By Lambert Strether of Corrente.
I feel a little bit like a Beltway operative whose ricebowl has been smashed; after three years of writing post after post about ObamaCare (“The History of ObamaCare, 2013-2016”), ObamaCare is going to be “repealed” and “replaced”, although
citizens consumers won’t have any idea how the changes will net out for them until the actual replacement has at least been proposed. And I’m not the only one who thinks that “nobody knows anything”; all the coverage is massively caveated, so I selected two of the caveats, which also apply to this post. From HealthBlawg:
Some MSM outlets reported last week — as if it were news — the President-elect’s support for some key components of Obamacare. While the man seems to be heavily influenced by the last person he spoke with, and he was interviewed shortly after his initial transition meeting with the outgoing president, it is impossible to predict with certainty what the future holds, in the health care realm as in many others. Despite the campaign rhetoric, the president-elect is a political naïf, a policy tabula rasa, and until we have a clearer picture of who his key appointees and advisors will be, and of whether, and to what extent, he is likely to actually follow their counsel — or simply allow them free rein — there’s no way of knowing exactly what to expect.
And this headline from Vox:
Will Obamacare be repealed? Replaced? Amended? We have lots of clues, but they all point in different directions.
At this point, I’ll have to introduce new vocabulary: I’m going to call whatever system replaces ObamaCare TrumpCare. And I do think we can know something about “what the future holds”:
- TrumpCare will be a neoliberal, market-based solution
- Trump has said he wants to retain coverage of pre-existing conditions, may want to abolish the individual mandate, and wants to allow insurance to be sold against state lines to cut costs
- If selling insurance across state lines is TrumpCare’s policy nostrum, TrumpCare will fail as badly as ObamaCare
Before I turn to the future, which lies ahead, some brief notes about the politics of TrumpCare. One theory is that Trump must deliver on repealing (and replacing) ObamaCare, because that’s what his voters demand. Bob Laszewski, who made a lot of good calls about ObamaCare, especially during the rollout:
Obamacare will effectively be repealed. No ifs, ands, or buts about it. The Trump voters voted for him expecting that he and the Republicans would do it and there is no turning back. This will be the first if not one of the first agenda items. Speaker Ryan, at his press conference this morning, reaffirmed that.
(Of course, Democrat voters thought they would be getting “hope and change” with Obama. Perhaps Republican leaders will be luckier in their candidate.) And here’s the “fear the base” rationale:
Don’t forget the point I have been beating the drum on for the last three years––half of those with Obamacare compliant individual health policies do not get a subsidy. I expect the vast majority of these people, hit with the big premiums and deductibles, voted for Trump and the Republicans.
(And the ObamaCare price hike the week before the election can’t have helped with those voters. There seems to be no exit polling on this.) A second theory is that Trump will not be able to repeal (and replace) ObamaCare because ObamaCare is too complicated and too interlaced with too many interests (including
citizens consumers, to change rapidly. Modern Health Care:
Some Republicans are worried about moving too fast and too far on healthcare changes, risking blowback from the public and stakeholder groups and potentially hurting their party in the 2018 congressional elections. The CBO concluded that the GOP repeal bill vetoed in January would add 22 million Americans to the ranks of the uninsured. Modern Healthcare’s second-quarter CEO Power Panel survey of healthcare executives found that more than two-thirds of 86 chief executives opposed repealing and replacing the ACA.
In fairness, a survey of Republican health care plans put coverage losses at far less than 22 million, so, again, we can’t know how TrumpCare nets out until… we know what it is. And Republicans may fall to fighting among themselves. There are also Inside Baseball issues of how the Republicans will use reconciliation in the Senate to do whatever is that they will do.
So having said what we don’t know, let’s look at what we do know.
TrumpCare Will Be A Neoliberal “Solution”
ObamaCare is a neoliberal, markets-first plan, and if or when it is repealed, it will be replaced by a neoliberal, markets-first plan. In fact, in one of life’s little ironies, ObamaCare is a Republican neoliberal program. For our newer readers:
Make no doubt. Romneycare was the model for Obamacare.
The conservative DNA of ObamaCare is hardly a secret. “The Obama plan has a broad family resemblance to Mitt Romney’s Massachusetts plan,” Frum wrote. “It builds on ideas developed at the Heritage Foundation in the early 1990s that formed the basis for Republican counter-proposals to ClintonCare in 1993-1994.”
Now let’s consider those Heritage “ideas,” because they ended up setting the boundaries for acceptable discourse in the policy debates that followed. In a 1989 Heritage Foundation brief, Assuring Affordable Health Care for All Americans, Heritage Foundation’s director of domestic policy strategies, Stuart M. Butler, Peter J. Ferrara (George Mason), Edmund F. Haislmaier (Heritage), and Terree P. Wasley (U.S. Chamber of Commerce) proposed the essence of ObamaCare: “[E]very resident of the U.S. must, by law, be enrolled in an adequate health care plan to cover major health care costs.” However, from the “political advantage” standpoint, the key goal of the Heritage plan was to fend off single payer. From the conclusion:
The mandate made its political début in a 1989 Heritage Foundation brief titled “Assuring Affordable Health Care for All Americans,” as and the employer mandate, which were favored in Democratic circles.
