So now we know what Republicans have to offer
as an Obamacare replacement. Let me try to avoid value judgments for a
few minutes, and describe what seems to have happened here.
The structure of the
Affordable Care Act comes out of a straightforward analysis of the logic
of coverage. If you want to make health insurance available and
affordable for almost everyone, regardless of income or health status,
and you want to do this through private insurers rather than simply have
single-payer, you have to do three things.
1.Regulate insurers so they can’t refuse or charge high premiums to people with preexisting conditions
2.Impose some penalty on people who don’t buy insurance, to induce healthy people to sign up and provide a workable risk pool
3.Subsidize premiums so that lower-income households can afford insurance
2.Impose some penalty on people who don’t buy insurance, to induce healthy people to sign up and provide a workable risk pool
3.Subsidize premiums so that lower-income households can afford insurance
So that’s Obamacare
(and Romneycare before that): regulation, mandates, and subsidies. And
the result has been a sharp decline in the number of uninsured, with
costs coming in well below expectations. Roughly speaking, 20 million Americans gained coverage at a cost of around 0.6 percent of GDP.
Republicans have
nonetheless denounced the law as a monstrosity, and promised to replace
it with something totally different and far better. Which makes what
they’ve actually come up … interesting.
For the GOP proposal
basically accepts the logic of Obamacare. It retains insurer regulation
to prevent exclusion of people with preexisting conditions. It imposes a
penalty on those who don’t buy insurance while healthy. And it offers
tax credits to help people buy insurance. Conservatives calling the plan
Obamacare 2.0 definitely have a point.
But a better
designation would be Obamacare 0.5, because it’s really about replacing
relatively solid pillars with half-measures, severely and probably
fatally weakening the whole structure.
First, the individual
mandate – already too weak, so that too many healthy people opt out – is
replaced by a penalty imposed if and only if the uninsured decide to
enter the market later. This wouldn’t do much.
Second, the ACA
subsidies, which are linked both to income and to the cost of insurance,
are replaced by flat tax credits which would be worth much less to
lower-income Americans, the very people most likely to need help buying
insurance.
Taken together, these
moves would almost surely lead to a death spiral. Healthy individuals,
especially low-income households no longer receiving adequate aid, would
opt out, worsening the risk pool. Premiums would soar – without the
cushion created by the current, price-linked subsidy formula — leading
more healthy people to exit. In much of the country, the individual
markets would probably collapse.
The House leadership
seems to realize all of this; that’s why it reportedly plans to rush the
bill through committee before CBO even gets a chance to score it.
It’s an amazing
spectacle. Obviously, Republicans backed themselves into a corner: after
all those years denouncing Obamacare, they felt they had to do
something, but in fact had no good ideas about what to offer as a
replacement. So they went with really bad ideas instead.
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