Deep uncertainty and serious divisions within the Republican coalition about the way forward on Obamacare have surfaced in the new Congress, and they’ve put the future of repeal and replace in doubt.
It’s become evident that there is little GOP unity on how much a replacement plan should cost, how to pay for it, whether the Medicaid expansion should be rolled back, or how to fix the individual markets.
Furthermore, there is no evident agreement even on extremely broad questions such as, “What should the goals of the GOP’s replacement plan be?”
Accordingly, many Republicans in both the House and Senate are increasingly fearful about moving to roll back Obamacare too quickly when so little is settled about what comes after it. And their problems are compounded by the fact that while a reasonably comprehensive repeal bill could be rammed through with just 50 Senate votes plus Vice President Mike Pence, a serious replacement bill would need 60 Senate votes, at least eight of which would have to come from Democrats.
It is not impossible that President Trump and the Republican Party will overcome all these problems. But to do so, they will have to come up with consensus answers to these five very serious unsettled questions.
1) What is the goal here?
When Democrats tackled health reform in 2009 and 2010, their primary goal was to expand useful health coverage to millions more people. Their strategy to achieve that goal was complex in its particulars, but broadly quite simple — they’d spend a lot more government money on health care, and pay for it with new tax increases and spending cuts elsewhere.
Now that Republicans are tackling the issue, their goals are far more muddled.
For instance, the GOP seems to be in agreement that Obamacare is too expensive. Yet when you look a bit more closely, some Republicans are most passionate about cutting government spending on health care, while others (including Trump) tend to cite people’s complaints about their own high premiums and deductibles.
But these are, to some extent, opposite problems with opposite solutions. Realistically, if you slash government spending on health coverage, at least some of those constituents will end up paying much more out of their own pockets. And many Republican health wonks don’t think high deductibles are actually so bad, since they would theoretically incentivize people to spend less on unnecessary care. (Congress members listening to their constituents’ complaints about high out-of-pocket costs may not be so persuaded by this argument.)
Then there’s the crucial question of whether any GOP replacement should maintain Obamacare’s coverage levels, or even seek to expand them. Trump has said he wants his replacement plan to “have insurance for everybody,” even those who “can’t pay for it.” Yet Republican congressional leaders reportedly think the goal should instead be to provide everyone access to coverage — a much more nebulous objective.
The community of conservative health wonks is also divided on this topic. Lanhee Chen and Tevi Troy wrote recently that “the ACA’s replacement ought to have universal coverage as a goal.” But Philip Klein says that if Republicans don’t flat-out say, “We don't believe that it is the job of the federal government to guarantee that everybody has health insurance,” their reform efforts will be “doomed to fail.”
Drafting and passing a comprehensive health reform bill is incredibly difficult even when you do have clear goals, as Democrats found out in 2009. The GOP’s current lack of consensus on coverage goals or just what lowering costs means compounds the difficulty.
2) What will they do about money?
The Affordable Care Act spends more than $100 billion a year toward health coverage. But importantly, Democrats wrote the health law so that this new spending would be paid for — so the ACA also raises a lot of money. It does this through several sources, including new taxes on rich people and fees on health-related industries, which are projected to raise hundreds of billions of dollars in the next 10 years.
Repealing Obamacare naturally means repealing those taxes and fees, and many Republicans are eager to do that. The problem, though, is that if Republicans also replace Obamacare with anything that spends anywhere close to as much on coverage, they’ll need to come up with new sources of funding to pay for it.
Coming up with what in Hill parlance is known as a “pay-for” is tremendously challenging for legislators, because there will be some constituency or group very vocally opposed to essentially any new tax hike, fee, or spending cut that’s proposed.
And while Republicans do have one idea here, it looks to be an extremely tough sell. In leaked audio from Republicans’ closed-door retreat last month, House Ways and Means Committee Chair Kevin Brady said that he’s “looking at” limiting “the biggest tax credits we have ... the tax break you get for health care” provided through employers, to help fund a health care tax credit that would be more portable.
Brady is referring to the fact that all employer-sponsored health insurance premiums are currently exempt from federal taxes, which wonks on both the left and right have long seen as a wasteful subsidy that distorts health spending decisions.
The problem is that changing it is terrible politics. That’s because the majority of Americans who have insurance currently get it through employers and therefore benefit from this tax break. Past administrations have shied away from messing with it as a result, with Obama’s one major attempt to do so — the never-yet-implemented “Cadillac tax” — predictably ending up incredibly unpopular.
The optics of repealing taxes targeting rich people, while capping a tax break enjoyed by a much broader section of Americans, could be devastating. Indeed, Sen. Bill Cassidy (R-LA) pushed back against Brady’s idea in the audio from the retreat. “It sounds like we are going to be raising taxes on the middle class,” Cassidy said.
But what Republicans can do on the replacement side will in large part be determined by how much money they can dredge up to pay for it. So if they’re dead set on repealing Obamacare’s pay-fors and can’t come up with their own, they will likely have to deal with a whole lot of people either losing coverage or seeing even greater costs.
3) What’s to be done with Medicaid?
Out of the money question comes another very clear division that splits Republicans in Congress: the fate of Obamacare’s Medicaid expansion.
