For Republicans determined to repeal and replace Obamacare, the devil is not necessarily the man in the White House. It’s in the details.
“Once Republicans vote to repeal Obamacare, the hard part begins. Health reform never gets more popular as the details get filled in,” Larry Levitt, senior vice president of the Kaiser Family Foundation, tweeted after last week’s House vote to repeal the law.
Obama promptly vetoed the repeal bill. Now the party will begin the much harder work of crafting an alternative to the Affordable Care Act that has been on the books for six years. Ryan has made it clear that Republicans will have an Obamacare replacement plan ready to go by the time the party has a presidential nominee.
Health care policy always involves tradeoffs and tough decisions, but replacing a system that has already given health coverage to some 17 million people will be especially complicated. “I think the environment is certainly more challenging now because we are almost six years into implementation of the law, with major provisions having been in place since 2014,” said a Republican health policy expert who has been consulted by 2016 presidential campaigns.
Republicans face a tough balancing act. They want to create a system that adheres to conservative principles, particularly by repealing the law’s mandates. However, they also must avoid stripping health care coverage from millions of people who now receive insurance under Obamacare. And finally, after years of talking about Obamacare’s costliness and fiscal irresponsibility, they’ll need to create policy that is no more expensive than the ACA.
Here’s the big-picture explanation of the GOP’s challenge: Requiring everyone to have health insurance balances out risk pools, keeping premiums lower and reducing taxpayer money spent subsidizing coverage for low-income people. Mandates also make it easier to require insurers to cover a wider array of conditions and prevent them from discriminating against those with pre-existing health conditions. The addition of sicker people into insurance markets is balanced out by the addition of healthy people who might not buy coverage otherwise.
“The whole Affordable Care Act is a very complex, interrelated system that, because of its complexity, has a lot of problems, but really works out well,” said Tim Jost, a law professor at Washington and Lee University and an ACA supporter.
When asked about the Republican’s three objectives — continuity of coverage, repealing the mandates and not adding to the deficit — he said, “It’s not possible to do that, no.”
“There’s a basic fairness argument … that you should be able to buy health insurance no matter what,” said Dan Mendelson, CEO of Avalere Health, an independent consulting firm. “How you do that without mandates? That’s hard.”
Of course, Republican policy has traditionally contained solutions to this problem. One popular idea, for example, is high-risk pools, or separate insurance markets for sick people. But they are also very expensive. In the absence of mandates, the government could instead subsidize coverage more heavily for low-income people, but this would also spike costs.
The GOP’s work will be most complicated in a handful of Obamacare provisions. Here are the biggest areas of difficulty:
One of the most popular parts of the ACA is a provision that makes it illegal for insurers to deny coverage to those with pre-existing health conditions. It’s hard to imagine that part of the law going anywhere.
Both parties like that provision, and so does the public. In March 2014, the Kaiser Family Foundation found that 74 percent of Democrats and 69 percent of Republicans supported it.
“[Republicans] have to have a viable way to deal with pre-existing conditions,” said Bob Blendon, a senior associate dean at Harvard University’s School of Public Health. “There’s no way this country is going to go back to where people with cancer can’t have insurance.”
But if Republicans keep coverage for pre-existing conditions — thus allowing sick people into the marketplace — they also must figure out how to deal with impact on risk pools.
The ACA’s mechanism to manage risk are the individual and employer mandates, which also are two of the GOP’s most-despised parts of the law. Even so, requiring everyone to have health insurance increases the number of healthy people in risk pools. This is important because it drives average costs down, meaning insurers can charge lower premiums.
If mandates were removed and healthy people dropped out of the insurance pools, it could set off what is known in the industry as a death spiral. Premiums would rise as the average enrollee became sicker, and more healthy people would drop out of the marketplace. Premiums would then rise again, and the process would continue until the market eventually collapses.
Republicans could also pitch something short of full coverage for those with pre-existing conditions. “I would expect a replacement bill to offer some protection for people with pre-existing conditions, like guaranteed renewability of coverage, but something short of full access to insurance,” Levitt said.
But it’s almost impossible to give those people full access to coverage without a mandate that they buy insurance and big subsidies. “A full guarantee of access to insurance for people with pre-existing conditions, like in the ACA, sets off a chain of policy requirements that conservatives probably can’t live with,” Levitt said.
MEDICAID EXPANSION AND FEDERAL SUBSIDIES
Some 17 million people have gained health insurance through the ACA. Throwing them off of their coverage would be a political nightmare for the GOP.
Coverage has grown under Obamacare primarily through the expansion of Medicaid to more families. For those who don’t qualify for Medicaid, coverage has grown on the ACA exchanges, which offer subsidies based on income. Currently, 31 states and Washington, D.C., have expanded Medicaid to at least 138 percent of the poverty level, as defined under the ACA. About 84 percent of enrollees who don’t qualify for Medicaid receive a federal subsidy for their health insurance bought on an exchange.
The bottom line is that poorer people are getting coverage, and that’s hard to maintain without spending government money. “I think the biggest risk of the policy is coverage continuity for people who are low-income,” Mendelson said.
Even Republicans who don’t like Obamacare are reluctant to roll back Medicaid because it takes health benefits away from poor people. That became clear in the Senate in December when a Medicaid rollback provision was included in an ACA repeal bill. The repeal was a show vote, never going to become law, awaiting a sure veto. But even under that circumstance, some Republicans from states that expanded Medicaid said they were uncomfortable with the provision, although they ended up voting for the bill anyway.
