The House GOP’s you’re-on-your-own replacement for Obamacare

For six years, congressional Republicans have been screaming to “Repeal and Replace” Obamacare.  They proved quite adept at making symbolic efforts toward the “Repeal” half of this talking point, voting more than 60 times to tear up the national nightmare that has driven our uninsured rate to record lows, with the most recent vote fittingly falling on Ground Hog’s Day.

Coalescing around a single serious and workable replacement for the law, however, proved more elusive.  But this week, House Republicans finally put pen to paper, inching closer toward the conservative legislative solution to the nation’s healthcare crisis that they have promised for six years.  And it isn’t pretty.

To fill the Trump-sized conservative policy vacuum in 2016, House Republicans have been rolling out an affirmative conservative policy agenda called “A Better Way,” led by Speaker Paul Ryan.  And on Wednesday, Ryan and company released a policy paper finally detailing how GOP lawmakers would tackle the project of health reform.

The report begins with the standard right-wing airing of grievances about Obamacare.  It has caused premiums to increase; if you like your plan, Obama took it away from you; it cuts reimbursements to hospitals and providers—all the classics make a cameo.  Most notably, the plan accuses Obamacare of hampering the economy and employment—even though we’ve now had seventy-five months of continuous private sector job growth since the law was passed.  (But why abandon old disproven talking points now?)

With that aside, the plan gets to the heart of the matter: the conservative vision for health reform.  It turns out to be a barely warmed rehash of typical conservative healthcare ideas.  But assembled all together once more, it draws out what the conservative vision for health insurance really looks like: simply providing less of it.

Less insurance from private insurers for workers without employer-based coverage

For individuals who received insurance through their employers, it’s largely business as usual under the conservative plan.  Like Obamacare, the House plan has little impact on employer-provided coverage.  But it does seek to cap the tax exclusion for employer-based insurance.  Though the plan professes otherwise, this is essentially indistinct from Obamacare’s much-maligned (and much-delayed) Cadillac tax on lavish health insurance plans.

For those without employer-provided insurance, the House plan scraps Obamacare’s health exchanges and income-based subsidies.  It replaces them with a refundable tax credit for individuals to purchase “a plan of their choice, rather than the current offering of expensive, one-size-fits-all, Washington-approved products.”  Newly unbound health shoppers, freed from the shackles of Obamacare’s quality-regulated marketplaces, could take their tax credit and buy anything, anywhere called “insurance.”

The refundable tax credit would be adjusted by age, rather than by income.  The conservatives also provide no guarantee that it will cover the entire cost of insurance, like Obamacare does now for many working families.  It only promises to “help offset the cost” of insurance.  While the tax credit will supposedly be sufficient to purchase a “typical pre-Obamacare health insurance plan,” this entirely banks on cost savings from tossing out Obamacare’s regulations around the type of benefits plans must offer—meaning the savings come from muddying the quality of insurance.

To that end, conservatives would promote flimsier insurance with greater out-of-pocket costs.  A conservative health reform staple, the plan encourages high-deductible insurance plans that kick in only for the most devastating healthcare costs, leaving patients on the hook for everything else.  It then couples this insurance with tax-advantaged health savings accounts, in which individuals can save to cover out-of-pocket costs.

Rather amazingly, the plan boasts that it would come to the rescue of those trapped in the Medicaid coverage gap.  “[A]s a result of Obamacare’s poor design and incentives, many Americans— who do not have an offer of health insurance through their employer— have fallen into a coverage gap between their state’s Medicaid eligibility and the eligibility criteria for the Obamacare subsidies.”  The reason for this gap at all, of course, is that conservatives in 19 states have refused to adopt Obamacare’s Medicaid expansion that would provide coverage to these nearly 3 million people today.

And on the Medicaid expansion, the plan complains that Obamacare, which covers more than 90 percent of the states’ expansion costs, is too generous.  It argues that this leaves the federal government covering a bigger share of the cost for near-poor adults than it does for the disabled, elderly, or children in poverty, so the federal match for this less-deserving population should be cut.  Which is pretty remarkable, given that the chief justification for conservative opposition to the Medicaid expansion in the states has been that the federal government wouldn’t follow through on its funding commitment and would leave the states holding the bag–that is, that the federal government wouldn’t be generous enough.

The plan retains two of Obamacare’s most popular features.  It would continue to let children stay on their parents’ coverage up until age 26.  And it keeps the law’s monumental guarantee that no one can be denied coverage on account of a preexisting condition.

But it unravels Obamacare in countless other significant ways.  The plan would weaken Obamacare’s age-rating rules, which currently require insurers to charge older people no more than three times the premium rate charged to the young.  Conservatives would up this to five times, increasing the cost of insurance for older Americans and chipping away at universal health care’s communal ethic.  And even this limit is a mere default suggestion, because the GOP would give states the ability to “narrow or expand” this ratio.  (“After all, states understand what their residents want and need better than Washington.”)

The House plan would allow for state experimentation in a number of ways.  And given that the plan allows for buying health insurance across state lines (removing Trump’s “lines around the states”), conservatives seem downright eager to create a race to the bottom beholden to whichever state offers the loosest regulations, weakening the quality of insurance.