The health law expanded coverage to millions more people in two main ways. First is what we generally think of as Obamacare — the restructuring of the individual insurance markets, and the subsidies to help people buy insurance on those insurance exchanges. But second, the law expanded Medicaid eligibility to people making up to 138 percent of the federal poverty line, including childless adults, with the federal government shouldering the vast majority of the cost.
A subsequent Supreme Court ruling allowed states to reject the expansion if they wanted to. But 31 states have opted in. That means a full Obamacare repeal would eliminate health coverage for over 10 million people who gained it through the Medicaid expansion.
Currently, 20 of the 52 Republican senators represent states that expanded the program. Several have been vocal about their lack of interest in rolling this particular part of Obamacare back. “That’s 184,000 people in my state,” Sen. Shelley Moore Capito (R-WV) told Politico. “That’s problematic.”
But other Republicans in Congress are from states that didn’t expand, or are ideologically opposed to continuing the expansion. “Getting ahold of the Medicaid expansion and repealing that is absolutely critical if we’re gonna have control of the growth of entitlement spending,” Rep. Bob Goodlatte (R-VA) said in the retreat’s leaked audio. Republicans in states like his, he continued, “want to be proven that they were correct originally, that we can’t afford this when we have a $20 trillion national debt.”
The House Freedom Caucus is reportedly demanding that any repeal bill roll back the Medicaid expansion entirely, and they may have some allies in the Senate. Meanwhile, Republican leaders had planned to use some of the savings from repealing the Medicaid expansion to fund their replacement plan — which means that if they can’t do so, they’ll have to come up with more money elsewhere.
Beyond the question of the Medicaid expansion’s fate in repeal legislation, there’s the question of what will be done with Medicaid as a whole in any replacement for Obamacare. Republicans have long proposed overhauling the program by handing over much more authority to the states to run their Medicaid programs as they see fit. The catch is that such proposals from the GOP are almost always accompanied by changes that would also cut or cap Medicaid spending — which would mean people lose coverage.
Then there’s the further hiccup that if the GOP’s Medicaid overhaul caps payments per enrollee, the states that expanded Medicaid will effectively be rewarded with more federal cash. So you get the potentially bizarre situation where, as Politico’s Jennifer Haberkorn and Rachana Pradhan report, the party might end up having to placate those non-expansion states by throwing more money at them, so they can hopefully cut the program as a whole.
4) How will they try to make the individual markets work better?
When it comes to reforming the individual insurance markets, there is at least some Republican consensus on what to do. Everyone from HHS Secretary Tom Price to Speaker Paul Ryan to Senate Finance Chair Orrin Hatch agree on the basic premise that the government should give people buying insurance on the individual market a tax credit to help them afford it.
There’s one more thing they have in common: As Sarah Kliff wrote last November, the various GOP replacement plans are all “better for younger, healthy people and worse for older, sicker people.”
Indeed, the fundamental problem at the heart of the GOP’s replacement conundrum is that health care in the US is expensive, and health care for sick people is especially expensive.
One thing Obamacare tried to do was prevent so much of these costs from falling on sick people — by spreading them around to healthy people (by way of regulating how much insurers can charge and what benefits they must provide) and by having the government spend more too.
Now, Republicans have at least a reasonably good case that Obamacare’s individual markets aren’t working well, with insurers pulling out of some areas and costs rising to the point where many healthy people are less likely to find insurance worth their while. Some sort of fix appears to be necessary.
The GOP’s preferred reforms generally involve rolling back Obamacare’s regulations so that insurers have more flexibility to sell different types of insurance products and charge different rates.
But the devil will be in the details. How big should the tax credit be? How much should it vary for different populations (for instance, should it vary by age or income)? What, if any, policy tools will be used to encourage young and healthy people to get insured? Just how many regulations on what products insurers can sell will be rolled back? And if regulations are rolled back, how will the GOP’s replacement avert an outcome in which sick people are charged exorbitant rates or denied coverage altogether?
There are no easy answers to any of these questions. And when Republicans do release a real bill, the Congressional Budget Office will be waiting to issue its estimates on who would lose out from it.
5) Just how committed are they to this thing, anyway?
When Democrats tackled health reform in 2009, expanding health coverage had been a core value of their party for decades. As mentioned above, that was helpful because it helped them clarify their goals for the legislation.
But another important consequence of that is that many in the Democratic coalition, from the president on down, deeply believed they were doing something good that would help people.
Because of that, Democrats were willing to make sacrifices and take risks. So when Tea Party protests swept the nation and it became clear that the Affordable Care Act would be a really tough vote, many Democrats even in moderate states and districts turned out to be willing to walk the plank.
Republicans have gotten a lot of mileage out of criticizing Obamacare. The party is enthusiastic about, in broad terms, cutting taxes, regulations, and government spending.
But health policy specifically has never particularly inspired the GOP coalition. There’s a reason why, in the nearly seven years since Obamacare became law, the party has never managed to get together a consensus replacement plan.
For many, the commitment to repealing Obamacare is only slogan-deep. Accordingly, there’s already a sense of exhaustion and frustration among some Republicans on the Hill who would much rather focus on cutting taxes but instead feel like they’re stuck in an Obamacare mess.
So what happens after a wave of new protests at town halls? What happens if the GOP’s bill gets a bad CBO score? What happens if President Trump derails the process with a tweet?
Will Republicans find the fortitude to keep on pushing ahead — or will they back away?