The Republican Plan to Repeal and Replace Obamacare Will Do Neither
The GOP is heading into a health policy quagmire of their own making.
For years, Republicans have vowed to repeal and replace Obamacare. GOP leadership in Congress held dozens of symbolic votes to repeal the law, teeing up repeal votes shortly after each election cycle so that newly elected members could report to their constituents that they, too, had voted to repeal the law. Last year, President-elect Donald Trump ran as an avowed opponent of the law, promising to strip it from the books and put in place a different plan—something "terrific." After the election delivered unified control of Congress and the White House to the GOP, the party's congressional leadership began to declare that their first act would be to repeal and replace the law, a claim that the administration has repeated.
The repeal and replace of Obamacare, in other words, was—and is—the party's top domestic policy priority. Yet the GOP's current plan to repeal and replace the law would do neither.
Instead, it would further destabilize the already foundering individual health insurance market while setting up a political and policy equilibrium that is likely to make more effective reforms even more difficult.
The current Republican plan, as described by GOP aides to Philip Klein of The Washington Examiner, is to repeal the law now, but leave it in place for a transition period of somewhere between two and four years while they work out a replacement, which in theory would come later this year, and might be passed in pieces rather than as a single bill. It is not a plan to repeal and replace, but a plan to repeal and delay, while promising that a replacement plan will come later.
It is a tactically foolish course of action with numerous potential pitfalls and problems—not least of which is that it does not even repeal all of Obamacare.
To understand why, it helps to understand a bit about Senate procedure. Although Republicans have a majority in the Senate, they lack the 60 votes needed to overcome a filibuster. This means that a repeal bill can only be passed as part of a process known as reconciliation, which allows certain bills to move through the Senate on a simple majority vote. Thanks to a somewhat obscure requirement known as the Byrd Rule, however, reconciliation can only be used on provisions that are directly relevant to the budget. If there is any question about whether a provision passes the Byrd Rule or not, the Senate parliamentarian makes the call.
What Senate Republicans have taken this to mean is that they can repeal Obamacare's tax and spending provisions—namely its insurance subsidies and the individual mandate, which the Supreme Court ruled was a tax—but not its insurance regulations. Those regulations include provisions requiring insurers to sell to all interested parties and restricting them from charging more to individuals with preexisting conditions.
This is not an unreasonable interpretation of the rule, especially since Republicans, in a legislative test run early last year, got approval from the parliamentarian for a version that repeals the budgetary provisions. However, Michael Cannon of the Cato Institute and Paul Winfree of the Heritage Foundation have made a strong argument that the insurance regulations could be repealed through reconciliation as well, because, as the Obama administration has argued in court, those regulations are inextricably linked to the rest of the law. So far, though, Republicans in Congress have shown no interest in pursuing this argument.
The problem with repealing the mandate and subsidies but leaving those regulations in place is that doing so would decimate the individual market for insurance. Virtually every health policy expert, including those who oppose the law, agrees that this is what would happen. Indeed, it is what has occurred over and over again in states that passed preexisting conditions regulations without a mandate. It is true that the health insurance exchanges set up to facilitate the individual market under Obamacare are already unstable thanks to a sicker, smaller group of enrollees than expected. The Republican repeal plan, however, would exacerbate that instability, and quickly lead to a full-blown collapse.
Or it would if it ever came to fruition. Republicans are attempting to avoid this fate by putting repeal on delay, creating a transition period during which they can work on developing and passing a replacement plan.
Even in the best of circumstances, however, this will lead to a different sort of instability. With Obamacare set to expire in just a few years, and no clear sense of what (if anything) will proceed it, insurance companies, many of which entered the exchange market in hopes of building long-term business, will have even less incentive to participate in the exchanges than they do now—that is, unless the administration provides significant financial incentives for them to stay. The problem with this is that it amounts to the sort of illegal bailout of Obamacare insurers that Republicans have repeatedly criticized and challenged in court.
All of this, of course, is contingent on Republicans actually unifying around and passing replacement legislation. There is no reason to believe that the party will be able to do this in the foreseeable future, even if it sincerely intends to. The GOP has repeatedly promised to craft replacement legislation over the last seven years, and while a number of plans have been developed in varying degrees of specificity, there is nothing like consensus amongst the party's legislators or influential experts. The fact that the party has settled on the repeal and delay strategy is further proof that no consensus yet exists.