And of course, the plan would repeal Obamacare’s mandate to purchase insurance.  In lieu of an individual mandate, the conservatives would penalize those who go without insurance by (1) forfeiting their continuous coverage protections (which would provide HIPAA-style insurance portability after certain life events to those in the individual insurance market, in addition to those in the employer market), and (2) imposing higher coverage costs in the future.

Less insurance from Medicaid for the poor

For the poor, the conservatives would block grant Medicaid to the states in order to cut federal funding.  This is the same tack conservatives and President Clinton took to shrink the federal obligation for welfare benefits, devolving that program to the states, where the protection the program provides has been allowed to shrivel away.

The House conservatives would pay the states a fixed amount to manage their own Medicaid programs.  By putting a cap on federal Medicaid spending and turning the program over to the states, conservatives claim to be looking out for the “freedom and flexibility” of the states.  “For too long, states have been treated like junior partners in the oversight and management of the Medicaid program[,]” the plan mourns.

But ultimately, the plan admits, the real purpose of block granting Medicaid is to “[r]educe federal funding over the long term.”  Conservatives would kick the healthcare cost conundrum down to the states, who face their own fiscal pressures and are constitutionally blocked from running budget deficits.  At the end of the day, the conservative block-grant scheme will shore up the federal budget by providing less health insurance coverage to the poor.

No more guaranteed single-payer Medicare for retirees

For retirees, the GOP would transform Medicare from a single-payer, guaranteed benefit system into a competitive marketplace with only a guaranteed contribution toward premiums from the federal government.  Under the new system, seniors would receive a subsidy from the government, which they would then take to a marketplace where they could pick from a variety of competing private health insurance plans.  Sicker seniors would receive greater benefits, and low-income seniors would receive additional cost-sharing subsidies.  Premium support would be means-tested, paying less to high-income seniors.

Stop me if this sounds familiar.  This structure is nearly identical to Obamacare’s health exchanges for those who lack employer-provided insurance.  Which is ironic, given the litany of horrors that the House GOP rattled off at the beginning of their report.  If Obamacare is such a nightmare, why would Republicans want to enact the same reform for retirees?

Importantly, in the mix of insurance options on the conservatives’ new retiree health marketplace, one stands out: traditional Medicare.  Under this plan, Medicare becomes a public option competing with private plans for enrollees.  But what happened to the conservative fear that private insurers could never compete with the pricing of a public option?  Given the plan’s objections to Obamacare, maybe this is a tacit admission that competition from a public option would help constrain premium costs.

Notably, the GOP provides no specifics on how exactly it would calculate the level of premium support to Medicare recipients.  Low-balling the scheduled increase in the premium support subsidy has been the key to the estimated cost savings in Ryan’s previous Medicare privatization plans.

Ultimately, the House GOP wants to dismantle traditional, wildly popular, single-payer Medicare and submerge it as one option among competing private health insurance plans.  Maybe all seniors will just choose the Medicare option anyway, but it’s a first stab at shifting seniors away from a government-provided guaranteed-benefit program and toward private sector plans.

* * *

In sum, the conservative health plan would shift Obamacare’s exchange-based structure from workers to retirees.  For those with insurance through their jobs, your insurance continues to go largely untouched.  And for everyone else, you just get less insurance.

And ultimately, the conservative vision of health reform just repeats the same tune.  The solution is always to block grant: to block grant Medicaid to the states, to block grant a tax credit to individuals, and to block grant premium support to seniors.  Block granting gets the federal government out of the business—and away from the risk—of actually insuring people.

But who picks up that risk?  Individual Americans do.  With high-deductible plans and HSAs, individuals bear the burden of funding their own healthcare for all but the most catastrophic injuries.  With block-granted Medicaid, the poor wind up on the receiving end of federal and state budget slashing, with little institutional voice to stick up for them.

In truth, hacking away at the security provided by insurance has long been a conservative goal.  The whole point of insurance is to spread risk from the individual to the larger community.  But conservatives fear that this creates moral hazard, weakening the individual incentive to spend less and engage in responsible behavior.  To control costs and impose individual responsibility, people need to have “skin in the game”—to have their own dollars on the line.

The GOP dresses this up in language about promoting choice, flexibility, and consumer-driven care.  “One way to immediately empower Americans and put them in the driver’s seat of their health care decisions is to expand consumer-driven health care,” the report claims.  But what being in the driver’s seat really means is that you’re on the hook if you get sick.  By shifting health care risk back on to individuals, conservatives erode the very point of insurance.  So after six years, “Repeal and Replace” still just means “You’re on Your Own.”


3 thoughts on “The House GOP’s you’re-on-your-own replacement for Obamacare

  1. Pingback: Donald Trump wants to scrap Obamacare but keep its most popular provisions. Too bad that's logistically impossible — Quartz

  2. Pingback: Democrats can still save Obamacare — Quartz

  3. Pingback: Democrats can still save Obamacare — Quartz

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