The Unlovable Political Logic of Health Reform

The Unlovable Political Logic of Health Reform

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Every so often, voters conspire to hand unambiguous control over the federal government to a single political party.  It is rarely the unmixed blessing that party strategists dream it to be.  President  Clinton got a Democratic Congress, and promptly lost it two years later in the wake of the famously unproductive HillaryCare debate.   President George W Bush invaded Iraq.  Lyndon Johnson waged War on Poverty and sent a half-million baby boomers to Vietnam. 

More recently, President Obama had a (brief) filibuster proof Senate majority and an eighty vote House majority entering 2009.  Despite this huge advantage, the passage of ObamaCare turned into a costly, fifteen-month political cliffhanger. A lot of Obama’s problem wasn’t merely an increasingly angry Republican minority but a substantial (and imperiled) moderate wing of his own party

What can the resurgent Republicans learn from these cautionary tales as they enter Donald Trump’s Presidency?   What they will come to realize is that often, “friendly fire” is as perilous a risk as anything the other party throws at you.  The Republicans are actually in a much less strong position than they appear as they enter 2017.     

Today’s Republican Party is actually riven into at least four distinct factions, each of which has its own health policy agenda and hot buttons.  Arrayed from Far Right to Center Right, these factions are:

  1. The Hamburger Hill Republicans.  (See Wikipedia definition.) Exemplars include the House Freedom Caucus, who won office in the Tea Party rebellion, and would be perfectly comfortable repealing ObamaCare without replacing it, and letting states, particularly of the blue variety, sort out the carnage. A lot of them are “safe seat” Red State Republicans who can afford to take some electoral risks in the name of party principle.
  2. The Take Your Castor Oil Republicans.  Exemplars include most prominently Speaker Paul Ryan, and also HHS Sec. Designate Dr. Tom Price, who believe that entitlement reform is actually a bigger deal, fiscally and politically, than repealing ObamaCare, and who favor cutting entitlement spending, “pro-competitive solutions” (whatever that means in a highly concentrated health industry), and also compelling “wealthy” Americans to pay a bigger share of their healthcare bill.
  3. The Pragmatic Republicans.  Exemplars include:  Lamar Alexander, Orrin Hatch and Kevin Brady, all burdened with the realism borne of Chairmanships of major Committees, all of whom would prefer to strap on a parachute before exiting the airplane on Repealing and Replacing ObamaCare and who are also cognizant of the cost of ownership of the healthcare issue.
  4. Ten Republican Governors Who Expanded Medicaid.  Exemplars include:  Governors Snyder, Kasich, Brewer, Sandoval, Martinez, Baker, etc. whose states could be on the hook for billions in additional state costs if ObamaCare’s ten million person Medicaid expansion is scaled back.  Each of these Governors has Two Senators to advocate on their states’ behalf.   Vice President to be Pence also expanded Medicaid while Governor of Indiana. 

Interestingly, the new Republican standard bearer, Donald Trump (who was until 2012 registered for thirteen years in New York’s independent but left-leaning Reform party), ran to the left of his Congressional base on healthcare issues.  While he advocated “repeal and replacement ” of ObamaCare with “something terrific” (aka “TerrifiCare”), he also advocated “covering everybody” and “not cutting Social Security or Medicare”. 

If Trump had sided with either of the two dominant Congressional factions (Hamburger Hill or Castor Oil), he probably would not have gotten enough hard pressed working class votes to put him in office.   While at least three of the Republican factions outlined above are nominally committed to getting rid of ObamaCare, they are variously sensitive to the political cost of dislocating 20 million presently covered Americans, as many as 6 million of whom may have voted for Trump. 

In the past two weeks, the momentum to “repeal” has been blunted by divisions over the timing and content of the “replace” part of the Republican agenda.    The stickiest wicket by far:   rapidly repealing the roughly trillion in taxes and fees in ObamaCare would require a LOT of replacement revenues from somewhere (provider payments, import duties on Chinese manufactured goods, capping the tax deductibility of corporate health benefits, you name it), or those 20 million newly insured folks really do get thrown to the wolves.

It is easy to understand why postponing a big new revenue raise for a few years might be attractive politically;  but what pays for all those premium subsidies and Medicaid matching payments to states in the interim? There is a very good reason why we haven’t yet seen a credible replacement plan. Big revenue raises are best done “secretly” at 2:30 in the morning in a last-minute Reconciliation bill mark-up, not in the klieg light glare of a gigantic press conference. 

Since you can only lose two Senate Republican votes before use of reconciliation to repeal ObamaCare is not viable, the political path leading to repeal is narrower and rockier than most people think.  One Republican Senator, Rand Paul, has already declared that he will not vote for repealing ObamaCare without a viable replacement, and several others (Cotton, Corker, Portman. et.al.) have echoed his concern.  A rapid Senate vote for repeal and then replacement in two or three years looks like an increasingly questionable strategy.

