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Mitt Romney’s former policy director makes the case for the GOP’s health bill

Lanhee Chen explains why Republicans landed on this health care bill, and this process.

Candidate Mitt Romney Campaigns In Crucial Swing States Photo by Justin Sullivan/Getty Images

The reaction to the House GOP’s health care bill — the American Health Care Act, or ACHA — was swift and severe. Liberals hated it. But so did conservative health care wonks.

One exception was Hoover Institute fellow Lanhee Chen, who served as Mitt Romney’s policy director. “It is a good start and big step in the right direction,” he tweeted. So I called him to hear his case for the bill. A transcript of our conversation, lightly edited for length and clarity, follows.

Ezra Klein

Let’s begin with the subsidies. The Republican bill replaces Obamacare’s subsidies, which are based on income and the cost of insurance in your area, with age-based subsidies. Why is that a good idea?

Lanhee Chen

I think, as a general matter, the goal is to create a simplified system. One big concern about the ACA tax credits is how complex they were given the interactions between location and income. So I think part of it is an administrative argument.

The other issue has to do with labor market impacts. [Ezra’s note — see this Matt Yglesias article for a longer explanation of this issue.] The idea is that they create disincentives for additional labor, particularly at the threshold set by law. I think that’s the primary rationale behind moving to a strictly age-based arrangement.

In an ideal world, I think the House bill would want to provide a little more assistance for people right on the edge of Medicaid eligibility, because right now, as it’s written, if your income pushes you over the Medicaid threshold you’re now getting a less generous health care subsidy. So I think they need to address that.

Ezra Klein

I take your point on the appeal of a simplified system. But it seems a bit wishful. The country is big and complicated. A one-size-fits-all subsidy seems strange given how different the cost of insurance is in Alaska versus Los Angeles, or how different the situation of a 25-year-old who works at Instagram is from one who is still looking for their first job.

The complexity of Obamacare’s subsidies seems responsive to the complexity we see in the health care system and in people’s lives. On the other hand, this age-based credit, which isn’t responsive to what people make or how much insurance costs, is going to leave a lot of people with a credit that doesn’t buy them insurance.

Lanhee Chen

A primary determinant of how much one pays for insurance by and large is age. So while there is geographic variation, and it’s certainly the case that factors like income matter, age is a decent proxy for premiums.

On the geography point, I don’t think government wants to be in the business of subsidizing people for their lifestyles. Now, where you live isn’t entirely a life decision, but the goal of the tax system shouldn’t be to formalize or enshrine decisions about geography. It seems to me if you have a tax code that varies the subsidy based on where people live, that creates an incentive to locate in certain places. I’m not suggesting people pick up and move to San Francisco because they want a bigger tax credit under Obamacare, but if we’re moving to a different kind of system anyway, I don’t think it’s appropriate to reinforce some of these biases in the code that don’t make a lot of sense.

Ezra Klein

But if what we are trying to subsidize is people having health insurance, then the cost of health insurance where they live seems like a very relevant factor. And that relates to age being a proxy for premiums. In the Republican plan, the tax credits are about twice as big for older Americans as for younger Americans. But the bill allows insurance companies to charge older Americans five times as much as younger Americans. So if age is being used as a proxy for premiums here, shouldn’t the tax credits for older Americans be five times the tax credits for younger Americans, too?

Lanhee Chen

There is a disconnect between the size of the credit and the age rating permitted. That said, the argument for not necessarily wanting the tax credit to match with the age rating is that a larger credit creates an incentive for plans to price even higher. Just because insurers can take advantage of the 5-1 doesn’t mean they have to take advantage of it. But I take your point that a disconnect exists in the structure here, and I think that’s something they ought to think about.

Ezra Klein

Let me ask you about what kind of insurance you expect to see on the other side of this. A mainstay in Republican rhetoric criticizing the Affordable Care Act — I’ve heard this from Mitch McConnell, I’ve heard this from Donald Trump — is that the insurance offered has high deductibles, high copays. McConnell made this point that people are being forced to purchase health insurance that’s too expensive for them to use.

When I look at this bill, which lowers the percentage of health costs insurers have to pay and gives people less money with which to buy insurance in the first place, it looks to me like we’re going to see higher copays and deductibles. Do you see that going a different way?

Lanhee Chen

This is always the tension at the core of conservative health reform. On the one hand, I think you will have lower premiums. But those come, in some cases, with products where there is more expense for the consumer on the front end. Part of that is by design. We want a system where consumers have a better handle on the cost of care. One of the primary criticisms of the cost-sharing provisions under the Affordable Care Act was they masked the real cost of care, and so had the potential to drive up premiums over time, and I think you’ve seen some of that.

Ultimately, if our goal in the long run is to drive down costs, there’s a tension between not allowing consumers to see the cost of care and controlling costs in the long run. It’s very difficult to have lower cost sharing, lower deductibles, and lower premiums. Those goals are in tension.

One issue is the House bill, as it’s designed now, is constrained by the reconciliation process, and so they can’t do as much elimination of regulations as conservatives want. They don’t address essential health benefits, they don’t address guaranteed issue, they retain the modified community rating structure. The fact that those things are not in the bill will constrain the potential effects on cost that a conservative reform might have.

Ezra Klein

What are conservative goals on health care right now? Democrats wanted to increase the number of people with reasonably comprehensive insurance coverage and slow the grow of national health expenditures in the long run. What are the goals behind this bill?

Lanhee Chen

There are disagreements between conservatives about what the right goals are. I’d divide it into a few camps.

One camp of conservatives believes they should cover more people and cut costs — they think reducing costs is the gateway to expanding coverage, but both goals have merit and are important.

