When congressional Republicans began drafting health care legislation at the beginning of the year, critics worried that the result would not be the repeal and replace of Obamacare that the GOP had long promised. Instead, they warned, the Republican party was on track to produce something more aptly understood as "Obamacare lite"—a watered down version of the law that is already in place.
Partly this was for procedural reasons: Reconciliation, the budget maneuver which Republicans are relying on to pass a bill in the Senate with a simple majority vote, presents some procedural barriers to full repeal. But those worries also stemmed from long-simmering concerns that, despite having spent seven years campaigning on replacing the health care law, Republicans had developed no substantive health policy goals of their own.
This morning, after weeks of unusual secrecy, the Senate has finally released a draft version of the bill, dubbed the Better Care Reconciliation Act of 2017. In the hours before the bill was made public, details began to leak, and a clear picture of the legislation has emerged. Although Senate Republicans had initially indicated that they would scrap the House bill and start from scratch, the Senate plan looks more than a little like its House counterpart, which kept much of Obamacare's structure in place. But even more tellingly, the Senate plan looks even closer to the health care law that is already on the books.
In other words, it is exactly what critics predicted: a bill that, at least in the near term, retains weakened versions of nearly all of Obamacare's core features while fixing few if any of the problems that Republicans say they want to fix. It is Obamacare lite—the health law that Republicans claim to oppose, but less of it. It represents a total failure of Republican policy imagination.
To understand the Senate plan, it helps to recall Obamacare's underlying framework. The centerpiece of the law was a reform of the individual market, intended to give those who do not get coverage through work or a federal program access to subsidized, regulated coverage. The law created a new federal subsidy, based on income, for lower- and middle-income households to purchase health insurance. It set up federal rules requiring insurers to sell to all comers while limiting their ability to charge based on health history. It mandated that all individuals obtain health coverage or pay a tax penalty. And it erected a system of government-run health insurance exchanges on which consumers could purchase subsidized, regulated individual market coverage.
Those exchanges have never been fully stable as either business or policy propositions. Premiums have marched steadily upwards; last year, the price of a typical plan rose by 22 percent, and early reports show large spikes coming this year as well. The non-profit health insurance organizations that Obamacare funded have mostly shut down. Large, for-profit health insurers, meanwhile, have lost money and either scaled back their participation or dropped out entirely.
Republicans have repeatedly criticized these marketplaces for being expensive and unstable. As Senate Majority Leader Mitch McConnell, who spearheaded the drafting of this bill, likes to say, "Obamacare is collapsing around us."
Yet even more than the House plan, the Senate plan retains the essential structure of Obamacare's individual market reforms. It would likely result in fewer people being covered, and it would not stop the destabilization of the market.
Like the House plan, the Senate plan retains Obamacare's major insurance regulations, including the requirement to cover pre-existing conditions, at the federal level. Unlike the House plan, it does not allow states to apply for a waiver to opt out of those rules. It also eliminates Obamacare's health insurance mandate.
Every state that has attempted this combination of coverage regulations without a mandate has seen a swift meltdown in the individual market. There is every reason to expect that the same would happen under the Senate plan, especially since Obamacare's exchanges were struggling with a too-small, too-sick enrollee pool even with the mandate in place.
The Senate bill attempts to manage this instability by buying off health insurance companies with payments that Republicans previously argued were illegal and should be stopped.
The way it does this is by authorizing additional payments known as cost-sharing reduction (CSR) subsidies to insurers through 2019. It also authorizes the back payment of any CSR subsidies that insurers have not recieved. On this front, it is actually an expansion of Obamacare, and it is a revealing sign of the shallowness of Republican thinking on health care policy.
The Obama administration initially requested congressional authorization to make the CSR payments, which are called for in Obamacare, but not explicitly appropriated. The House did not provide it. The administration then paid them anyway, believing that the exchanges would collapse without them. In response, House Republicans sued, arguing that only Congress has the power to appropriate funds. A federal judge agreed that the Obama administration was violating the constitutional separation of powers. The Trump administration has continued making the payments while threatening to withhold them, adding to the uncertainty for insurers operating in the exchanges.
Now Senate Republicans are proposing to explicitly authorize those payments for the first time. That means they are proposing to explicitly authorize and continue the very policy their House colleagues took the previous administration to court for pursuing. It amounts to an expansion of Obamacare, and while it may reduce uncertainty in some markets, it is unlikely to halt premium increases or fully stabilize the exchanges, which were degrading even before Trump threatened to withhold the payments. Moreover, it is an admission that Republicans do not believe they can meaningfully improve on the Obama administration's implementation of the law.
