The Race to Repeal the Affordable Care Act is Now On

Republican leaders on both sides of the Hill have largely focused on a strategy of repealing the majority of Obamacare through reconciliation. Because this is purely a budgetary maneuver, it would leave many of the other components of the law intact because repealing those would require passage in the Senate, which in today’s environment, would likely require 60 Senate seats to overcome the inevitable Democrat filibuster.  However, many of the core components of the law would be repealed, including many of the taxes and mandates. Thus, the current plan is to pass the repeal through reconciliation, and then allow the revenue stream to be phased out over time.

This leaves the country with an open question: what happens next?

That is the $2 trillion question.

First, we should stipulate that virtually every conservative policy expert uniformly agrees this is the moment to repeal as much of Obamacare as possible. Components of the law will remain (such as regulatory restrictions like community rating, which impose high costs on the insurance market). However, the GOP will never have a window of opportunity like this to repeal the law, and if they are honest about their promises, they must move forward quickly.

Conservative Health Care wonk Avik Roy argues that the GOP has no choice but to move forward with ‘repeal and delay’:

The fundamental problem is that in order to fully replace Obamacare, Republicans need to come up with a bipartisan plan that can attract the 60 votes necessary to overcome a Democratic filibuster.

Given that Republicans don’t even agree among themselves as to how to replace Obamacare, it’s going to take them some time—at least a year or two—to figure out how to do that.

Based on dozens of conversations I’ve had with Democrats on this subject, it seems clear that Republicans’ best and only chance to get 60 votes is to develop a plan that can cover approximately the same number of people as Obamacare—and ideally more.

Think about it the other way around. If Republicans try to pass legislation that covers 10 million fewer people than Obamacare, most Democrats won’t support it. And then when Obamacare’s funding streams expire, Dems will blame Republicans for the resultant turmoil. On the other hand, if Republicans draft legislation that credibly covers a comparable number of people to the ACA, then it’s Democrats who would look stubborn if they refuse to play ball.

The argument is sound, but that said, the process argued for here to repeal and delay is steeped with risks. Roy argues that the GOP would have leverage to force at least 7 Democrats to join the Republican effort to replace Obamacare…but is such leverage realistic?

Consider this scenario: the GOP repeals much of the funding for Obamacare, and basically promises that the exchanges are not going to extend past 2019. What then is the incentive for insurers to stay on the exchanges? Many have already been hemorrhaging money, but have been willing to stick it out in hopes of establishing a long-term viable marketplace. With that incentive gone, there is no reason for them to suffer through the losses that would be involved going forward. The potential for a future death spiral of the exchanges is likely to increase rather quickly.

By 2018, what would the exchanges look like in this scenario? The best guess is that many if not most of the major players would exit by the end of 2017, basically leaving consumers with fewer if any choices for health care. This, in turn, would increase the rate of premium cost increases, further increasing financial pressure on the middle class.  In that environment, who would have the leverage…Republicans or Democrats? Many would argue the latter; with elections nearing, Democrats would lay the blame for the entire mess on the Republican Party, and would have legitimate claims to do so.  They would have no incentive to compromise until after the midterm elections.

Republicans would likely be quite vulnerable in 2018, especially in Governors races.  Republicans currently control 33 Governorships.  These include many states that are ‘purple’ states with Republican Governors that also expanded Medicaid under the Affordable Care Act, such as Michigan and Ohio, both of whom will have open seats in 2018. There is a practical reason why current Governors John Kasich of Ohio and Rick Snyder of Michigan have been vocal about Republicans being cautious as they move forward in this repeal process.

2018gubernatorialelectionswhoisrunning

Senate and House races would also face natural headwinds, as the President’s party usually does in the first term midterm election.  Compounding this with possible failing Obamacare exchanges and massive rising premiums is a possible prescription for an electoral disaster for Republicans.

Even if the GOP somehow survived with a slightly larger Senate majority after 2018, what are the chances that Democrats would side with Republicans on a plan that would eliminate abortion coverage?  That would narrow Medicaid expansion?  Destroy the individual mandate? The likelihood of any of those proposals passing in that environment is exactly the same as the chances in late 2009 that Republicans would join Obama in the ACA effort following the loss of their 60 vote majority to the death of then Sen. Ted Kennedy: slim to nil.

