A Sober Look at Obamacare Repeal and Replacement

Since 2009 I have written about problems with national healthcare reform for this website. I oppose Obamacare and would prefer a complete repeal and replacement with a market-based system. However, we must contend with political realities. A Democrat filibuster in the Senate means the end of any repeal and a guarantee of a financial failure of the ACA which may lead to a single-payer system that they prefer. Many others have already written about details of the GOP House plan, which is but a beginning to revoking ObamaCare. Speaker Paul Ryan has said that there will be three phases in this process, requiring the conventional legislative process. Improving this bill by empowering participation through amendments that do not prevent the reconciliation process will be beneficial.

We must understand whether we seek insurance or prepaid healthcare costs. Insurance is based upon risk assessment and premiums are arranged according to the potential costs for the insurance companies. Those with increased risks will pay higher premiums, reducing such behavior and controlling costs. The federal government transfers payments from one entity to another, without apportion to risk. Dr. Ezekiel Emanuel (the ObamaCare architect) thinks that everyone must share in this higher cost which is social welfare, a distortion of these economic principles. With pre-paid costs, there is no incentive to reduce risks and problematic behavior. The GOP plan moves federal healthcare toward private insurance coverage from an ObamaCare welfare program, thus reducing the cost growth curve.

Do the Republicans have a clean repeal and replacement bill? Do they have the votes to overcome a filibuster in the Senate? If they do not have at least eight votes from Democrats (assuming all Republicans agree) what compromises will the reconciliation process require? The principal problem with reconciliation is that the Parliamentarian of the Senate has enormous powers to declare portions of the legislation void. A full replacement bill cannot be passed through reconciliation. Passing the first phase will strengthen the president’s hand to gain votes for the next phases.

The ACA requires ten essential benefits of coverage. This regulatory requirement forces costs upward. Younger persons do not need all these requirements and are less likely to purchase coverage. Presently, more of this age group choose to pay the penalty rather than purchase care. Any reduction in statutory regulatory power is helpful to reduce costs. Further, the Secretary of Health and Human Services, Dr. Tom Price, has stated that he intends to reduce this burden on his own. Any move in this direction kills ObamaCare by a thousand cuts. This bill does not reduce benefits and would be improved by some adjustment.

Presently, premiums and deductibles under ObamaCare are excessive and these policies become catastrophic care rather than insurance for those purchasing it. Only those subsidized by the government find this insurance beneficial. Individual businesses are burdened so they may choose to forgo policies and pay the fine.

Medical costs are not determined by a simple marketplace. Third party payments by governmental agencies (Medicaid and Medicare), insurance through employers, and private insurance companies distort the use and misuse of healthcare dollars. The most effective way to restore this market place is through the use of Health Savings Accounts where individuals make these decisions directly. Expansion of HSAs is a move in the correct direction. The plan creates a significant expansion of HSAs.

When Justice John Roberts ruled that ObamaCare was legally a tax, all ability to argue against federal government intrusion into healthcare was ended. After all, we have the Medicaid and Medicare systems which are federal programs that are entrenched in our society. Block granting Medicaid to the states would move the cost curve down federally. It would allow the states to innovate within the program. This would reduce the bureaucracy necessary to administer Medicaid. Allowing individuals of low income to purchase into Medicaid might further provide options for states. Further, sunsetting the provisions expanding Medicaid would force the Congress to create a new system that is financially solvent.

The GOP plan removes the individual and business (for over 50 employees) mandate. This is an improvement as it reduces government requirements and intrusions. The cost for insurance purchased after discovery of an illness will be increased by 30% one time. This could be modified upward to increase the incentive to purchase insurance prior an illness.

Tax credits are used to induce insurance purchases. This is preferable to direct subsidies in giving freedom to choose. The ability to purchase insurance through families till age 26 is continued as it is popular. An increase in premium might be considered for this option. This bill allows insurance companies to charge up to five times the premium for older patients compared to younger ones. In Obamacare, the limit is three times. Again, this adjusts risk as most healthcare dollars are spent at the end of life.

There are interested groups opposing the GOP plan. These include the AMA, hospital groups and insurance companies. We should not forget that these groups supported Obamacare and are not objective. Their opposition might be meaningful as the Democrat opposition means the GOP plan has some merit.

The mainstream media is working against the GOP plan to replace ObamaCare. Damaging this effort would hurt the Republicans in Congress and the president in any future legislative initiatives. Few practicing physicians and dentists have found the ACA to be helpful in providing medical care. Nurses and hospitals have been burdened with additional paperwork. Yet, elements of these industries have already become entrenched in the ACA.

The promised reduction in costs has not materialized. Some 10-20 million people have ObamaCare, but how many (perhaps 10 million) have lost their private insurance? Therefore, there will be some who will lose under any replacement plan. Are these affected people likely Republican voters?

Republicans are concerned that some will prevent their re-election if the ACA is repealed. They seek a smooth transition so few are adversely affected. Senator Susan Collins represents this group. Others, in the conservative movement, want a clean repeal. Senator Rand Paul leads this movement. The GOP can only lose one vote in the Senate under reconciliation. Finding a middle ground is not easy.

During the ACA debate, Republicans suggested ideas to increase the individual choices of consumers. These ideas were not used as the Democrats wanted a governmental regulatory program. This program had little chance of success and then the result would be a single-payer system. Senator Schumer and Nancy Pelosi are hoping for such a failure.

Now that two House committees have marked-up the legislation, the sausage process will begin. Hopefully, a plan can emerge that will make it through the Senate. A clean repeal might not be acceptable through reconciliation, but would be preferable. However, a complete replacement is not possible through reconciliation. Now we understand why healthcare reform is difficult. Future bills are necessary either way. The enemies are on the frontlines of Congress. Will the people emerge unscathed?

