July 10, 2017

Healthcare Conundrum: Turning a Sows Ear into The Sow’s Other Ear

by Hal Gershowitz

Comments Below

Of Thee I Sing Heading AuthorsThe US Congress has, and is, really making a mess of healthcare.

Instead of focusing our efforts on the 15% of Americans who were uninsured prior to President Obama’s Affordable Care Act (ACA)—an oxymoron if ever there was one, President Obama embarked on a quest to require all Americans (85% of whom were happy with the insurance they had), to have or to obtain health insurance that the Obama Administration considered acceptable.

“Acceptable” plans were those that— (1) took in, at no additional risk-related cost, all comers regardless of pre-existing health condition, (2) redefined children who could be covered under their parents’ plans as kids through age 26, and (3) provided a wide range of “essential coverages” that many people simply didn’t need and, therefore, hadn’t purchased in their previous policies, which were then considered “unacceptable” by the ACA.

To compound the problem, the low penalty for not buying insurance under the ACA has been counterproductive. Millions of young, healthy men and women have ignored the ACA. They understand they can simply apply when, and if, they eventually get sick, knowing they can’t be turned down nor can they be charged a higher premium for waiting until they are about to impose high health-related costs on the system. Not surprisingly, this resulted in a deluge of applicants who were disproportionately older and sicker, while far too many younger and healthier Americans took a pass, or, maybe, a trip to Disneyland instead.

To make matters worse, Americans were “sold” on the ACA with what we’ll call the most famous three no’s since Khartoum. The Obama “three no’s were, (1) no loss of your doctor, (2) no loss of your plan and (3) no increase in premiums. Of course, millions of people quickly lost their doctors, their plans, and their former premiums, not to mention incurring substantial increases in their deductibles.

Premiums for healthcare plans sold through HealthCare.gov are projected to increase by an average of 22 percent this year—nearly triple the 7.5 percent annual increase in 2015 and again in 2016.  According to the Kaiser Family Foundation, the average annual growth rate of annual healthcare spending will continue to increase by more than 5.0% a year by 2020. That’s at least a 50% increase over a five-year period, with continued increases of more than 5.0% projected thereafter. This after candidate Obama promised in 2008 a $2400 reduction in premiums for families by 2012. Well, who remembers 2012 anyway?

Republicans have pontificated for the better part of a decade that when and if they gained control of Congress they would repeal and replace the ACA. As Candidate (and then President) Trump promised, the Republicans were going to replace Obamacare with something…beautiful and terrific. Now that Republicans have gained control of Congress they are finding that the silk purse they wanted to make of the sow’s ear known as Obamacare, is turning out to be nothing more than the sow’s other ear.

That’s because the Republicans want to keep the most popular provisions of the ACA while simultaneously reducing costs. The only way to do that, really, is to pull back on the ACA’s expansion of Medicaid, which, of course, has created a firestorm of criticism. That’s because of the potential impact on millions of additional lower-income citizens who were brought into the ACA who, prior to Obamacare, still earned too much to qualify for Medicaid. Politicians who vote to take away or reduce an entitlement are called all sorts of names. In the case of cutting back on the expansion of Medicaid the name de jour is “murderer.”

We assume that those of our fellow citizens who had to drop health insurance coverage under Obamacare because they couldn’t afford the higher premiums and deductibles being incurred under the ACA are also prospective murder victims at the hands of those who passed the ACA in the first place.

Under the ACA’s Medicaid expansion, many states chose to accept the federal dollars dangled in front of them to expand the government Medicaid program. That was the proverbial carrot at the end of the stick. The nonpartisan Congressional Budget Office estimated that 13 million additional people will be enrolled in Medicaid through 2017 as a result of the ACA.

Now comes the non-partisan Foundation for Government Accountability with the finding that adult Medicaid enrollment in 24 of the 29 States that accepted Medicaid expansion has exceeded projections by an average of 110 percent. That means that the States’ portion of the tab for this expansion will double in the next couple of years, leaving taxpayers in those States on the hook for substantially increased budgets and the increased State taxes that are certain to follow. It seems free lunches are just as hard to come by today as they ever were.

Now, here’s the conundrum. Republicans are hell bent on reducing taxes. The Republicans have no choice but to reduce the budgetary impact of the ACA if they want to enact tax reform later using the rather arcane reconciliation process, which only requires a simple majority vote. Without being able to use the reconciliation process, the Republicans would have no chance of getting tax reform through the Senate as that would require a supermajority of sixty votes. A Senate healthcare bill must, as a practical matter, result in deficit reduction over ten years if it is to pass with a simple majority through reconciliation. That’s why turning back the Medicaid expansion in the ACA is a must for the Republicans. That’s where they can most readily reduce the impact of healthcare on the federal fisc.

That’s because the use of the reconciliation process is prohibited for provisions that would increase the deficit beyond 10 years following the reconciliation measure. In other words, a budget provision that is enacted using reconciliation must either lapse after ten years or result in a deficit reduction within ten years, which the bill passed by the Republican-controlled House does and, which the Senate bill, if it is ever enacted, must do.

That is why the tax cuts enacted during the Bush (43) Administration lapsed after 10 years in order to satisfy the requirement that prohibits legislation that increases the deficit within the ten-year time period covered by a budget resolution passed through reconciliation.

The House healthcare bill is expected to reduce deficits by $119 billion over a 10-year period, which, therefore, qualified it for a simple majority vote. The reconciliation rules dictate that any budget bill that isn’t deficit neutral in ten years, or which failed to provide budget deficit reduction cannot qualify under reconciliation and would, therefore, be subject to filibuster (legislation-killing unlimited debate). That’s why the Republican Senate’s healthcare legislation is projected by the CBO to reduce deficits by over $300 million over the next ten years.  It’s all about deficit reduction. The Republicans are determined to produce a healthcare bill that slashes Obamacare costs so that they can enact tax-reduction legislation later this year or next year.

But all of this is, of course, academic if we as a nation have determined that more or less state-of-the-art medical treatment is a basic human right. But is it? More on that next week.

The summer reading best picks –

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3 responses to “Healthcare Conundrum: Turning a Sows Ear into The Sow’s Other Ear”


    Can’t wait for next: Is it or isn’t a right?

  2. robert borns says:

    thank you. after reading your article i can finally say i now can separate fact from fiction in the overall picture.

  3. Steve Hardy says:

    The health care mess is a classic example of what happens when the government gets involved in something it should have stayed out of in the first place. The solution is simple. Everyone should buy their own health insurance. For people below the poverty level the government can give them what amounts to health insurance vouchers. The same for people with preexisting conditions. That should be the only government involvement. Milton Friedman pointed out that when we realized that some people couldn’t afford food we didn’t nationalize the food industry. We just gave poor people food stamps. The same can be done for health care. Those who choose not to buy insurance and can’t afford medical emergencies would have to depend on private charity or be out of luck.

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