Sen. John McCain (R-Ariz.) offers one example, because his state expanded Medicaid. “It’s going to trouble me in the vote,” he said in December. “It does provide me with discomfort. I am very reluctant to take positions counter to the decision made by the governor.”
What’s more, the coverage expansion provisions are popular. The Kaiser poll found 74 percent of voters supported Medicaid expansion, and 77 percent supported Obamacare subsidies.
The GOP will also have to decide how generous the health care subsidies should be. That is “really the big question, especially given the difficulty the House GOP has shown so far in agreeing on any subsidies toward health insurance, even within their high-risk pool idea,” said Loren Adler, research director at the Committee for a Responsible Federal Budget.
If subsidies are less generous than they are now, this would almost certainly translate into people losing their health coverage. Another Republican idea, replacing part of the Medicaid expansion with subsidies for private insurance, would also probably result in fewer insured among the poor. “Most of the subsidies in GOP plans to date would leave private insurance very expensive for people with low incomes,” Adler said.
GUARANTEED COVERAGE TO AGE 26
Of all the ACA provisions discussed in Kaiser’s poll, the extension of dependent coverage to age 26 was the most popular, supported by 80 percent of respondents.
It may be popular, but it’s out of line with conservative philosophy simply because it is a federal requirement. Republicans have railed against Obamacare as Washington-dictated health coverage and called for more decision-making power for the states.
The “coverage until 26” provision could force Republicans to choose between a politically popular idea and basic conservative ideology. “How could they keep that requirement if they repeal all the federal controls? What mechanism would they have to enforce,” said Bill Pierce, a former HHS spokesman in the Bush administration. “Granted, the 26-year-old coverage requirement is popular, but reality presents challenge.”
“It is easy to say, ‘We will preserve the 26-year-old option’. It is harder to put the ‘how’ into legislation,” Pierce added.
A requirement that young adults remain covered is, by definition, a federal control, something Republicans want to do away with. “I have no idea how they bridge the gaps between ideas and specific language,” he said.
A CADILLAC TAX BY ANOTHER NAME
Republicans have said for years that the ACA is too expensive and adds to the deficit. As they craft their own legislation, they will in theory want to come up with a final product that is, at worst, only equally as expensive as Obamacare. It certainly can’t cost more.
That could be tricky. Without mandates, providing subsidies to poor or sick people becomes more expensive as healthy people drop out of the insurance market and premiums skyrocket. “Maintaining any financial help for people buying their own insurance will cost money, so a replacement plan will have to find taxes or budgetary savings to offset that,” Levitt said.
To put this problem in context, repealing the full ACA without a replacement is expected to cost $353 billion over 10 years. Republicans will need to fill that gap and then some.
Complicating this debate is the question of how to deal with the law’s tax exemption for employer-sponsored insurance. Obamacare does so through the “Cadillac tax,” a 40 percent excise tax on employer-provided health benefits over a certain threshold. The Cadillac tax isn’t very popular among either party, but it is the only way the ACA can keep a lid on taxpayer spending for health care. It is ACA’s primary cost-control mechanism as well as a revenue raiser.
The Cadillac tax was delayed for two years after lawmakers and a diverse alliance of interest groups railed against it late last year, saying it would harm workers. Many elected officials would still like to see the tax completely repealed, but that part of the statute alone is estimated to raise around $90 billion over 10 years.
A replacement for the Cadillac tax gets even trickier because Republican health reform plans in the past have contained similar provisions. In light of the strong opposition to the tax, it could be difficult for the GOP to pitch something that looks like a Cadillac tax replica.
“Recent Republican plans, including those from presidential candidates, have included scaling back the tax subsidy for employer-provided health benefits, which would have largely the same effect as the Cadillac plan tax,” Levitt observed.
2016 AND DONALD TRUMP
There is some plain old political maneuvering that Republicans must consider when rolling out a new health law. The current plan is that Ryan, when finished with the ACA alternative, will hand it over to the Republican presidential nominee. Health care is not at the top of the presidential campaign agenda, but repealing Obamacare is. Some strategists believe the GOP must have a viable proposal to replace it.
Blendon says Republican presidential candidates generally “are not interested in fixing health care.” But an alternative helps them appeal to two vital voting blocs — their base, which wants Obamacare repealed, and independents, who Republicans don’t want to lose by “looking like they don’t care about the problems they create.”
Most of the 2016 candidates would likely adopt the Ryan plan should they become the party’s nominee. But it’s not a guarantee. The GOP campaign expert observed, “Once the party has a presidential nominee, it’s going to be that individual, and not anyone in Congress, who will drive the policy discussion on how to best replace Obamacare.”
The most likely non-cooperator is, as always, Donald Trump, who has arguably shifted the campaign away from serious policy proposals in a number of areas. When it comes to health coverage, he has also praised single-payer health care, a far-left stance.
So what would Trump do with a carefully thought out GOP replacement for the ACA? “I don’t think he’s going to get caught in policy proposals,” Blendon said.
Trump has more recently endorsed private health insurance, following with the rest of the GOP presidential field, but his details are sketchy. Last year, Trump told CNN that his solution is to “repeal and replace with something terrific.”
“The only way the government should be involved, they have to make sure those companies are financially strong, so that if they have catastrophic events or they make a miscalculation, they have plenty of money,” he said.
Should Trump become the Republican nominee, Ryan and his fellow ACA replacement drafters may want to come up with a better way to sell the plan.