THCB

The Republican Alternative to Obamacare: Their Aversion to Fixing it May Prove to Be a Political Mistake

The Republicans have an alternative to Obamacare and they may have given the Democrats a big political gift.

The proposal was unveiled last Monday by Republican Senators Richard Burr, (NC), Tom Coburn (OK), and Orrin Hatch (UT).

The Republican plan targets many of the most unpopular parts of the Affordable Care Act such as expensive mandated benefits and the resulting lack of choice, the individual mandate, the employer mandate, and age-rating disruptions.

My sense is that most independent voters––the ones that matter in an election-year––don’t want Obamacare repealed; they want it fixed.

The problem for Republicans is that they have such a visceral response to the term “Obamacare” that they just can’t bring themselves to fix it. The notion that Obamacare might be fixed and allowed to continue as part of an Obama legacy and as a Democratic accomplishment is something they can’t get past.

So, the only way Republicans can propose an alternative to Obamacare is to first wipe the health insurance reform slate clean and start over.

There is a problem with that strategy. Have you heard the one about, “If you like your health insurance you can keep it?”

It is now 2014. The Affordable Care Act is law. The Republican alternative would mean taking lots of things away the Democrats will quickly pounce on:

  • Medicaid Expansion – The Republican alternative would “not expand” Medicaid––presumably rolling back the Medicaid expansion in each of the 24 states that have expanded it. By year-end, millions of Americans will have gained coverage. Who wants to tell these people now on Medicaid the Republican alternative only contemplates covering pregnant women, low-income children, and low-income families at the old levels? Twenty-four states that would see benefit cuts equates to 48 U.S. Senators.
  • Insurance Subsidies – The Republican alternative would offer health insurance premium subsidies for people up to 300% of the poverty level. Far fewer people than expected are buying Obamacare but that number will be well into the millions before long. Obamacare offers subsidies up to 400% of the poverty level meaning that lots of people would lose their subsidies––and they would be the voters who are solidly middle-class.
  • The Tax Exclusion for Employer-Based Health Insurance – There is no health insurance policy so sacred in America as the one a worker gets from their employer. The Republican alternative would cap the tax exclusion, currently at 100% of whatever the employer gives the worker and their family for health insurance, at 65% of the cost of the “average” cost of a policy. Democrats will quickly jump on this as a huge middle class tax increase and an attempt to undermine employer-based health insurance.
  • Lower Premiums for Older People – A controversial part of Obamacare was its requirement that older people can’t be charged more than three times the premium of the youngest. That contributed to the rate shock that hit many people in the small group and individual market when Obamacare policies had to comply. Republicans would take people through the same political nightmare once again but in reverse this time. Their plan would cap rating differences at 5:1, thereby forcing older peoples’ premiums up, and younger peoples’ premiums down. Older people tend to vote more often. Ironically, they have also been the ones who so far have more often bought an Obamacare compliant policy.
  • The Prohibition of Pre-Existing Condition Provisions – As of January 1, 2014, there is no such thing in America any longer. But Republicans would bring the provision back if people did not maintain continuous coverage. That sounds fair. But what happens when someone is forced to drop their expensive coverage when they lose their job for a few months and the Republican tax credits don’t give them enough help maintaining it? Democrats will be able to think of lots of scenarios where a family playing by the rules has no choice but to drop coverage and face pre-existing condition provisions once again.

Each of these Republican proposals is credible and constructive and should be part of any discussion over how to move forward with health insurance reform.

No one has been more critical than me, for example, toward Democrats who refused to phase-in age rating compression rather than shock the market all in one year. But, it’s done. Rolling key provisions of the Affordable Care Act back would only create a new set of offended parties who would want to keep the insurance they have.

This sets up an incredible political irony.

By not being willing to fix Obamacare, the Republicans have put themselves in the position of having to take things away from people––many of them from solid middle class people.

That opens up a huge political opportunity for the Democrats.

