Republicans patched together a health care bill. Now it contradicts their own arguments.

In their rush to patch together a health care bill with enough support to pass the House, Republicans have created a plan with bizarre incentives that undermine the arguments they have used to deflect criticism of the legislation.

The final tweak to the American Health Care Act, an amendment offered by Rep. Fred Upton of Michigan, directly contradicts the defenses that Republicans have deployed for the earlier MacArthur amendment. That amendment allowed states to waive Obamacare’s rule prohibiting insurers from charging sick people more than healthy people — with some conditions. It won over many conservatives but spooked moderates who were worried about rolling back a popular Obamacare protection.

The Upton amendment, which adds an additional $8 billion to defray the higher costs people with preexisting medical conditions could face under the AHCA waivers, seems to have been enough to convince wavering centrist Republicans to back the bill and get it through the House.

But in doing so, it undermines two arguments Republicans have made in favor of the MacArthur amendment, which created the waivers in the first place: that it would encourage people to stay covered and that few states would really want a waiver anyway.

The Upton amendment dulls the incentive for people to stay covered

One wrinkle in the MacArthur amendment was that people in a state that received a waiver could not be charged a higher premium based on their health unless they had a lapse in coverage.

Some conservatives have argued that this strengthens the incentive for people to maintain coverage, because they would otherwise risk facing higher premiums. Which might have been true, before the Upton amendment was added to the bill. As Ramesh Ponnuru wrote in National Review Online:

One advantage of this system over Obamacare is that it would strengthen the incentive for healthy people to buy insurance (since buying coverage would mean also buying the ability to renew that insurance at nondiscriminatory rates).

But this new money from the Upton amendment undercuts that incentive. It is specifically designated for people who live in states with AHCA waivers and who face higher insurance costs because they had a lapse in coverage. The new money helps to bring those costs down.

People who go without health coverage and then sign up later aren’t going to feel the penalty as harshly or at all.

Here’s how Nicholas Bagley, a health law professor at the University of Michigan, put it:

If you believe in the MacArthur amendment—if you believe in it so much that that’s what it took to secure your support for the AHCA—the last thing you’d want to do is dilute the penalty for going without coverage. But that’s exactly what the Upton amendment does.

“The Upton incentive dulls the incentive that an AHCA waiver would otherwise create to stay continuously covered,” Bagley told me.

Other health experts agreed with his interpretation when I asked them about it.

“Absolutely,” Tim Jost, a health law professor at Washington and Lee University, said in a brief email.

The Upton amendment could encourage states to pursue AHCA waivers

The other argument some Republicans used in favor of the MacArthur amendment is that most states wouldn’t actually pursue a waiver from the Obamacare rule anyway. Rep. Chris Collins (R-NY) told me this week that maybe zero states, maybe only a couple, would request waivers. Upton made a similar point on Wednesday, noting that the Republican governor of Michigan had told Upton that his state would not want a waiver.

There might be political reasons for that — House Republicans have seen for themselves the blowback you can face for waiving those protections. But as a matter of pure policy, the Upton amendment actually incentivizes states to seek a waiver.

The $8 billion in extra funding is only made available to states that have a waiver from the Obamacare rule. So to get that money, you need to get a waiver.

“By dangling money, the amendment encourages states to sign up for waivers,” Bagley wrote.

If more states took that offer and sought a waiver, it would then make the funding problem worse. Many experts believe that the funding available under AHCA already isn’t enough to make sure people don’t fall through the cracks.

The more states that adopt the waiver, the more the $8 billion in the Upton amendment must be spread around, the less money for individual people to help lower their insurance costs.

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