Replacing the ACA; Closing the Deal

Last week, the CBO threw buckets of cold water on the American Health Care Act.

While there are serious questions concerning the CBO’s methods and its historical accuracy (see Avik Roy’s critique), Democrats fighting to defend the ACA as it heads towards collapse celebrated; they know CBO scores have potent political weight.

The Republican response was two fold—the loudest voices want to repeal the ACA and see what happens.  They’re wishing away the concerns of millions of Americans to demand a rapid march over the political cliff.

Many other Republicans (e.g., Senators from Medicaid expansion states) are quietly eying the hills. To succeed politically and substantively, the AHCA needs to preserve the ACA’s most popular features in a fiscally sustainable way while building a base of political support that lasts beyond the next election.

Here’s a path forward.

ACA’s core flaws.  The ACA has two fundamental flaws—it is financially unsound and politically unstable.  The ACA’s financial instability is hard-wired.  Combining a weak individual mandate, community rating that strongly tilts against young people, guaranteed issue and comprehensive benefits has produced predictable results. Too many young people have concluded the ACA’s a bad deal, too many others are gaming the system and premiums/deductibles are too high for too many.

Whether the ACA is in a death spiral is debatable.  Whether it’s heading that direction is not.

The ACA’s enactment added political instability to the mix. 

Had common ground with Republicans been found when the ACA was enacted, its repeal would not be today’s top legislative priority.

AHCA’s proposed fix; heat and light

The AHCA carries a heavy load of political peril. The AHCA replaces subsidies with refundable tax credits.  Critics on the left believe the tax credits won’t be generous enough.  Refundable tax credits give the Freedom Caucus real heartburn.

Medicaid will transition to a block grant program.  ACA proponents are convinced Medicaid will then wither on the vine.  The Freedom Caucus wants the expansion off-ramp to kick-in yesterday.  Many Americans need an orderly transition.

To encourage young people to buy healthcare coverage, the AHCA widens rate bands to shift more of the cost of care to the consumers of care; i.e., older people.

Because older people are paying attention and most younger people aren’t, the politics of that move are very dicey.  There’s already been movement on this front since the CBO report.

Finding the political sweet spot.  Most of the chatter about the AHCA’s prospects assumes enactment will be a purely Republican exercise.

If last week is any indication, it’s far from clear Republican can thread that needle within their ranks.

If they succeed, they’ll tee up the same partisan strife as the ACA, and attacks ads targeting Trump voters write themselves if some of the AHCA’s current provisions remain.

In a strong contender for political tin-eared move of the year, the AHCA eliminates the ACA’s application of Medicare taxes to investment income.

The prospect of campaigning against a bill that cuts care for struggling working families in the heartland while giving tax breaks to Wall Street has Democratic consultants salivating.

President Trump should defer that idea until tax reform efforts begin in earnest.  A smart negotiator should be able to secure some Democratic support for a revised AHCA that eliminated the investment income tax cuts.

The President knows there isn’t a private company in the world that would forego the negotiating strength its market clout gives the federal government.  He’s been talking about getting better Rx deals since his campaign started.

Ten days ago, the President met with Rep. Elijah Cummings to discuss reducing Rx costs.  That could be a harbinger.  If the Administration looks for bipartisan support for an ACA replacement, securing authority to negotiate drug prices as part of the AHCA could provide some glue.

The additional revenue from deferring the investment tax cuts and the savings from Rx price negotiations will also improve the CBO score.

These changes would provide room to further cushion the blow of broader rate bands on lower-income, older Americans, ease the Medicaid transition and/or strengthen the proposed risk pools.

To close the deal with Congress, the President will need to knock heads with Republicans who put ideological purity ahead of achieving what’s important and possible.

Campaigning for the AHCA in the red states with Democratic Senators is part of the path to enactment.

Perhaps most importantly, giving moderate Democrats some positive reasons to vote for the AHCA would go a long way towards avoiding the political instability that’s haunted the ACA since its inception.

The ACA needs fixing.  Let’s get it done once and done right.

Gary Mendoza is CEO of Health eWay, healthcare’s mobile first platform.  He served as California’s HMO regulator in the mid-90s and was the Republican candidate for Insurance Commissioner in 2002.

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1 reply »

  1. With all these to be or not to be, concerning ACA repeal, hope remains. The hope that if the repeal will commence, then those ACA flaws (financial and political instability) would disappear. Republicans aren’t giving up on positive changes, so why should we? HIMSS17 hosted multiple talks on ACA replace options and we at ScienceSoft highlighted them to analyze overall mood and possible alternatives: https://www.scnsoft.com/blog/the-hopes-and-fears-of-possible-aca-repeal-at-himss17