Democrats can now claim the high political ground by admitting they made mistakes and they are now willing to fix the things that are so obviously wrong with Obamacare. They no longer have to defend it. They become the, “Don’t throw the baby out with the bathwater,” team. Democrats can now be critical about the most unpopular parts of Obamacare because they are the ones willing to fix them!

It is now the Republicans, the Democrats will argue, who would put the country through another round of health insurance disruption.

Of course, Republicans will claim that Obamacare can’t be fixed.

But tell that to the older people who Democrats will be quick to remind will be paying more, the middle class people who would get their health insurance subsidies cut, and the 160 million people who get their health insurance––which the really like––through employer-based plans and will see their taxes go up.

I am convinced Obamacare will have to be fixed. It is a mess as it is.

But it will limp along for at least a few years; the health plan “reinsurance” provisions of the Affordable Care Act will assure that.

Even if the Republicans win the Senate this fall, as long as Barack Obama is in the White House there will not be a repeal of Obamacare.

The first real crack the Republicans will have at repealing and replacing Obamacare would be in 2017––IF they sweep the Congress and the White House in 2016. By then this law will be even more entrenched.

I doubt Republicans will ever have the 60 Senate votes they would need for a unilateral remaking of Obamacare. That means any fix will have to come from a bipartisan agreement at some level. A bipartisan agreement would give both sides the political cover they would need for the controversial but fundamental improvements Obamacare needs.

I really believe we will ultimately see a bipartisan agreement to fix Obamacare––most likely after the 2016 elections––that ironically could well include many of the things these Republicans are talking about like caps on health plan tax exclusions, an alternative to the individual mandate, far more flexibility in plan choices, more Medicaid flexibility and accountability for states, and maybe even real medical malpractice reform built upon ideas like “health courts.”

But by putting a repeal and replace plan on the table, rather than focusing on a fix from the point we are at today that creates obvious losers, Republicans may have handed the Democrats a big political gift.

I can’t disagree with those who argue that all sides have a responsibility to tell us what they would do.

But I will suggest the Republicans would have been better off starting from the place we are at in 2014. About the only thing they will now end up doing is wasting some good ideas.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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AurthurRobin KitchenMatthew Holttcoyotelegacyflyer Recent comment authors
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Bob Hertz
Guest

The best commentaries on Medicaid (in my admittedly self-centered view)
were in this very blog in Oct 2012.

“Laughing at the Chutzpath of the Right on Medicaid” was Matthew Holt’s lead article.

Bob Hertz
Guest

Tcoyote makes very good points about Medicaid. States like Illinois and Michigan are on very shaky ground financially, and I can sympathize with their unwillingness to take on the woodwork Medicaid enrollments.

I have less sympathy for the states which have no income tax like Florida.
These states contain many wealthy people who benefit every day from the labor of cooks, nannies, farm laborers, et al who would benefit from a Medicaid expansion. An extra $2 billion in costs to Florida is not a small sum, but it is a very tiny percentage of the wealth in that state.

Robin Kitchen
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Robin Kitchen

Wow. IMHO, both of them need to be scrapped, and the system needs to be rebuilt from the ground up.

Also, I had thought this site was objective. Apparently not. So, I’ll just unfollow on my FB feed as of now.

Barry Carol
Guest
Barry Carol

One more point. If the provider is out of network, the patient can be balanced billed for the difference between what the insurer pays, if anything, and the list price.

The friend I referred to in an earlier comment had that happen to her one year. Her oncologist who practiced at the academic medical center was in the insurer’s network but the hospital’s imaging center wasn’t. What a system!

legacyflyer
Guest
legacyflyer

Barry, First of all, it is important to distinguish between the “list price” and what was actually paid. Most payors get a substantial discount from the “list price”. Of course Medicare sets its own prices. (And as has been pointed out before on this blog, only the uninsured are charged “list”) So the first thing I would say is: Are you sure you know what was paid vs. what was charged? Having said that, there are typically significant price differences between hospitals and independent imaging centers with hospital prices being higher. In my opinion these differences are NOT explained by… Read more »