The larger question, of course, is what the electoral payoff from killing ObamaCare is likely to be.  Certainly, taking health insurance away from twenty million newly insured folks because of a diffuse ideological concern about “government-run healthcare” doesn’t seem to be an obvious political winner.  The redistribution of those trillion dollars in taxes on high income individuals and fees from health insurers, device manufacturers, etc.  to pay for those health benefits may be the real rub for the Hamburger Hill caucus. 

Indeed, the vehemence of the Republican opposition to ObamaCare may have been driven by its seeming irreversibility; once granted, an entitlement is almost impossible to take away.

The classic interest group political logic of granting a government entitlement has historically been was that delivering tangible benefits to a specific group of voters would bind them to the party who gave it to them.   Roosevelt gave the elderly Social Security and Lyndon Johnson gave them Medicare; therefore, elderly voters would always think fondly of Democrats, etc. 

Obama’s reward for passing ObamaCare, on the other hand, was to lose first one, then the other house of Congress in the next two non-Presidential election cycles, and to help birth the Tea Party, a still powerful insurgent faction of the Republican party.   What changed?  Well, after the post-World War II creation of the Veterans Administration, then Medicare for the elderly and disabled and Medicaid for the categorically needy, and the bipartisan S-CHIP for kids, the most “attractive” subgroups of vulnerable Americans already had their health care entitlement. 

Those who remained uninsured were a mélange of marginalized folks- young people transitioning from school to work or stuck in their parents’ basements, part-time workers and the “new” working class in low wage jobs without benefits, single unemployed people, immigrants, documented or otherwise, victims of age discrimination in employment but years shy of Medicare eligibility, people rendered uninsurable by chronic illnesses.  There was no common denominator other than their marginality.      

Other than the hospitals, who are obligated by federal law (EMTALA, 1986) to treat them, there was almost no focused interest group advocacy on behalf of the uninsured; rather, it was almost Great Society “muscle memory”- an inchoate desire to get the rest of the way to universal coverage- rather than some massive political reward that drove Obama to greenlight health reform as his highest domestic policy priority.   

In retrospect, investing his limited stack of political chips not just in avoiding a Depression, but in more vigorous economic growth, as his political team (notably Rahm Emanuel and David Axelrod) advocated, might have been a better bet than doubling down on healthcare.  Hindsight is, of course, always crystal clear and 20/20.

Nevertheless, the hand the Republicans seem to have dealt themselves on ObamaCare seems even less promising:  how do you unmake the law without stranding 20 million people and somehow provide them something “better” than ObamaCare’s mixture of Medicaid and heavily subsidized high deductible private coverage without either raising taxes further, adding to the deficit or cutting caregiver payments to pay for it.    As the new Republican majority will learn in the next year, healthcare is an issue that you can win and still lose.  President Trump’s skill as a dealmaker will likely meet an early and stern test.

Jeff Goldsmith is President, Health Futures and Assoc Professor, Public Health Sciences, University of Virginia.

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14 Comments on "The Unlovable Political Logic of Health Reform"


Member
Steven Findlay
Jan 13, 2017

Great piece, Jeff. I’m to your left, but appreciate these insights and your comments below. Ryan et al know how hard this will be and the magnitude of the impact, and thus it’s irresponsible in every way that they’d go along with rapid repeal & replace.

It’s abundantly clear Trump has no idea what’s this truly entails; it’s just a political goal he knows he has to achieve. Hopefully, moderate Rs will stop the foolishness. And maybe Ivanka, her husband or somebody will clue dumbo in on this “reality show” and why his best strategy would actually be to be a go-between between Ds and Rs on fixing the ACA and then rebranding it — God knows he loves branding. Trumpcare, Terrificarew…..whatever! Good luck getting to the universal coverage he pledged…and at lower cost. Read Ezra Klein on Vox for best take on that recently.

Member
Allan
Jan 13, 2017

” somebody will clue dumbo in on this “reality show” ”

You must think that calling the President-elect dumbo is a smart way of bridging the gap between the two parties and enhancing the discussion. Trump hasn’t even taken office, yet you can’t use the appropriate term.

Member

This is really awesome post

Member
Jan 12, 2017

A very good article Jeff. It outlines all the issues trenchantly. Of course, it’s one thing to outline the issues, and another to posit and then defend solutions. Your article is a good starting point. I find interesting the parallels between the current federal method of financing state Medicaid programs and fee for service (the more you cover/do, the more you are paid). Admittedly states share the pain in Medicare, but the idea should be to disincent gross spending. Block grants have their attractiveness, but if the block grants are to be 20% (say) less than what the states received before, then there will be pain, particularly in the more generous (if that is the word) states. Yet isn’t this kind of pain the necessary precursor for tightening spending which we really must do? We can’t seem to do that without something awful forcing us to do it.