Another group makes the argument that you have to focus on cost above all else, and that the coverage question isn’t even a meaningful metric — if you lower cost enough, coverage automatically follows. They think this discussion about coverage is useless because it’s a metric any Republican plan won’t be able to meet as well as progressive alternatives.

Then there’s another group of people that has a visceral reaction to the role of government in the health care system. They want to get government out of the business of health care as much as possible. That’s obviously a challenge given the number of people on Medicaid and Medicare, but particularly in private insurance markets, they want as little government intervention as possible — that leads to saying things like any tax credits are a new entitlement.

Part of the reason why you’re seeing some of these challenges on the Obamacare repeal-and-replace effort is because conservatives depart from slightly different places. The House bill includes something for everybody in that coalition, but what ends up happening is that it doesn’t do any one thing in a particularly outstanding way. That isn’t to say it’s not a good place to start, but I think it explains some of the angst you’re seeing.

Ezra Klein

This does not look like a process built to work through those differing ideas and find consensus. Republicans spent years saying the 15-month Obamacare process was too fast, it was jamming the law down the country’s throat, it was too partisan. And so I’ve been really struck seeing them bring this bill out on Monday, moving it to markup on Wednesday without a Congressional Budget Office score, and discussing trying to pass it through the Senate within roughly a month.

When I think about how Obamacare was built — the Gang of Six, all those committee markups — that was painful for them, but they did it because they were trying to work everybody onto the same page. This process feels like they are trying to hide the fact that everybody is not on the same page, like they’re trying to hide the trade-offs.

Lanhee Chen

I’m not sure they’re trying to hide the divisions. Those have come pretty clear. What I do think is the case is they’ve been talking about repeal for seven years. There’s nothing, in my mind, on the repeal side that is a surprise.

On the replace side, there are these tensions between conservatives on the best way forward. That said, none of the ideas on the replace side should be a surprise to anybody. There has been this narrative that Republicans had no plan and no ideas. As a result, things like the Burr-Hatch effort in the Senate, or Ryan’s Better Way in the House, or Tom Price’s bill have not gotten the coverage and analysis they should have because no one took them seriously.

So yes, are there elements of the process being conducted behind closed doors? Of course there are. But the notion that this is being jammed down people’s throats is fantasy.

Ezra Klein

Let me push you on this. I’ll speak for Vox here. We read all the Republican replacement plans. We did a big summary of all of them. It’s true that a lot of different plans have been around. But this bill, with this particular constellation of ideas, is new in important ways. The Medicaid freeze, for instance, is something we haven’t seen before.

So to try to push it so fast — to try to get it through committee before there’s even a CBO score! — that is surprising to me. They don’t even have the information to know how the bill needs to be amended. Are you not surprised by this?

Lanhee Chen

It seems to me that clearly the Republican leadership has made a decision that time is of the essence here. Now, would it be great to have all the information we need in place while or before we have these discussions? In an ideal world, yes. But I also think that runs up against the reality that the deeper we go into this process, the harder it will be to achieve certain policy and political goals. We all know what happens in the policymaking process when you slow things down — it becomes harder to achieve consensus even among your own members. Is it an elegant process? Probably not. But it’s the best they can do given the constraints.

On CBO, for many years, a lot of Republicans have argued we shouldn’t pay any attention to CBO at all — the notion they would wait for CBO before moving forward would cut against the rhetoric folks on the right have embraced. I don’t take the view CBO is not credible, but many on the right have made that argument.

Ezra Klein

The thing I find difficult to figure out there is Democrats had the same views. They knew that leaving things out there could make it hard for a bill to ultimately pass. It created time for things like the Scott Brown election to happen. But the Republican argument, which I hope was at least a bit principled, was that this should take time, this is how the system works, these big bills require a lot of deliberation and amendments and input.

I certainly understand that it’d be easier to get things done if you just wrote a bill in secret and passed it the next day. I can imagine a system that works that way. But it’s not the system Republicans said they wanted. And I worry it’s not the system that’s going to get a bill that’s fully vetted.

I understand the dangers of slowing down for them, and I’m sympathetic. But there’s a lot of risk here. First, an escalation of just how fast the norms of passage become, and second, if we throw out things like CBO, we begin making policy in a very nihilistic space — no one is empowered to say, here’s where we think might happen, let’s consider that. For policy people, this is a very scary space.

Lanhee Chen

This is not the ideal process. That is clear. But one point I would make is the Democrats in Congress have already made it clear they have no intention of working with the Republicans. I haven’t heard anyone say they’ll bite the bullet and work with you to make this happen. If you already know you’re in a situation where the other side has no intention of working with you, that changes the dynamic.

I think throughout the Obamacare debate there was always the hope of Republican support, and there were efforts, like the Gang of Six, to see whether that was possible. We’re in a very different time now, and that does affect the process. There hasn’t been that level of outreach from Democrats. There’s no regular order possible here because Democrats don’t want to work with Republicans on this.

Ezra Klein

Isn’t it to some degree incumbent on the majority party to pull some Democrats in and say, hey, what would your goals be here? Is there some way for us to work together? I haven’t seen Mitch McConnell and Lamar Alexander and Orrin Hatch entering a process with Joe Manchin and Heidi Heitkamp and Claire McCaskill to see if there’s something they can agree on, which is how Max Baucus ran the Senate Finance Committee at that time. There are a lot of Democrats up in 2018 who are very vulnerable. It’s not obvious to me it had to go this way.

Lanhee Chen

We may have to disagree on that point. It seems to me Democrats have made it abundantly clear there is no middle ground here now. Republicans didn’t feel they had a choice to pursue a process other than the one they’ve pursued. Could Republicans have done more reaching out? Perhaps. Would it have changed the outcome? I’m skeptical.

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