Note that Chuck Schumer, the new Democrat Senate Leader, has been quite clear on this front:

“We’re not going to do a replacement,” Schumer said of the Senate Democratic caucus. “If they repeal without a replacement, they will own it. Democrats will not then step up to the plate and come up with a half-baked solution that we will partially own. It’s all theirs.”…

Asked directly if Democrats would refuse to support anything that falls significantly short of the ACA in terms of expanding social welfare, Schumer said: “The odds, after they repeal without any replacement, of us sitting at the table to do something that will chop one arm off instead of two is very small.”

Why wouldn’t we take him at his word on something like this?

Enter into this dynamic is the President Elect.  Trump, in his recent press conference, basically voiced his promise for a repeal and replace strategy, not just one relegated to repeal.

Mr. Trump appeared to be unclear both about the timing of already scheduled votes in Congress and about the difficulty of his demand — a repeal vote “probably some time next week” and a replacement “very quickly or simultaneously, very shortly thereafter.”

But he was clear on one point: Plans by congressional Republicans to repeal the health law now, then take years to create and implement a replacement law are unacceptable to the incoming president.

Trump understands that the political risk of leaving the ‘replace’ portion of health care reform is steeped with major political downsides for him.  If he is going to take this on, far better the does it swiftly and quickly, instead of letting the issues drag on over time, because time is not his friend.

The questions surrounding what a conservative health care plan would look like remain the same today as they were in 2009: will the Federal government subsidize health care, and to what extent? Will it continue Medicaid expansion?  Will it protect people with pre-existing conditions? Will it maintain coverage for young people under their parent’s plan until age 26? Will there continue to be a mandate to buy insurance, or will you use other methods, such as continuous coverage mandates, to guarantee everyone has some basic level of insurance?

James Capretta of the American Enterprise Institute lays out the obvious tradeoffs involved in any health care reform…and these tradeoffs will not change over time:

To succeed in this effort, however, House and Senate Republicans, as well as the incoming Trump administration, must dispense with wishful thinking. There is no plan for replacing the Affordable Care Act (ACA) that is without political controversy. Whatever they do will involve trade-offs, and in some cases they will be attacked by their political opponents for doing what is necessary but perhaps unpopular. 

Further, there is no silver bullet for reforming health care that will solve all the existing problems. Health-care policy is complicated and does not lend itself to simple solutions. What’s needed most of all is the discipline of a well-functioning marketplace. Getting there will require many changes, in public insurance, employer plans, Health Savings Accounts (HSAs), and the individual insurance market. While Medicare changes can be addressed separately from other reforms, it will not be possible to replace the main provisions of the ACA in incremental, piecemeal bills, as has been suggested by some in Congress. An effective ACA replacement plan will need to ensure that changes in Medicaid, the individual insurance market, and employer-sponsored plans work well together to provide insurance options for the entire non-elderly population. That will happen only if these changes are made in one coherent reform plan so that interactions among various provisions can be understood and anticipated.

Republicans must also drop their ambivalence about embracing the goal of providing a ready and reliable pathway to insurance for all Americans. It should be self-evident, and not at all controversial to acknowledge, that health insurance is a necessity of modern life. Only the very affluent can afford to pay the cost of treating many forms of cancer without health insurance, and no one is immune from cancer, or a costly accident for that matter. Moreover, households with low incomes will never be able to pay the premiums for health insurance without governmental assistance.

The questions go on and on…and don’t get any easier with time. There are costs and benefits to every one of those policy decisions, and all come with political risks.  Republicans are extremely risk averse when approaching these issues, but ultimately there is no way to escape from those potential downsides; Democrats learned that lesson all too well in the years after ACA passage.

While the GOP appears ambivalent to take on these issues head on, and deal with them immediately…Trump, for better or worse, does not. Now that he has come out in favor of immediate replacement, Speaker of the House Paul Ryan and others are lining up to do just that, regardless of their concerns.

There are ways Republicans can limit their immediate downside risk. For one, they can grandfather current ACA plans, to reduce disruption in the market. They can stabilize the Medicaid system, while continuing to move forward on much-needed long-term reforms of the program. They already appear to be moving full speed ahead on reforming the tax code to provide more equal treatment of benefits under the law, while giving more access to Health Savings Accounts across the board.

Simply put, if the Republicans have meant what they have said for the past eight years regarding the Affordable Care Act, this is the time to put up or shut up. Donald Trump has taken the first step in this process by staking his flag upon immediate repeal and replace. Time will tell how much their past promises really meant, and how much it will politically cost them going forward.