Oh, and “Hamburger Hill Republicans?” I dare say I’m the only one of us who actually was there in 1969 and while I really do get FUBAR, I don’t get the phrase.

Member
Jeff Goldsmith
Jan 12, 2017

Was definitely NOT at Hamburger Hill. My reference was to: “Take the Hill;
Damn the Cost!” Not obvious the hill was worth the price paid, and you saw the price paid in living color. I just saw it on TV.

I will be candid and say that were I asked by Paul Ryan to solve for: cover the same #, provide greater value, no new taxes and use market forces, knowing what I know, I couldn’t do it. I think there is a null solution set for the problem framed as I have. It is going to take the present crew about three months to figure this out. Then the fun begins.

As readers of this blog know, I was a Wyden Bennett advocate, which would have taken out BOTH employer based insurance subsidies AND Medicaid in one fell swoop, and created a tax-credit/payroll tax funded universal benefit. The two main problems with Wyden Bennett: it was bipartisan and it was TOO SIMPLE. The technocrats in the Obama White House really had no idea of the fluid dynamics of a TRILLION DOLLAR
private insurance risk pool (the size of Turkey or Mexico) and could not resist a lot of dogma driven tinkering with the rules. Where are they now?

Member
Steve2
Jan 12, 2017

I liked Wyden-Bennett also. Was sorry to see Bennett lose his Senate seat because he had his name on a bill with a liberal.

Member
Jeff Goldsmith
Jan 13, 2017

Have known Ron Wyden for many years and contributed to his campaigns.
Though he was an advocate (Grey Panther) of Medicare beneficiaries before entering Congress, would not characterize him as a “liberal”. He is a pragmatic moderate, was not embraced by Ted Kennedy or Jay Rockefeller when he came to Senate.

On Wyden/Bennett, he was willing to part company with the labor unions, who are very influential in Oregon, on basically pulling the tax exemption for corporate health benefits, which would have put a lot of rich,union-won benefit packages at risk, and diminished union influence over the health benefit.

He was significantly to the right of Pelosi and Waxman in the House, and was marginalized by Obama White House in ACA reform process, to the detriment of ultimate outcome.

Wyden is the most knowledgeable Democrat in the Senate on healthcare issues, and would have been an exceptional Finance Chairman if Dems had remained in control of the Senate.

Member
Steve2
Jan 14, 2017

Jeff-If you aren’t a conservative, you are a liberal. Just the way things are viewed now. May not like it, but that’s how it is.

Member
Jeff Goldsmith
Jan 14, 2017

That makes me one of the tens of millions of politically homeless, I guess

Member
William Palmer MD
Jan 12, 2017

Let Medicare continue. Let Medicaid continue–as desired–by states.
Let the exchange insurers do whatever they want, including underwriting and changing benefits.
Let the employers do whatever they want.
Let hospitals do whatever they want.
Let the patients do whatever they want.
Let the doctors do whatever they want.
The wicked problem: Be clever and shrewd and smart in subsidizing the needy in a defined-contribution or voucher or Medi-Buck style–not a defined-benefit style–the subsidy to be related to 3 things: income and nature of illness and present family wealth. The government would subsidize in a way that would mimic a parent helping a loved one.
The idea is to pre-subsidize the needy so that they can go out and get care, without defining how they do this. The subsidy money goes to the patient first. They can buy insurance. They can pay their employer some or all of costs. They can pay cash. They can borrow using subsidy as collateral.
The hope is that providers and insurers will define their offerings to fit the subsidy and also compete to get the defined and limited subsidy monies.
The safety net is EMTALA which is enlarged so that hospitals can offer continued care to the needy and can charge whatever they believe the patient subsidies can pay.

Member
Barry Carol
Jan 12, 2017

Your subsidizing the needy part sounds like the college financial aid model to me. My perception is that a lot of documentation is required which can be expensive in terms of administrative costs if it has to be done for, potentially, tens of millions of people. Also, the cost of medical needs can change radically from year to year whereas college tuition costs are at least knowable in advance. What happens to a patient who has minimal medical needs this year and then needs a $200K cancer treatment next year but couldn’t pass underwriting or afford insurance that reflects high risk, older age or both?

As for sending the subsidy money to the patient first, if I were a provider, especially a hospital, that provides expensive and sophisticated care, why should the patient be trusted to pay me / it when they are living from paycheck to paycheck, have no savings, and may be uneducated or at least unsophisticated or unwise in handling money?

Member
Barry Carol
Jan 11, 2017

Ah, we learn again that talk is cheap. Action that doesn’t create more problems than it solves isn’t so easy. Also, behavioral economics tells us that people feel more pain from losing something they already have, health insurance in this instance, than they gain in pleasure from the mere possibility but not the certainty of something better instead. Good luck republicans on repealing and replacing the ACA. You’re going to need it.

Member
Jan 13, 2017