Since 2009 I have written about problems with national healthcare reform for this website. I oppose Obamacare and would prefer a complete repeal and replacement with a market-based system. However, we must contend with political realities. A Democrat filibuster in the Senate means the end of any repeal and a guarantee of a financial failure of the ACA which may lead to a single-payer system that they prefer. Many others have already written about details of the GOP House plan, which is but a beginning to revoking ObamaCare. Speaker Paul Ryan has said that there will be three phases in this process, requiring the conventional legislative process. Improving this bill by empowering participation through amendments that do not prevent the reconciliation process will be beneficial.

We must understand whether we seek insurance or prepaid healthcare costs. Insurance is based upon risk assessment and premiums are arranged according to the potential costs for the insurance companies. Those with increased risks will pay higher premiums, reducing such behavior and controlling costs. The federal government transfers payments from one entity to another, without apportion to risk. Dr. Ezekiel Emanuel (the ObamaCare architect) thinks that everyone must share in this higher cost which is social welfare, a distortion of these economic principles. With pre-paid costs, there is no incentive to reduce risks and problematic behavior. The GOP plan moves federal healthcare toward private insurance coverage from an ObamaCare welfare program, thus reducing the cost growth curve.

Do the Republicans have a clean repeal and replacement bill? Do they have the votes to overcome a filibuster in the Senate? If they do not have at least eight votes from Democrats (assuming all Republicans agree) what compromises will the reconciliation process require? The principal problem with reconciliation is that the Parliamentarian of the Senate has enormous powers to declare portions of the legislation void. A full replacement bill cannot be passed through reconciliation. Passing the first phase will strengthen the president’s hand to gain votes for the next phases.

The ACA requires ten essential benefits of coverage. This regulatory requirement forces costs upward. Younger persons do not need all these requirements and are less likely to purchase coverage. Presently, more of this age group choose to pay the penalty rather than purchase care. Any reduction in statutory regulatory power is helpful to reduce costs. Further, the Secretary of Health and Human Services, Dr. Tom Price, has stated that he intends to reduce this burden on his own. Any move in this direction kills ObamaCare by a thousand cuts. This bill does not reduce benefits and would be improved by some adjustment.

Presently, premiums and deductibles under ObamaCare are excessive and these policies become catastrophic care rather than insurance for those purchasing it. Only those subsidized by the government find this insurance beneficial. Individual businesses are burdened so they may choose to forgo policies and pay the fine.

Medical costs are not determined by a simple marketplace. Third party payments by governmental agencies (Medicaid and Medicare), insurance through employers, and private insurance companies distort the use and misuse of healthcare dollars. The most effective way to restore this market place is through the use of Health Savings Accounts where individuals make these decisions directly. Expansion of HSAs is a move in the correct direction. The plan creates a significant expansion of HSAs.

When Justice John Roberts ruled that ObamaCare was legally a tax, all ability to argue against federal government intrusion into healthcare was ended. After all, we have the Medicaid and Medicare systems which are federal programs that are entrenched in our society. Block granting Medicaid to the states would move the cost curve down federally. It would allow the states to innovate within the program. This would reduce the bureaucracy necessary to administer Medicaid. Allowing individuals of low income to purchase into Medicaid might further provide options for states. Further, sunsetting the provisions expanding Medicaid would force the Congress to create a new system that is financially solvent.

The GOP plan removes the individual and business (for over 50 employees) mandate. This is an improvement as it reduces government requirements and intrusions. The cost for insurance purchased after discovery of an illness will be increased by 30% one time. This could be modified upward to increase the incentive to purchase insurance prior an illness.

Tax credits are used to induce insurance purchases. This is preferable to direct subsidies in giving freedom to choose. The ability to purchase insurance through families till age 26 is continued as it is popular. An increase in premium might be considered for this option. This bill allows insurance companies to charge up to five times the premium for older patients compared to younger ones. In Obamacare, the limit is three times. Again, this adjusts risk as most healthcare dollars are spent at the end of life.

There are interested groups opposing the GOP plan. These include the AMA, hospital groups and insurance companies. We should not forget that these groups supported Obamacare and are not objective. Their opposition might be meaningful as the Democrat opposition means the GOP plan has some merit.

The mainstream media is working against the GOP plan to replace ObamaCare. Damaging this effort would hurt the Republicans in Congress and the president in any future legislative initiatives. Few practicing physicians and dentists have found the ACA to be helpful in providing medical care. Nurses and hospitals have been burdened with additional paperwork. Yet, elements of these industries have already become entrenched in the ACA.

The promised reduction in costs has not materialized. Some 10-20 million people have ObamaCare, but how many (perhaps 10 million) have lost their private insurance? Therefore, there will be some who will lose under any replacement plan. Are these affected people likely Republican voters?

Republicans are concerned that some will prevent their re-election if the ACA is repealed. They seek a smooth transition so few are adversely affected. Senator Susan Collins represents this group. Others, in the conservative movement, want a clean repeal. Senator Rand Paul leads this movement. The GOP can only lose one vote in the Senate under reconciliation. Finding a middle ground is not easy.

During the ACA debate, Republicans suggested ideas to increase the individual choices of consumers. These ideas were not used as the Democrats wanted a governmental regulatory program. This program had little chance of success and then the result would be a single-payer system. Senator Schumer and Nancy Pelosi are hoping for such a failure.

Now that two House committees have marked-up the legislation, the sausage process will begin. Hopefully, a plan can emerge that will make it through the Senate. A clean repeal might not be acceptable through reconciliation, but would be preferable. However, a complete replacement is not possible through reconciliation. Now we understand why healthcare reform is difficult. Future bills are necessary either way. The enemies are on the frontlines of Congress. Will the people emerge unscathed?

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