Barry Carol
Guest
Barry Carol

legacyflyer, Thanks for your last comment which largely squares with my perceptions. Those are that Radiologists often read images for both hospitals and independent centers and the difference in payments to hospitals and the independent centers is NOT justified. When insurers negotiate with hospitals, if the insurer has a significant market share in the state or at least the region, the ultimate payment agreement is usually some percentage above the Medicare rate. When the insurer has a small market share and the hospital is a large dominant system and/or a famous academic medical center, the payment is usually a discount… Read more »

Barry Carol
Guest
Barry Carol

legacyflyer, Regarding imaging specifically, I had a brain MRI in 2009 in NYC at a non-hospital owned imaging center. My insurer’s contract rate was $475 vs. a list price of $1,800. A friend in the Midwest needs to get the same test every year. In her area, a non-hospital owned facility charged $600. At the high end, the regional academic medical center charged $4,200 and actually received close to that amount from some insurers. A year or so later, the independent imaging center was acquired by a local hospital and the price for the same image suddenly surged. Perhaps you… Read more »

Bob Hertz
Guest

Well, I am probably showing my socialist stripes a little here, but Canadians, Germans, and Japanese are extremely insulated from the cost of care, and they have not experienced our extreme medical inflation. That is because they have strong civil service bureaucracies who pay constant attention to the cost of care; and their doctors and hospitals essentially (though not happily) obey the national fee schedules. I understand that national systems cannot be just transplanted lock stock and barrel. However, on all the blogs I read I bring up the point that there is more than one way to achieve cost… Read more »

Barry Carol
Guest
Barry Carol

Bob, I’ve said before that the German and Swiss insurers negotiate prices as a group with providers who also negotiate as a group in each region. We would need an anti-trust exemption to use that approach in the U.S. The French actually use reference pricing. Doctors and hospitals are allowed to charge more than the price the government will pay but they have to make that transparent to the patient and, presumably, convince the patient that the value they offer is worth the extra money. The Japanese have a national fee schedule but patients who want to see the most… Read more »

Barry Carol
Guest
Barry Carol

Legacy Flyer, There are plenty of examples of large hospital systems that can extract prices from private insurers that are well above Medicare rates. The best example that I’m aware of is Partners Health System in Massachusetts which includes Massachusetts General Hospital and Brigham & Women’s Hospital. Most employer plans want these hospitals in their network and the hospitals know that. In the past, insurance plans that excluded those facilities in exchange for a lower premium just didn’t gain much traction in the market. I’m told that Partners commands prices that are 30%-40% higher than what its local competitors are… Read more »

legacyflyer
Guest
legacyflyer

Barry, There is this idea out there that Insurance Companies are naive/stupid and if they only learned how to negotiate better, we (patients and health care consumers) could save a “gazillion” dollars. I think people who subscribe to this idea are themselves naive. While I cannot speak with any great insight into negotiations between Insurers and Hospitals, I can tell you that Insurers definitely DO know how to negotiate with “providers” We (Radiology/Imaging) negotiate with Insurers on a regular basis. Trust me, they do not walk into these negotiations, lay on their backs and raise a white flag. Nor do… Read more »

Bob Hertz
Guest

Good points, Barry. But let me go back to the fine article by Robt Laszewski and raise a few questions: a. Why do Republicans dislike Medicaid so much? Especially when 2/3 of Medicaid spending is on the poorest elderly and the disabled, and not on poor kids or the working poor. Even the states with the greatest opposition to Medicaid — Texas, LA, et al — have in most cases been riding on an 80-90% federal share for decades. Bill Maher once said that “The primary job of the Democratic Party is to drag the hillbilly half of this country… Read more »

tcoyote
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tcoyote

Texas’ FMAP (Medicaid Matching Rate) dropped to 58% after the temporary stimulus bump- from around 70% and California went back to 50%. The FMPA is based in states’ per capita wealth.

The state share of both programs is a huge fiscal problem. The ACA provided enhanced (e.g.100%) federal funding for the newly eligible Medicaid folks, falling to 90% after a few years.

