The good, the bad, and the ugly in the GOP's health care plan

Today, the House Energy and Commerce Committee and the House Ways and Means Committee marked-up the parts of the Republican Obamacare "replacement." Here is a breakdown of the good, the bad, and the ugly of the Republican plan:

The Good:

1. Reduces s the penalty for failure to comply with the individual mandate to ZERO.

2. Repeals the Cadillac tax.

3. Repeals the tax on over the counter medications.

4. Repels the increased tax on Heath Savings Accounts (HSA) and Flexible Savings Accounts (FSA).

5. Repeals limits on contributions to FSAs.

6. Repeals medical device tax.

7. Repeal of Obamacare; increase in percentage of one's income someone must spend on health care before they can deduct those expenses.

8. Reinstates the deduction for business that subsidies there retired employee's prescription drug costs.

9. Repeals Obamacare's increase in Medicare taxes.

10. Creates a new tax credit for health insurance. While not ideal, a tax credit does put money in the hands of individuals to control their own health spending, thus takes a step toward a free-market health system.

There are legitimate concerns about making a tax credit refundable, since that does allow some individuals to receive a check from government above their income tax liability. One way to address this is to make the credit refundable against income and payroll tax liability. This makes the credit valuable to many working Americans while limiting the amount of redistribution introduced into the tax system.

11. Increases amount individuals can put in their HSA to  "...equal the maximum on the sum of the annual deductible and out-of-pocket expenses permitted under a high deductible health plan. Thus, the basic limit will be at least $6,550 in the case of self-only coverage and $13,100 in the case of family coverage beginning in 2018."

12. Repeals the the Prevention and Public Health Fund (PPHF).

13. Allows individuals to use tax credits to purchase catastrophic-only health insurance, thus taking a step toward restoring the true meaning of "insurance."

The Bad:

1. Maintains Obamacare's mandates and price controls on insurance, guaranteeing continued problems in the health insurance market. The only exception insurance companies to charge people who do not maintain insurance coverage for two months a 30% "late enrollment" surcharge.

2. Maintains mandates that insurance companies allow "children" to stay on their parent's policies until age 26.

3. Reinstates the Cadillac Tax in 2025

The Ugly:

1. Does not repeal Medicaid expansion until 2020, and does not roll it back after that. So states have three years to get as many people as possible onto the Medicaid rolls to create a more powerful voting block in favor of rolling back expansion repeal. It is very likely Congress will not allow the expansion to be repealed since 2020 is an election year and no one wants to be accused of denying people health care while on the campaign trail.

2. Creates a special new program to provide $10 billion to states that did not expand Medicaid. So states that resident Obamacare's expansion of federal funding of health care get rewarded with....federally-funded health care.

3. Creates a new "Patient and State Stability Fund,  at a cost of $100 billion, which is designed to lower patient costs and stabilize State markets." The state may use the money proved under this fund for:

* Helping, through the provision of financial assistance, high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State, as such market is defined by the State (whether through the establishment of a new mechanism or maintenance of an existing mechanism for such purpose).

• Providing incentives to appropriate entities to enter into arrangements with the State to help stabilize premiums for health insurance coverage in the individual, as such markets are defined by the State.

• Reducing the cost of providing health insurance coverage in the individual market and small group market, as such markets are defined by the State, to individuals who have, or are projected to have, a high rate of utilization of health services (as measured by cost).

• Promoting participation in the individual market and small group market in the State and increasing health insurance options available through such market.

• Promoting access to preventive services, dental care services (whether preventive or medically necessary), vision care services (whether preventive or medically , or any combination of such services, as well as mental health and substance use disorders.

• Providing payments, directly or indirectly, to health care providers for the provision of such health care services as are specified by the Administrator.

• Providing assistance to reduce out-of-pocket costs, such as copayments, coinsurance, premiums, and deductibles, of individuals enrolled in health insurance coverage in the State.

If a State chooses not to use the funding for their own program, the resources will be available to the Administrator of the Centers for Medicare & Medicaid Services (CMS) to help stabilize premiums for patients.

4. Instead of repealing Obamacare's provision limiting  the  most generous plan for older Americans to three times the cost of the least generous plan for younger Americans, thus bill "loosens" the requirement to allow insurance companies to charge older Americans fives times what they charge younger Americans.

CATO health policy expert Michael Cannon has a good analysis of the plan at the CATO website, although I disagree with Michael that tax credits are the equivalent of an individual mandate. Here are some experts from Michael's piece:

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse.

Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all. Congress would have to revisit ObamaCare again and again to address problems they failed to fix the first time around. ObamaCare would consume the rest of Congress’ and President Trump’s agenda. Delaying or dooming other priorities like tax reform, infrastructure spending, and Gorsuch.

The fallout could dog Republicans all the way into 2018 and 2020, when it could lead to a Democratic wave election like the one we saw in 2008. Only then, Democrats won’t have ObamaCare on their mind but single-payer. First, let’s look at how the main features of this bill fall short of repeal.

