health insurance is little more than welfare.
2010 was not some distant age. We know who had insurance then and who did not. I do not see why the Kaiser Family Foundation scholars have to hypothesize.
I do not doubt for a moment that it would be extremely painful all around if a future Congress enacted cutbacks in Medicare.
My only point was that it remains in Congress’s power to do so. It might take a Greece-level debt crisis to make it happen, but that too is possible.
I am arguing against what Dean Baker calls an infinite threshold of liability….
http://cepr.net/blogs/beat-the-press/larry-kotlikoff-tells-us-why-we-should-not-use-infinite-horizon-budget-accounting
Incidentally, there are numerous corporations in America that promised medical benefits to early retirees, and then cancelled the promise. Health insurance did not prove to be a legal liability for them.
You’re right, it’s only a ‘promise’ not a legal liability.
But given likelihood of reneging, why would we want to expand the system?
“Incidentally, there are numerous corporations in America that promised medical benefits to early retirees, and then cancelled the promise. Health insurance did not prove to be a legal liability for them”
For pensions, while the value of vested benefits attributable to past service is a legal liability, benefits attributable to future service are not at least for private corporations. For example, my employer closed its pension plan to newly hired employees starting in mid-2003 and gave them a 401-K defined contribution plan instead. Then, last year, the defined benefit pension plan was frozen so future service did not further enhance the value of the pension. Instead, a defined contribution 401-K plan would be provided to cover future service.
For retiree health benefits, employees who retired before they were eligible for Medicare used to get a supplemental monthly payment to help them purchase private insurance until they turned 65. That payment was discontinued years ago. Early retirees were also allowed to buy into the company’s self-funded health insurance plan at the average cost for insuring the active workforce until they became eligible for Medicare. That stopped about a year before I retired. Changes that shrink benefits happen all the time in the private sector, aka the free marketplace. Why is it so terrible if the government opts to do something similar in order to reduce its long term liabilities?
“Changes that shrink benefits happen all the time in the private sector, aka the free marketplace. Why is it so terrible if the government opts to do something similar in order to reduce its long term liabilities?”
Because those in social security were forced to pay into the fund which is not true in the corporate sector. Additionally corporations follow the law and therefore their contracts determine what is legal and what isn’t.
Allan, after doing a lot of reading about Medicare and Social Security in the 1980’s, I decided that I was NOT funding my own retiremnet or health care with my taxes.
I was funding my parents’ retirement and health care.
This does not make me wise, but it is what I believe. If I want generous benefits when I am 85, I and my cohorts will have to convince the taxpayers of that time to fork over.
To me, Medicare is no more an unfunded liability than national defense. We can engage in a future world and spend trillions, or we can go isolationist. It is misleading to project our current defense budget for 75 years and call that a liability.
“It is misleading to project our current defense budget for 75 years and call that a liability.”
Very true, but then one should not make the promise in the first place. When we calculate our defense budget it is for that year, but contracts that are made and binding are paid off even if we don’t want to. Those contracts were made through agreement of both parties. Medicare was mandated. These are just a few of the reasons why your comparison carries little or no weight.
There are no doubt advantages and disadvantages to using Medicare as the means of administering risk pool coverage. It just seems premature without understanding the requirements and general structure of what Medicare would be implementing.
Since the president-elect and the leadership of both houses have all committed to covering preexisting conditions, it seems that some form of risk pool is a given. The biggest questions are (1) the size of the risk pool, (2) where to cap premiums for high-cost individuals, and (3) how to pay for the remainder.
Size could range between that of existing state-run risk pools that serve a small percentage of the population, to having a single large risk pool that includes the entire population (which is in effect what you have when you outlaw individual underwriting). The current employment-based system is somewhere in between, as it includes over 60 percent of the non-elderly population (albeit it excludes some long-term sick as well as some healthy individuals).
For a given maximum premium level (2), the total subsidy cost should be constant regardless of risk pool size and design (assuming perfect efficiency), since the number of actual high-cost individuals doesn’t change. Taxpayers are going to pay this cost one way or another. Should it be collected through a ‘fair’ tax system and distributed out of the general fund, or through what amounts to a head tax on healthy individuals?
Much or most of the $250 billion in employer tax expenditures is already going toward this risk pool subsidy. If there is a major shift away from employment-based insurance, then I would argue that this money is already spoken for and will be needed to subsidize the replacement risk pool in whatever form it appears.
Very well put.