That same inability to move beyond the core structure of Obamacare is also apparent in the design of the Senate plan's insurance subsidies.
The House version of the AHCA provided subsidies based on age. But the Senate version relies on income-based subsidies, just like Obamacare—but a little less generous. Currently, Obamacare provides subsidies for individual up to 400 percent of the poverty line, or about $98,000 a year for a family of four. Starting in 2020, the Senate bill would ratchet that back to 350 percent of the poverty line, or about $86,000 for the same family. In addition, reports indicate that the subsidies are pegged to lower-cost plans, which means the subsidies will be smaller, and will likely lead to more plans with high deductibles.
Taken on its own terms, this scheme undercuts the GOP's complaints that Obamacare hurts the middle class. In addition to the higher deductibles, it creates a subsidy cliff for middle-class families purchasing health insurance on the individual market. Those who earn slightly too much to qualify for a subsidy would have to pay full price for health coverage that is increasingly expensive.
More generally, it represents a failure to think beyond the confines of the law that is already in place. At a fundamental level, the Senate plan accepts Obamacare's premises about the nature of health insurance and the individual market. It works from the assumption that the only way to make expensive health insurance cheaper is to subsidize it through the federal government. It is a plan that subsidizes, and therefore disguises, unaffordability, rather than attempting to bring down costs directly.
Perhaps the Senate bill's biggest departure from Obamacare is the way it would handle Medicaid. Like the House bill, the Senate plan would slowly roll back Obamacare's Medicaid expansion over a period of years, converting Medicaid into a per-capita system in which federal matching funds are allocated on a per-person basis. It would delay the start of the phase out until 2021, scaling back funding for expansion enrollees a little more each year. In addition, starting in 2025, it would place a stricter cap on the growth of Medicaid spending than the House bill, limiting it to general inflation rather than medical inflation. In the long term, then, the Senate bill's Medicaid cuts would be much deeper.
But even this suggests a resistance to act outside of the parameters already set by Obamacare. Not only is the phase-out slow, but the delays mean that it is susceptible to political reversals. As conservative health policy analyst Chris Jacobs wrote recently, any Medicaid rollback that is delayed until after 2020 essentially requires a Republican president to go into effect. The growth cap, meanwhile, is unlikely to happen unless a Republican wins the White House in 2024. The Medicaid provisions, like much of the bill, appear designed to frustrate nearly everyone. Backers of the expansion oppose the cuts, while critics will worry that they won't happen at all.
The Medicaid provisions—and in particular the altered growth cap—may be best understood as budget gimmicks. On paper, the rollback reduces federal spending, generating estimates of budget savings inside the 10 year window that the Congressional Budget Office uses to score legislation. Those budget savings are necessary for Republicans to use the reconciliation process, but they assume that in the future, Congress will not reverse course. Given that many Republicans from Medicaid expansion states are wary of the rollback, and Democrats universally oppose it, this is far from certain.
Indeed, one of the most striking features of the Senate plan is how many of its major provisions are delayed for years. The CSR subsidies that are now being paid on a month-to-month basis by the Trump administration would continue through 2019. The adjustments to the individual market subsidies would not start until 2020. The Medicaid expansion rollback also would not begin until 2021, and the growth cap would not kick in until 2025.
These delays mean that the current high levels of political uncertainty surrounding Obamacare and the individual market would last for years, through the next two elections and beyond. It is not too hard to imagine some or all of these provisions being delayed further, or even becoming kicked down the road on a semi-permanent basis, as the tweak to physician Medicare reimbursement known as the doc fix was for more than a decade. That, in turn, could result in a health care system that is wracked by permanent instability and uncertainty—one that is always about to change, according to the law, but never or rarely does.
That sort of environment would satisfy almost no one. It would cause headaches for both providers and patients, while making product policy reforms even more difficult, as lawmakers constantly debate changes scheduled to go into effect rather than improvements they would like to see. It would prolong and exacerbate the political squabbling over health care rather than settle it.
For Republicans, this might be the notable failure to think beyond the terms set by Obamacare. It means that Senate bill not only won't be Obamacare repeal, it might not even be Obamacare lite. Instead, it might be Obamacare lite—later. And later could easily turn out to be never.