Repeal + Replace

The Rust Belt Is Burning: Republicans Lay Waste to their Base on Health Reform

William Tecumseh Sherman, who laid waste to the South at the end of the Civil War, famously said, “War is Hell”.  So, too, is health reform.  And like Sherman’s infamous March to the Sea, where he burned town after Confederate town, the Republican War on Obamacare entered its attrition phase with the introduction on Monday in the House legislation to repeal and replace ObamaCare.  Except that Ryan is marching in the wrong direction; his troops are marching “north” and burning towns behind their own lines.

Ryan’s bill released Monday was greeted with a chorus of derision from the newly empowered Republican base; some conservative wags dubbed the bill “RINOCare”. Thoughtful conservative analysts savaged it.  Michael Cannon, the hard core libertarian Cato Institute health analyst, called it “a trainwreck waiting to happen” and suggested  that “ it will create the potential for the sort of wave election Democrats experienced in 2008”    In Reason.com, Peter Sunderman wrote,  “it’s not clear what problems this particular bill would actually solve.”

Ryan’s draft neither repeals nor replaces ObamaCare.  

It retains the insurance underwriting rules that have raised the cost of health insurance, as well as ObamaCare’s 10 million person Medicaid expansion (until 2020).  And then, it shrinks Medicaid only by attrition, protecting the enhanced federal match for the expansion population. 

It leaves the exchange system intact, removing the individual mandate and  replacing the income-related premium subsidies with an age-related system of refundable tax credits tilted toward younger people. The refundable tax credits are a much  better mechanism that the complex and difficult to administer premium subsidies, but they are way too small to help lower income and older people stay insured.   Many millions of families will return to the ranks of the uninsured.

It also doesn’t effectively stabilize the individual insurance market. While Ryan’s  bill creates a $100 billion slush fund for states to protect the individual market, that they might use for high risk pools or other purposes, it accentuates the risk selection problem by letting the potentially sick enter the market with only a 30% premium penalty for a year. 

Robert Laszewski, a fierce critic of ObamaCare, argued that this sum of money wouldn’t come close to dealing with either the Obamacare individual health insurance market problems or the gap that gutting Medicaid would create.” He went on to argue that

“Obamacare is so poorly constructed it is literally an anti-selection machine. The Republican proposal is worse.”  Mario Molina, whose Molina Healthcare sells coverage on nine ObamaCare exchanges, said, You’re going to see big rate increases, and you’re going to see insurers exit markets.”

The bill also doesn’t reduce federal spending or costly regulatory mandates enough to matter to Republican “deficit hawks”.  Though it has yet to get a CBO score, it is highly likely that the bill  increases the federal deficit, which will be unacceptable to the large fiscal conservative wing of the Congressional Republicans.

But worst of all, it lays waste to President Trump’s electoral base– Baby Boom vintage working class white voters in Appalachia and the Rust belt. As many as 5-7 million of whom got coverage from ObamaCare.  The median age of a Trump voter is 57, and they came from counties with serious underlying health problems.   

These working class Trump voters get clobbered by Ryan’s bill.

The AARP, which advocates for older folks said:  This bill would weaken Medicare’s fiscal sustainability, dramatically increase health care costs for Americans aged 50-64 and put at risk the health care of millions of children and adults with disabilities, and poor seniors who depend on the Medicaid program for long-term services and supports and other benefits.”

Thanks to the switch from income related premium subsidies to a fixed and not terribly generous refundable tax credit, 60 year old workers all across “Trump Country” earning $20 thousand a year (thus ineligible for Medicaid)  take between a 50-75% haircut on federal help that will push millions of them out of health coverage, according to a Kaiser Family Foundation analysis

What Ryan’s bill DOES do is repeal $600 billion in taxes on the wealthy, as well as pharmaceutical companies, health insurers and health manufacturers. It also lifts the $500 thousand annual cap on deductibility of health insurance executive salaries imposed by ObamaCare. And it spends a remarkable six pages making ABSOLUTELY CERTAIN that winners of high dollar state lotteries will NOT receive Medicaid benefits!