So, reminding ourselves of Jeff Sessions’ strictures on “anything goes” post-modernism, we have Democrats (Obama + Gruber) adopting a Heritage-inspired plan pioneered by Republicans (Romney + Gruber), whereupon the Republicans turn around and fight their own plan tooth and nail, while the Democrats, fighting back furiously, never mention they adopted the Republican plan. However, we also find Democrats, Republicans, Heritage, and Gruber in simultaneous agreement that “single payer” is verboten, taboo, unmentionable, “off the table,” and not politically feasible. So all parties noisily and venomously seek “political advantage” at a level of mind-boggling illogic and contradiction, but the real policy conflict — the policy both parties and the political class seek to avoid — is buried, and never mentioned at all.
TrumpCare operates in the same policy space, because markets. On TrumpCare, I’ll quote the putatively wonkish Paul Ryan, since Lazsweski highlights Ryan’s work, considering it “as detailed as the plan Bill Clinton or Barack Obama had the morning after they were elected.” Ryan’s impressive-looking site, A Better Way, has several PDFs on health care. From the policy paper:
Americans deserve a competitive insurance marketplace that provides quality care at an affordable cost. But, this does not mean returning to the pre-Obamacare status quo. Our health care system has been broken for decades because people lack the most basic tools they need to make decisions that are right for them. Red tape hides information on prices and quality, bureaucrats in Washington put themselves between doctors and their patients, and choice and competition take a back seat to federal mandates and coercive taxes.
(I like “Americans deserve.” Because, as we know, “you can’t always get what you want.”) The “big gummint” rhetoric is different from Democrat’s, but the concept — If only people had better information! — is identical. And then there’s this:
Unleashing the power of choice and competition is the best way to lower health care costs and improve quality. 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. Consumer-driven health care allows individuals and families to control their utilization of health care by providing incentives to shop around. This ultimately lowers costs and increases quality.
Again, I can’t imagine Obama using rhetoric like “unleashing the power of choice and competition.” Obama says buying health insurance will be like buying a flat-screen TV. But the concept — go shopping! — is identical. That doesn’t mean that TrumpCare won’t further crapify what you’re shopping for. Health Affairs surveyed eight Republican health care plans offered between 2012 and 2015:
Regarding guaranteed issue, medical underwriting, and pre-existing condition exclusions in health insurance policy rating, while all plans endorse the principle of guaranteed issue, all but one require that individuals have at least 12-18 months of continuous coverage to avoid medical underwriting. Though two plans preserve the ACA’s ban on lifetime benefit limits in insurance, six do not, and all but one (Roy) eliminate the ACA’s ban on annual benefit limits.
In summary, the plans demonstrate a clear intent to deregulate most consumer protections established in the ACA, and to eliminate the individual and employer mandates. More limited tax-based assistance would be available to fewer consumers and that assistance would not vary by income. Guaranteed issue and the elimination of pre-existing condition exclusions would apply only to individuals who can maintain continuous coverage.
Of course, ObamaCare being in a death spiral of rising rates, crapifying policies, and falling enrollment, there’s no telling what the Democrats would have picked from this laundry list.
Trump, Preexisting Conditions, the Mandate, and Selling Insurance Across State Lines
Here’s what Trump had to say in the CNN-Telemundo Republican debate:
MODERATOR: Mr. Trump, Senator Rubio just said that you support the individual mandate. Would you respond?
TRUMP: I just want to say, I agree with that 100 percent, except pre-existing conditions, I would absolutely get rid of Obamacare. We’re going to have something much better, but pre-existing conditions, when I’m referring to that, and I was referring to that very strongly on the show with Anderson Cooper, I want to keep pre- existing conditions.
I think we need it. I think it’s a modern age. And I think we have to have it.
MODERATOR: OK, so let’s talk about pre-existing conditions. What the insurance companies say is that the only way that they can cover people is to have a mandate requiring everybody purchase health insurance. Are they wrong?
TRUMP: I think they’re wrong 100 percent. What we need — look, the insurance companies take care of the politicians. The insurance companies get what they want. We should have gotten rid of the lines around each state so we can have real competition.
Parsing Trump, which is not easy, we see:
1. Clear: “I want to keep pre-existing conditions.”
2. Clear: “We should have gotten rid of the lines around each state so we can have real competition.”
3. Not clear: “I agree with that 100 percent, except pre-existing conditions, I would absolutely get rid of Obamacare.” Since Trump is asked “you support the individual mandate. Would you respond?” Trump seems to be saying (“I agree with that”) that he supports (!) the mandate. But he also says that he would “get rid of ObamaCare,” with the only exception being preexisting conditions. My interpretation is that Trump would abolish the mandate. His campaign site says he will:
Completely repeal Obamacare. Our elected representatives must eliminate the individual mandate. No person should be required to buy insurance unless he or she wants to.