Medicaid Expansion ObamaCare expanded Medicaid to able-bodied adults below 138 percent of the federal poverty level. The federal government covers a much larger share of the cost of covering Medicaid-expansion enrollees than enrollees in the “old” Medicaid program—currently 95 percent, bottoming out at 90 percent in 2020.

So far, 31 states have chosen to implement the Medicaid expansion; 19 have declined. The House leadership’s bill would not even start to repeal ObamaCare’s Medicaid expansion until 2020, more than two and a half years from now, and even then would repeal it only one enrollee at a time.

In 2020, states could no longer enroll new able-bodied adults into the Medicaid expansion. Yet the federal government would continue to pay for each and every continuously covered able-bodied adult who enrolled in the expansion before then. And it would do so at the enhanced ObamaCare matching rate, in perpetuity, until an enrollee leaves the program.

If the House leadership has its way, we may be decades away from full repeal of the Medicaid expansion. For the two-plus years between enactment and 2020, the House leadership bill would continue to allow states both to opt into the expansion and to go on an enrollment binge, for which the federal government could be paying for decades.

It is likely that the number of states participating, and the number of people enrolled in the Medicaid expansion will be higher after “repeal” than before. Which means the Medicaid expansion may never disappear at all. By 2020, the constituency for preserving the Medicaid expansion would be much larger than it is now. More states, more voters, and more special interests will resist repealing the expansion than do today. As I discuss below, Congress will likely be more Democratic than it is today.


The first thing the House leadership’s bill does is expand ObamaCare by appropriating funds for the law’s so-called “cost-sharing” subsidies, something no previous Congress has ever done.

The House leadership bill retains the very ObamaCare regulations that are threatening to destroy health insurance markets and leave millions with no coverage at all. ObamaCare’s community-rating price controls literally penalize insurers who offer quality coverage to patients with expensive conditions, creating a race to the bottom in insurance quality. Even worse, they have sparked a death spiral that has caused insurers to flee ObamaCare’s Exchanges nationwide, including driving all insurance companies from the market in 16 counties in eastern Tennessee.

As of next year, 43,000 Tennesseans in those counties could have no way to obtain coverage. Nearly 3 million Exchange enrollees have just one more carrier exit from the same fate. The leadership bill would modify ObamaCare’s community-rating price controls by expanding the age-rating bands (from 3:1 to 5:1) and allowing insurers to charge enrollees who wait until they are sick to purchase coverage an extra 30 percent (but only for one year). Even with these changes, however, premiums would remain high, ObamaCare would continue to make it easier for people to wait until they are sick to purchase coverage, and the law would continue to penalize high-quality coverage for the sick.

In fact, the House leadership’s decision to leave ObamaCare’s community-rating price controls in place while relaxing its “essential health benefits” requirements would cause coverage for sick to deteriorate even faster than ObamaCare does. It is because the House leadership would retain the community-rating price controls that they also end up retaining many other features of the law. Observers have started to notice that successive iterations of the bill look increasingly like ObamaCare.


ObamaCare’s Exchanges are already on the brink of collapse. Since this bill does not repeal the community-rating price controls, repeals the individual mandate, shifts the benefits from ObamaCare’s tax credits up the income scale, and tasks states with devising new bailout schemes of uncertain timing and efficacy, the threat of death spirals will remain.

Even where the individual market does not collapse, the coverage will get increasingly worse for the sick. If the tax credits (read: subsidies) for low-income Americans are less than under ObamaCare, many more low-income patients will lose coverage. Premiums will continue to rise. Republicans will take the blame for all of it, because they will have failed to repeal ObamaCare, or learn its lessons, when they had the chance.

The leadership bill therefore creates the potential, if not the certainty, of a series of crises that Congress will need address, and that will crowd out other GOP priorities, in late 2017 before the 2018 plan year begins, and again leading up to the 2018 elections. If Congress gets health reform wrong on its first try, health reform could consume most of President Trump’s first term. Pressure from Democrats, the media, and constituents could prevent Republicans from moving on to tax reform, infrastructure spending, or even Supreme Court nominees.

Partial Repeal Is the Road to Single Payer Flubbing ObamaCare would at once united and embolden Democrats while dividing the GOP base, driving the former to the polls in 2018 and 2020 while causing the latter to stay home. If ObamaCare is not doing well, and Republicans take the blame, it will create the potential for the sort of wave election Democrats experienced in 2008, when they captured not just the House and the presidency, but a filibuster-proof, 60-vote supermajority in the Senate.

If that happens, and ObamaCare is not doing well, Democrats will be less interested in rescuing ObamaCare than repealing and replacing it themselves—with a single-payer system. ObamaCare opponents often muse that supporters designed the law to fail because it would give them the excuse to enact a single-payer system. Republicans have a choice.

They can either prevent that future from unfolding, or they can help it along.

Read the whole thing here.

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