If Trump had run on Ryan’s plan- cut taxes for the rich and throw millions of working class people back into the raging sea of no health coverage- he would never have been elected President in the first place. If the bill is enacted, Trump’s promises to “cover everybody” and provide people “something terrific”- better coverage for less out of pocket cost- will look as specious as President Obama’s campaign promises about cutting family costs by $2500 a year and “if you like your health plan, you can keep it”. “TerrifiCare” this bill isn’t.

Trump is now in a very difficult position. Even if he pushes hard, it is unlikely that this bill, as written, gets the 50 Republican votes he needs to clear the Senate. If he pushes hard and loses, his ability to enact the vital tax cuts and infrastructure plans equity markets and businesses expect will be impaired, and the economic problems he promised to address will not be solved.

It is not clear that Trump has the political leeway to cancel the Medicaid expansion without damaging the political fortunes of the sixteen Republicans who expanded their programs. And his staff clearly has no grasp of the magnitude of change required to reverse the meltdown underway in the individual insurance market, nor the votes in the Senate to change the key elements of ObamaCare that have led to that meltdown.

What Trump’s colleagues in the House have done with Ryan’s bill , unwittingly, is set fire to their own government. As pollster Sean Trende demonstrated in his masterful electoral analysis, The Lost Majority  the wave elections of 2006, 2008 and 2010 were “illusory” realignments of American political power.

What the wild swings in these elections-from Republicans to Democrats and back to Republicans in three successive seasons- showed was an increasing disconnect between the day-to-day reality of American voters and their political elites. Trende’s analysis foreshadowed Trump’s surprise victory.

Trump understood that disconnect better than any other actor on the 2016 electoral stage, and connected with a lot of hopeless, dispossessed and angry voters. Unless he can turn his generals around and stop setting fire to his own people, his reign, to paraphrase Hobbes, will be nasty, brutish and short.

Jeff Goldsmith is an associate professor at the University of Virginia and National Advisor, Navigant Healthcare. 

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AllanBobHertz5Bob McNuttJim PurcellHeyward Zwerling, MD Recent comment authors
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Peter
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Peter
BobHertz5
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BobHertz5

Barry, you note that up to 40 million people will get tax credits averaging $3,000 each. But in the Ryan plan, unlike the Cassidy-Sessions plan, the tax credits will only be activated if someone uses them to buy a plan. A lot of people in the Ryan plan will be too discouraged to use their tax credits, so the expense to the gov’t will not be $120 billon. Small comfort, though. As I read the Ryan plan, the existing subsidies will continue for 2018 and 2019. People will assumedly not have to face the scrawnier tax credits until 2020. Out… Read more »

Peter
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Peter

“As I read the Ryan plan, the existing subsidies will continue for 2018 and 2019.”

Hummm, I wonder if the congressional election cycle has anything to do with that.

Barry Carol
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Barry Carol

Assuming roughly 40 million people who don’t currently get health insurance through an employer, Medicare or Medicaid and a median age of about 40, it will cost $120 billion per year to provide an age-based tax credit averaging $3,000 per year to each of them. If we want to establish high risk pools for the sickest people so most of the rest of this population can buy health insurance for a significantly lower premium, it could easily cost another $100 billion or more to cover them less whatever they can afford to pay in premiums out of pocket. Throw in… Read more »

Peter
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Peter

Looks as if Ryan is saying, well if Trump can lie I might as well try it also. The leader sets the tone.

http://www.politico.com/agenda/story/2017/03/three-misleading-claims-in-paul-ryans-obamacare-lecture-000349

Peter
Member
Peter

“poor people just don’t want health care and aren’t going to take care of themselves.”

Said by Rep. Dr. Roger Marshall. This typifies the Repugs, “Let them eat cake” attitude to health care “Replace”.

