Donald Trump made repealing Obamacare one of the cornerstones of his campaign. Now that he has won, his administration will face the daunting task of unraveling nearly seven years of Obamacare. Republican policymakers cannot agree how to proceed. Some Republicans believe Trump should repeal Obamacare piecemeal; others worry that would be a disaster.
Whether you oppose or support the Affordable Care Act (ACA), it has structural flaws that will have to be addressed. Addressing those flaws will be less painful if repeal of the costly insurance provisions is accompanied by a replacement plan. Congress can repeal some Obamacare provisions using budget reconciliation, which requires only a simple majority. Only those provisions involving taxes and the budget can be repealed this way. The individual and employer mandates and all the ACA taxes can be repealed using budget reconciliation. However, the regulations that prevent insurers from designing affordable health plans cannot. Repealing the insurance mandates require a filibuster-proof majority. A slight Republican majority in Congress means the Trump Administration likely has the power to gut the ACA. However, Trump cannot replace Obamacare without maybe a dozen Senate Democrats willing to go along.
What else can Trump do? Consider this a Scorched Earth strategy, since it is premised on making Obamacare so unprofitable for insurers they would drop out of the individual market. As president, Trump could command his appointed HHS Secretary to drop the appeal of House vs. Burwell. The Obama administration already lost the court case, which found the ACA cost-sharing reduction payments are illegal, because they have not been appropriated by Congress. Insurers are required to provide cost-sharing reduction payments to low-income enrollees whether or not the health plans are reimbursed for them. Without being reimbursed for the cost-sharing subsidies, insurers would likely leave the market. The administration could also seek to prevent any Court Settlement Funds from being used to reimburse insurers for loses above the budget neutral risk corridors payouts.
Another powerful weapon Trump will possess is the power to order his HHS Secretary to merely stop enforcing Obamacare’s provisions. Some provisions are not on the chopping block. Trump has already indicated he supports allowing young adults to stay on their parents’ employer plans. He has also indicated he favors retaining the ban on pre-existing condition exclusions. A ban should come with restrictions, however, such as guaranteed issue and guaranteed renewability only for those who maintain continuous coverage. Obamacare provisions that allow anyone to sign up for coverage without proving they have continuous coverage (no gaps of more than 62 days) is what allows people to game the exchange — driving up premiums for continuous enrollees and bankrupting insurers.
The most pressing goal should be to replace all the costly provisions in the ACA with the consumer-friendly health plans most Americans prefer. Increased flexibility in health plan design should also encourage the use of cost-containment tools, such as transparency tools and expanded health savings accounts (HSAs). Trump has already indicated he supports expanded transparency and HSAs. Why not allow HSAs to be a vehicle for saving for family leave, sick days and retiree medical care — regardless of the coverage people choose?
Many Americans do not have access to coverage through work and must pay for health insurance with after-tax wages or pay the full cost of medical treatment out of their own pockets. Trump supports allowing a tax deduction for those who lack access to health coverage at work. Many Republicans also believe a tax credit should be available to those who do not get employer subsidies. The tax credit could replace the cost-sharing and sliding-scale subsidies of the Obamacare exchanges and could be used to purchase private health insurance or to pay directly for care. The credit could be adjusted for health status, or age as a proxy for health status.
Another goal of any reform agenda should be to expand Americans’ access to primary care. If you ask moderate-income Americans what they want out of health insurance, they mainly want to be able to see a doctor should they become ill. Obamacare’s high-deductibles with unlimited lifetime benefits is generally not the kind of coverage they clamor for.
Medicaid also needs reformed to better serve low-income families. States should be allowed to experiment and find solutions that meet each state’s unique needs. A block grant would do this, while holding states accountable for cost-overruns. For able-bodied adults on Medicaid, the program could be designed to transition them to private plans as their incomes rise, including requiring enrollees to pay small premiums; to work, seek work or participate in job-training programs; and requiring enrollees to pay nontrivial copays and cost sharing. States should also be allowed to remove beneficiaries who fail or refuse to pay premiums, co-pays or follow the rules.
The past seven years have been an exercise in futility for many people who have to buy their own health coverage. In its current form, the Affordable Care Act is unaffordable for taxpayers and many consumers. Maybe both major parties can now come together to work on a replacement plan we can all live with. It will not be easy.
Devon Herrick, PhD is a health economist and a senior fellow at the National Center for Policy Analysis (NPCA).