Barry Carol
Guest
Barry Carol

Last year, I heard one of the governors tell an interviewer that 80%-85% of state and local revenue goes to pay for three things. He said: “We educate, medicate and incarcerate.” Medicaid is a big deal for state budgets and to the extent that it grows faster than revenue, it starts to crowd out lots of other worthwhile things including infrastructure spending. While the federal promise to pay for 100% of the cost of Medicaid expansion under the ACA for the first three years and 90% after that sounds pretty good, the issue from a governor’s perspective comes down to… Read more »

tcoyote
Guest
tcoyote

It’s more complicated than merely a matter of trust. It was also the huge reservoir of people (estimates vary, but easily 8-10 million) who were ALREADY eligible for Medicaid, but not enrolled. The 100% FMAP was for the NEWLY eligible. For the ALREADY eligible, who are referred to as “the woodwork people”, the state was going to be on the hook for anywhere from 30-50% of every new dollar spent on their care. PLUS, the exchanges created a “motor voter” type express lane for the woodwork folk to enroll- you could do it online, instead of having to take the… Read more »

Matthew Holt
Guest

Hmm tcoyote, if S-CHIP is any indication, the Red southern states have got a pretty decent ability to kick people off rolls when the going gets tough. And even the Western Blue states (CA & OR) do manage to cut Medicaid spending in recessions. But overall you’re right. Medicaid being states based is a stupid idea. In fact Medicaid as a separate program is a stupid idea. But apparently having lived through 1994 (and seen what happened in Massachusets in 2006) Daschle and pals decided that expanding this stupid idea was the only way to get to sorta-universal coverage. Oh… Read more »

Aurthur
Guest
Aurthur

Great idea to make it federal as long as states can opt out completely.

Barry Carol
Guest
Barry Carol

Legacy Flyer, Reference pricing is a concept that would be most useful in controlling costs for the commercially insured non-Medicare population. Here’s an example. The big CA state pension fund, CalPERS, found that it was paying, at contract reimbursement rates, $15,000 to $110,000 for hip and knee replacements in Southern CA. There were 110 hospitals in the network and there was no discernible difference in quality of outcomes. In working with Anthem Blue Cross, owned by Wellpoint, it decided that it would pay $30,000 for this procedure and 46 of the 110 hospitals agreed to do them for that price.… Read more »

Legacy Flyer
Guest
Legacy Flyer

Barry,

I generally find myself agreeing with what you say. However, in this case I find some of what you say confusing. What does this mean:

“Bring reference pricing to surgical procedures, imaging ….”

I am sure you are aware that Medicare has an extensive price list for particular procedures/tests.

I presume you also know that insurance companies have access to this data and negotiations with “providers” are conducted based on “percent of Medicare”.

In what way does “reference pricing” differ from what is currently being done?

Barry Carol
Guest
Barry Carol

I think Republicans would be better served if they focused on ideas that would reduce healthcare costs. The fact is that the poor need Medicaid and a pretty significant percentage of the rest of the population that don’t get their health insurance through an employer or qualify for Medicare need subsidies to afford coverage. I also think the employer tax preference issue should be deferred for now and tackled later as part of a future broad based tax reform effort. Ideas to reduce health insurance costs could include the following: (1) Get more of the Medicaid eligible population into managed… Read more »

Shane Irving
Guest

Nice article… I think you’re exactly right. The foundation has been laid but what gets built on top of this base over the next 4-5 years will be the real model into the future. The “Doc Fix” is just one of the many things that now need to be corrected….

Don't Go Back to Rockville
Guest

Fix Obamacare? Here’s my two cents. 1. We’re going to need a real “doc fix.” We’re going to have empower healthcare workers rather than trying to systemize and process them into submission. And doctors are the logical people to go to if you’re trying to get leadership on the ground. Like it or not, Dems are going to have get over their instinctive hatred of doctors if they want that can make this work. They probably won’t be able to do this. Instead they’ll work with administrators. Exactly the people you want on your side in a fight. Smart. 2.… Read more »