Barry Carol
Member
Barry Carol

Just keeping the ACA taxes, especially on higher income people, which includes myself, would provide a lot more flexibility in how to structure health insurance reform without increasing the federal deficit. The biggest single challenge will be financing high risk pools that actually work for the people who need them. The next biggest challenge will be providing subsidies on top of age-based tax credits to ensure that nobody pays more than 10% of modified adjusted gross income out of pocket for health insurance premiums and much less than that for people with low incomes but too much to qualify for… Read more »

Peter
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Peter

Look to Trump to claim credit for “Repeal”, but blame Democrats for no ‘Replace”.

Keith Berndtson
Member

Patients and physicians seem to be the only key stakeholders in the health care sector with no leverage on reform. I’m not sure if burned out physicians would risk leaving Medicare, Medicaid, and commercial networks to salvage some semblance of career satisfaction. Staying boxed in may be preferred over the risk of being locked out. Physician cooperation with reform goals is an externality that’s hard to read. Physician burnout affects care quality by eroding motivation, self-esteem, sense of fulfillment, work-life balance, and much more. Should disgruntled doctors wish to mount a mass exodus, I can imagine legislators making it illegal… Read more »

Peter
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Peter

“I wish for a kind of health care reform that treats patients and physicians with fairness and respect.”

Yes, but who will pay?

Keith Berndtson
Member

Viable answers to your question might stand a better chance of emerging if patients and practicing physicians were part of the reform process.

Steven Findlay
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Steven Findlay

Excellent piece. Thanks Jeff! On so many levels, AHCA fails. And for many different groups. I’d note the “job lock” issue – for more well off people in 50s and 60s. With almost all the major health care interest groups opposing the initial draft, it’s not likely it can pass…in the House let alone the Senate. We’ll see how open the Rs are to substantial changes. Paul Ryan thought it was “his day” on all these fundamental changes, especially Medicaid. Probably not. And Trump does not have the political capital to make a difference; he doesn’t have any credibility on… Read more »

jamesepurcell
Member

Yup. Disaster II. What will be interesting is what happens in my home state of Massachusetts. Charlie Baker, who DOES understand coverage, is trying to shore up the individual and corporate mandates, and tidying up what was Romneycare. However, the loss of Medicaid dollars (perhaps, given the very recent waiver approval MA received) would hurt. Joe Flower (today I think) posted a well written letter to a Trump advisor, basically saying that without halving the cost of care, we’re sunk. Well done both Jeff and Joe). But, critiquing what’s going in is a tad like shooting fish in a barrel.

Member

“without halving the cost of care, we’re sunk”
Oh, simple, just cut the cost of care in half! I’m sure if you can just give Trump/Price a hint on how to jump that little hurdle all will be great! Pardon my facetious tone, but seriously, are there suggestions on how to do this without imposing a national draft of all docs, nurses and hospital administrators and nationalizing all hospitals and pharma companies? (there I go again!, I can’t stop myself from being facetious!).

jamesepurcell
Member

Half does seem ambitious. But yes, there are ways that require discipline and political will, something in short supply. We first need complete price, quality, and outcomes data to use to create consumerism (whether it’s individuals, employers, CMS, or insurers). Competition is not today at the right level (amongst providers of care) and not on the right things (said price, quality, and outcomes). Waste accounts for perhaps $1 Trillion a year. Can’t be eliminated entirely, but maybe halved? Changing how we pay for care that incents lower rates of use. Addressing chronic illness that accounts for arguably 2/3 of all… Read more »

Member

Thanks for the serious response. The majority of the points I agree with, especially re cost and waste as the key, though perhaps disagree with the most expeditious way to address those items.

Steve2
Member
Steve2

AS much as I want to tell Trump supporters “I told you so”, I think we should just regard this as coming out so Trump can make it look like he did something quickly. I suspect, hope, this is not that close to a final bill.

Steve