However, the Trump transition site page on health care is silent on this topic. Trump doesn’t mention the mandate in a recent interview with the Wall Street Journal. Ryan is equivocal, at least on his own site. The survey of other Republican plans is from 2015, and so does not include Ryan’s plan, but most of those plans do abolish the mandate.
I’m going to assume that Trump misspoke in debate and wants to abolish the mandate. Of course, if Trump’s replacement plan includes a mandate, he’ll be following in Obama’s footsteps: Obama slammed Clinton in 2008 for having a mandate for her plan; then he incorporated a mandate in his own plan when he was elected. And I’m further going to assume that Trump’s solution to rising health insurance premiums is selling health insurance across state lines; certainly they are juxtaposed in his own mind.
Selling Insurance Across State Lines is Snake Oil
Unfortunately, selling health insurance across state lines is a seemingly reasonable policy proposal that has lousy results. Michael Hiltzik has an excellent takedown in the Los Angeles Times. He points out two problems. First, the proposal encourages a regulatory race to the bottom:
On the face of it, lowering state-level barriers to health insurance sales would launch a race to the bottom akin to what happened with credit-card regulations after 1978. That’s when the Supreme Court ruled that credit card regulations could be exported by banks located in one state to customers located anywhere else. (This was no reactionary ruling, by the way; it was a unanimous opinion, written by arch-liberal William Brennan.) The result was that credit card-issuing banks set up shop in places like South Dakota and Delaware, which had virtually no usury laws, effectively nullifying other states’ limits on credit card fees and interest rates. One can envision a similar reaction in health insurance.
The second problem is more subtle:
The key is that healthcare is almost always delivered locally. Even if a Southern Californian’s insurer is located in, say, Idaho, his or doctors and hospitals are almost certain to be nearby. To provide coverage, Joe’s Insurance would have to make deals with local providers in its new markets, creating its own local networks and agreeing on fees.
The typical tradeoff is that Big Insurer A promises Hospital B access to its thousands of local enrollees, if Hospital B agrees to treat them at a preferential rate. [Richard] Mayhew, who does this stuff for a living, tells us: “Insurers have leverage against providers when the insurer can credibly promise to direct a large number of covered lives to or from a particular provider. Providers have leverage when they don’t think that the insurer is bringing a lot of members.”
Insurers entering a new state from far away will have no leverage because they’ll be building their customer base from scratch and therefore will have only minimal business to offer hospitals or doctors in their new state. They’ll have to pay premium rates to attract these providers, at least at first; and to attract more customers they’ll have to offer competitive premiums.
Multi-state networks work under limited conditions, chiefly in metropolitan areas that span several states; an insurer in the Washington, D.C., market needs to offer a network of doctors and hospitals in the District, Maryland and northern Virginia, for example.
Everywhere else, this is a formula for big losses in the first few years of expansion, at least. One could argue that such a loss-leader strategy might work in the long run, but the big U.S. insurers such as Aetna and United Health have shunned the loss-leader game under Obamacare — they’ve pulled out of the market because they’re unwilling to sustain losses until it stabilizes. What makes anyone think they’d jump back in?
We know the answer: They won’t. We know because the ACA allows states to reach compacts with other states to allow cross-border insurance sales (compacts are essentially interstate treaties). Georgia, Maine and Wyoming have passed laws enabling such compacts.
So, another case of the dogs not eating the dog food. We could, of course, subsidize the insurance companies as they seek to stand up their markets. But that would be expensive, complicated, unwieldy, and would give big gummint a leading role…
What we do know is that TrumpCare, like ObamaCare, will be a neoliberal, markets-first solution. So the country will have oscillated from the left side of the Overton Window to the right, and simple, rugged, and proven single payer will still be unmentionable in polite company; it will be interesting to watch liberals squirm to avoid discussing it. Since we can cross selling insurance across state lines off as any kind of solution, I’d be surprised if TrumpCare didn’t end up looking like a crapified version of the already crapified ObamaCare. For pre-existing conditions in particular, the Republican plans from 2015 all crapify the coverage (with, for example “at least 12-18 months of continuous coverage” being required). Too bad the Democrat victory in 2008 was such a squandered opportunity.
 There are also the actuarial issues of selling a product in a marketplace that is be about to be abolished. How does that work?
 Coverage of Ryan’s policy paper says that it will abolish the individual mandate. The policy paper itself is more equivocal; it inveighs against mandates, plural, but nowhere does explicitly say that the individual mandate will be abolished. The same is true of the “Snapshot,” a short version of the policy paper. The same is true of the FAQ, which uses verbiage like “ending expensive mandates,” but nowhere mentions the individual mandate. Perhaps that’s because the Republican hive mind hasn’t figured out how to square the circle of having enough healthy people in the pool for the insurance companies to make a profit without a mandate.
 Perhaps they’ll make the Exchanges go away? Or privatize them? Throw Jeff Bezos a bone and sell health insurance on Amazon? With customer reviews turned off, of course.