No consensus exists on legislation in large part because there is no consensus amongst the party or its expert class on what the basic goals of American health policy should be. Some Republicans have talked about increasing affordability and accessibility. Others have talked about reducing the size of government while making health care more responsive to market mechanisms.
Still others have talked about finding ways to keep Obamacare's preexisting conditions regulations in place, and to maintain coverage for those who currently have it under the law. This final group includes Donald Trump and senior members of his incoming administration. This week, for example, Trump adviser Kellyanne Conway stated that people who are currently covered under Obamacare would not lose coverage under any replacement plan, but provided no specifics as to how this would be accomplished. Republicans, with some exceptions, have no idea what their product is, or how to sell it.
Making big promises without providing operational specifics has long been critical to the GOP's strategy on health care, and it remains so now. When Vice President-elect Mike Pence spoke to Republicans earlier this week, he rallied them behind repeal and replace—yet offered no details about the strategy. As always, the details will come later, which usually means they never come at all.
Republicans, then, could be marching themselves into a quagmire, in which they have repealed Obamacare without actually repealing it, further wrecking or undermining the insurance market in the process, and thus leading to a political environment in which Republicans shoulder the blame, making further reforms even more politically difficult. The current GOP thinking about how to avoid this is to simply blame all the problems on the previous administration, but that's unlikely to work for very long, and the disruptions could easily last years.
Granted, not all Republicans are up for this plan: Most notably, Sen. Rand Paul (R-Kentucky) said earlier this week that the GOP should not repeal without a replacement at the ready. Because Republicans hold only a narrow majority in the Senate, the repeal-and-delay process can survive very few defections, which means that the positioning of every GOP Senator is important.
Trump himself is a wild card in this process. He trashed the health care law during the campaign, but he never really appeared to understand how it worked, and he sometimes seemed to want to replace it with provisions that were already in the law. This week, he weighed in to warn Republicans to "be careful" to make sure that "Dems own the failed ObamaCare disaster," seeming to recognize that the politics of repeal were risky for the GOP. So it's not clear how the image-obsessed president-elect will respond to the sort of political pressure he's likely to face during any sustained repeal push.
Still: What if, in some sort of late season plot twist (have 2016's writers been fired?), Republicans did manage to coalesce around a plan in some reasonably speedy fashion? The most likely scenario under which that would happen would involve uniting behind something that looked roughly like the Obamacare replacement framework released by House Republicans earlier this year. The plan (which does not yet have a legislative form) has some virtues, such as the way it expands Health Savings Accounts. But as Cato's Michael Cannon wrote earlier this year, that plan essentially replicates key elements of Obamacare, including a system of refundable health insurance tax credits for lower income individuals who don't qualify for another government health plan. This would preserve much of Obamacare's spending, as well as creating a de facto individual mandate, in which those who purchase insurance benefit from a tax break, and those who choose not to are effectively penalized. (The current mandate, thanks to the Supreme Court, is a "tax penalty.") The GOP plan would also preserve modified versions of the law's major insurance regulations, and, as Cannon notes, would do so in ways that might function even less well than Obamacare does.
There is precedent for this sort of pseudo-opposition to the law: As governor of Indiana, Mike Pence, who is now Trump's liaison to Congress, claimed opposition to the federal health law, but expanded Medicaid under its auspices, even while claiming not to be expanding the program. His Medicaid expansion was essentially a deal brokered with health industry lobbyists to funnel federal money to the state's hospitals that he then described as a "market-based" health reform.
So even if Republicans did, somehow, manage to repeal and replace Obamacare, they might well end up with a plan that mirrors the law's major provisions—replacing Obamacare with a flawed but more GOP-friendly version of, well, Obamacare, which may or may not be much improvement over the original. At that point, why bother? (Indeed, there is already informed speculation that Republicans could simply end up agreeing to modify the law, creating a kind of Obamacare Lite, rather than fully repealing and replacing it.)
Republicans have talked about repealing and replacing Obamacare for years, but it's not clear that many of them ever thought much about how they would do so or what the consequences might be. At this point, it's enough to make you wonder whether the GOP really wants to repeal and replace Obamacare—or simply say they did.