ObamaCare fails to reduce the inflationary costs in the health care system by not focusing on chronic diseases, defensive medicine, and prevention/wellness. ObamaCare squanders a golden opportunity to reform a dysfunctional system that is squeezing corporate and personal budgets alike and threatening, to overwhelm the federal budget entirely. To put it mildly, ObamaCare is a terrible disappointment. – Algenon L. Cash, 2010
Former President Barack Obama is etched into American history for multiple reasons, but one principal reason is he achieved a goal that Democrats chased for decades and ushered in the largest expansion of social programs since LBJ’s lamented “Great Society” – which gave people Medicare and Medicaid, two programs designed to provide health care services to the elderly, poor and disabled.
Obama signed his top domestic priority into law with considerable fanfare; he fulfilled a long-held campaign promise; however by all key metrics, the Patient Protection and Affordable Care Act, or more popularly known as ObamaCare has been a “terrible disappointment.” The healthcare law simply failed to lower premiums, but reduced options for consumers and harmed small businesses that are chiefly responsible for job creation.
Health insurance premiums have increased by an average of 25% the past year alone; nearly 1/3 of all counties in the United States have only one insurer offering plans; and 34% fewer doctors and other health care providers accept the plans compared to private insurance. Prior to passing ObamaCare less than 50% of family practitioners accepted Medicaid patients, so enrolling millions of additional patients, without expanding program infrastructure was short sighted at best.
Republicans largely came into control of Congress promising to repeal Mr. Obama’s signature legislative achievement and the foundation of his presidential legacy. However, the goal of repealing and replacing the healthcare law has eluded GOP leaders for seven years, but with a new administration bolstered by a populist base – lawmakers now believe they have a mandate to take decisive action.
American Health Care Act
House Republicans on March 6 announced a draft plan to “repeal and replace” ObamaCare. Presented as the American Health Care Act, the plan is triggering more questions from media pundits, voters and even party loyalists than celebration.
I’ve read the 66 page draft bill, which is now undergoing a markup process in two committees – House Ways and Means and Energy and Commerce – the primary committees with jurisdiction over health care. GOP leaders are pushing for a vote in committee on March 8 and a full vote on the House floor within the next few weeks, unlike the Democrats, they promise to take the bill through “regular order”.
Some may argue the process, which didn’t allow input from Democrats on the draft bill, and was unveiled only two days before a vote has become highly politicized. But anyone making those arguments has a short memory and must not recall how Democrats shoved ObamaCare down the throats of Congressional Republicans in 2010 – narrowly passing a Senate version of the bill by a margin of 219-216.
For the most part, the American Health Care Act is strikingly similar to the Affordable Care Act, and it’s not just the word play that catches your eye. The GOP plan eliminates the individual mandate requiring every man, woman and child to purchase health insurance or suffer the consequences of a penalty. It also strikes down the revenue component of the original healthcare law – removing taxes on prescription drugs, OTC medications, health insurance premiums and medical devices. Beyond the “repeal” of those provisions, AHCA leaves most of the ACA intact, with material changes occurring in 2018 and once again in 2020 – conveniently after the important mid-term and presidential elections.
One piece that is sure to be controversial is the popularly known “Cadillac Tax”, which imposes a tax on wealthy insurance plans; AHCA kicks the can down the road to 2025.
Fiscal hawks such as me are still wading through the draft bill trying to understand how GOP leaders will pay for their plan – it currently leaves many goodies in place – while gutting the tax revenue being collected. Nothing in the current draft highlights what this may do to the budget deficit at a time when the nation’s debt has reached $20 Trillion or 106% of GDP and climbing. More concerning is the rush to pass the bill without allowing the non-partisan Congressional Budget Office ample time to score the legislation.
What is the Republicans Proposing?
At least temporarily, GOP lawmakers are not proposing to repeal the expansion of Medicaid and tax subsidies to aid low-income consumers, both costly measures. Insurance companies will continue to be prohibited from denying coverage to patients with pre-existing conditions and children can stay on their parents’ policies until they are 26 – both widespread liked components that politics simply prevented from being repealed.
Healthcare experts remind us insurance companies will not offer coverage to patients with pre-existing conditions without a mandate for all individuals to purchase health insurance. Otherwise, why would anyone purchase insurance when they can wait until they actually get sick? The GOP plan addresses this issue by allowing health insurers to charge new enrollees a 30% surcharge if they had any gap in coverage – you can expect many lawmakers, mostly Democrats to attack this proposal. Undoubtedly, placing insurance companies in a position to collect surcharges will be demonized, but to cover sick patients; insurers need a revenue offset.
My long-established position is that its more sensible for the federal government to structure a catastrophic risk pool for patients with pre-existing conditions and offer coverage for those select consumers, similar to how landowners purchase insurance for property located in a flood zone.
GOP lawmakers pledged to establish a $100 Billion fund to provide states with resources to assist low-income citizens; transition Medicaid to a per capita allotment; expand the use of Health Savings Accounts; and provide tax credits for those not receiving insurance through a private employer or government based program. Of course all this was met with much skepticism from healthcare advocates, Democrats and some Republicans. Personally, without much details from the CBO; its too difficult for any reasonable person to analyze the plan and present a clear outcome.
TrumpCare vs. ObamaCare
Republicans up front acknowledged their plan will cover less patients, but chalked it up to the fact that no individual mandate should translate to less insured – because the federal government is not forcing consumers to purchase unwanted insurance. “TrumpCare” appears to be “ObamaCare lite”, but just a little less filling when you consider the number of people who may lose their coverage, see rising premiums or unaffordable options all together.
In my opinion, the plan could leave states that expanded their Medicaid coverage in a real bind; naturally it was their decision to trust the federal government would provide subsidies for perpetuity – a preposterous concept since inception. But now that 32 states (including D.C.) has expanded their rolls; a sustainable plan and well thought out exit strategy must be crafted, not a rushed concept that mostly check off a political promise.
Not to mention, conservatives used to actually care about fiscal health, carefully considering the impact legislation may have on deficits and debt in the long run. Truly an important question when the country spends two-thirds of every taxpayer dollar on entitlement programs and interest on a national debt that increases by $14,057 every second.
Repeal, Replace or Restructure
History is often akin to gravity when important work is being done on public issues, it can weigh down the debate and erect barriers, in this case history informs us that no Congress has ever successfully withdrew a major entitlement program once enacted. For years after the “New Deal” was introduced by FDR, Republican lawmakers attempted to rollback Social Security, but finally embraced change after much futile resistance. Eventually Reagan made substantive adjustments during his administration that restructured the program and increased its solvency.
Trumpism is not traditional conservatism and it disrupted Reaganism’s 30-year reign on GOP politics, but perhaps TrumpCare may solve a 30-year plus debate on how to affordably deliver quality universal healthcare access to all Americans. Like so many other policies in this young administration’s first 100 days – too early to judge. Stay tuned.
Algenon Cash is the managing director of Wharton Gladden & Company, an investment banking firm. Reach him at acash@algenoncash.com.
