Trump Walks: He Finally Did the Right Thing.

As readers of these essays know by now, we’ve not showered President Trump with accolades since he’s been in office. Quite the opposite.

But this time we think he did the right thing.  He walked away from his dysfunctional Republican-majority Congress, and their Democratic never-Trump erstwhile allies. The American Health Care Act (ACHA), the Republican first-phase legislative attempt to begin the process of repealing and replacing the Affordable Care Act (ACA) was, to be sure, never going to be an easy sell, nor was it even close to being the final legislative fix to the ACA (better known as ObamaCare). It was, however, a beginning step in the right direction. Forget the well calculated avalanche of criticism and vituperation that Democrat talking heads and their strange, ultra-conservative, Republican bed fellows have leveled at Speaker Ryan and the AHCA. The AHCA addressed very legitimate issues, and the attempt to shift some of the responsibility for subsidizing healthcare costs (premium subsidies) to the states, was not unreasonable, nor was the attempt to create a more competitive health insurance marketplace.  We’ve expressed our doubts in these essays (last week) whether the AHCA would produce the premium cost reductions President Trump promised, but the AHCA was a step in the right direction, even though many more course corrections were certain to be necessary.

The so-called Freedom Caucus, a rag-tag, rabble-rousing, far-right group of Republicans confronted Speaker Ryan and President Trump with a list of demands intended to make sure the baby got thrown out with the bath water.  President Trump tried to meet some of their demands, but, to our surprise and satisfaction, he walked rather than allow this group to make a further mockery of what he and Ryan were trying to accomplish. Every successful negotiator knows that the strongest arrow in a negotiator’s quiver is the willingness to walk away from any negotiation that has gone sour. Trump walked and he was right to do so.

So just what were President Trump and Speaker Ryan trying to accomplish?  Perhaps they were trying to turn a sow’s ear into a purse.  If not silk at least a fabric that would serve a useful purpose.

Look, the Affordable Care Act is in very serious trouble.  The promises that were made to sell the ACA to the American public were not made in good faith. There was never any truth to the assertion that: (1) premium costs would come down (they have consistently gone up as have deductibles), (2) everyone could keep their doctor “period!” (emphasis added by President Obama), (3) everyone could keep their healthcare plan if they liked it. All totally disingenuous rhetoric.

The case for the ACA was a sham and a deliberate one at that. Remember what Jonathan Gruber, the MIT economist and key architect of the so-called Affordable Care Act stated quite publicly, “the stupidity of the American voter” made it important for him and Democrats to hide Obamacare’s true costs from the public. That was really, really critical for the thing to pass,” said Gruber. He admitted that the sales pitch was one big cover-up operation: “Lack of transparency is a huge advantage. And basically, you know, call it the stupidity of the American voter or whatever. But basically, that was really, really critical to getting the thing to pass.” That may have been candid, but it was also vile. And former Speaker Nancy Pelosi had the temerity to refer to the AHCA as “a cruel bill.”

 The so-called Freedom Caucus bragged that it had the votes to kill Ryan’s health care bill, and they thought they had enough clout with the White House to force Trump to negotiate even after Ryan indicated no more changes would likely be made. Trump did the right thing once it was clear the recalcitrant Republicans were out to scuttle any real meaningful deal.  He walked.

Thus far in the Trump presidency we have had little positive to say about how this Administration has comported itself. In this instance, however, we think the President did exactly the right thing.  The Affordable Care Act (ObamaCare) needs an overhaul.  First, it is not affordable. Aside from steady premium increases each year with an average whopping 25% bubble of an increase last year, increasing deductibles made a sham of coverage for many families.  In some cases, families could keep their premiums from increasing if they opted for a higher deductible. Talk about a cruel hoax. The higher deductible may have kept their premium from increasing, but it certainly didn’t keep their costs from increasing.

We have real concerns about whether a more competitive marketplace for health insurance can produce the kind of cost savings the Trump Administration envisions.  Healthcare involves very high fixed costs which are relatively unaffected by reducing the demand for healthcare services.

To further exasperate matters, the average annual growth rate of healthcare spending will, according to the Kaiser Family Foundation, exceed five percent over the next five years. That’s because new medical treatments and drugs—especially for life-threatening conditions like cancer—are very expensive. The resulting increased demand for more expensive procedures drive up premiums for the entire pool of insured Americans, and when younger, healthier individuals and families forego coverage as many do, the remaining pool of insureds is hit particularly hard. This has been especially true under the so-called Affordable Care Act. Consequently, millions of Americans, especially the younger, healthier ones, have opted to forgo coverage—despite the tax penalty associated with opting out of coverage. Preliminary data shows that roughly 5.6 million people paid a penalty instead of buying health insurance in 2015. A typical family, for example, could pay a mandatory penalty of almost $1,000 because they found it preferable to the $400 or $500 monthly cost of an ACA health plan.

State budgets are also taking a hit because of the ACA’s hidden costs. For example, one of the major components of the ACA is Medicaid expansion, whereby states can choose to accept federal dollars to expand the government insurance program. According to the nonpartisan Congressional Budget Office 13 million additional people will be enrolled in Medicaid this year because of the ACA. But there is never a free ride. The Foundation for Government Accountability (FGA) determined that adult Medicaid enrollment in 24 of the 29 states that accepted Medicaid expansion exceeded CBO projections by an average of 110 percent. That means the states’ share of Medicaid expansion costs will rise from five percent to 10 percent by 2020, leaving taxpayers in those states on the hook for vastly increased state budgets.

So, most of the hysterical criticism of the Ryan-Trump effort to repeal and replace the ACA (ObamaCare) is carefully calibrated political rhetoric.  The effort to move the AHCA (Ryan-Trump bill) forward has failed because the far-right fringe of the Republican Party thought they could gut the effort with the demands they made of Trump.  He was right to walk.

The Schumer-Pelosi wing of the US Congress are enjoying the moment. It remains to be seen, however, how long the laughter lasts.