The movement to repeal and replace Obamacare is moving quite fast, and often in a disjointed manner. In the coming weeks, and months, I will try to write a series of updates that explore the current positions, and what lies ahead. Today I’ll talk about how the ACA can operate an individual mandate, and how much of the law can be repealed through reconciliation.
On Friday, Donald Trump made some news by telling WSJ that he would not repeal all of Obamacare, and that he was open to keeping the prohibition on denying coverage based on pre-existing conditions.
Mr. Trump said he favors keeping the prohibition against insurers denying coverage because of patients’ existing conditions, and a provision that allows parents to provide years of additional coverage for children on their insurance policies.
“I like those very much,” Mr. Trump said.…
“Either Obamacare will be amended, or repealed and replaced,” Mr. Trump said.
This isn’t news, at all. As I discuss in Chapter 29 of Unraveled, titled “Make Health Care Great Again,” Trump has long insisted that he would cover “everybody,” eliminate the individual mandate, and prohibit discrimination against those with pre-existing conditions.
On CBS’s 60 Minutes, Trump maintained that “everybody’s got to be covered.” 21 Host Scott Pelley asked, “Universal health care?” Trump replied, “I am going to take care of everybody …. They’re going to be taken care of. I would make a deal with existing hospitals to take care of people.” Pelley asked, “Who pays for it?” Trump replied, “The government’s gonna pay for it.”
During the GOP debate in Goffstown, New Hampshire, moderator Mary Katherine Ham asked Trump if his vision of health care was closer to Bernie Sanders’s single-payer plan or Hillary Clinton’s support of Obamacare. He replied, “I think I’m closer to common sense. We are going to repeal Obamacare.” But he insisted that “we’re going to take care of people that are dying on the street.”
Trump also maintained that the individual mandate can be repealed, while ensuring that everyone has access to coverage:
Trump also favored the elimination of Obamacare’s individual mandate. CNN’s Dana Bash told him, “The insurance companies say [the mandate is] the only way that they can cover people” with preexisting conditions. “Are they wrong?” Trump replied, “I think they’re wrong 100 percent. The insurance companies take care of the politicians. The insurance companies get what they want.” He fell back on his initial point about selling insurance across states. “We should have gotten rid of the lines around each state so we can have real competition.” He continued, “we thought those lines were going to be gone, so something happened at the last moment where Obamacare got approved, and all of that was thrown out the window.” Bash asked, “What you’re saying is getting rid of the barriers between states, is that going to solve the problem?” Trump answered, “That’s going to solve the problem. And, the insurance companies aren’t going to say that, they want to keep it. They want to say whatever they have to say to keep it the way it is.”
As I discuss in the book, Trump’s policy–as stated-makes absolutely no sense. But that doesn’t mean he’s entirely wrong.
A common refrain that the only way to ensure coverage for those with pre-existing conditions is an individual mandate. This is not accurate.
This morning, Paul Ryan was interviewed by Jake Tapper, who asked about his proposal:
TAPPER: Now your Better Way Agenda talks about spending $25 Billion on high risk pools that would help those with pre-existing conditions afford insurance. Where would that $25 Billion come from?
RYAN: Uh well, we actually have it paid for in our bill. You really want me to give you a technical answer for this? it gets a little technical. The point is in our plan paid for doing that. Here’s the bigger point Jake. We agree, it’s in our plan. Donald Trump agrees with this. We need to have a solution for people with pre-existing conditions. In our plan is also allowing younger people up to the age of 26 to stay on their parents plans. So there are aspects that we’ve all along agreed to.
TAPPER: Under Obamacare as you know, millions of people were able to get health insurance for the first time through the expansion of Medicaid. What is going to happen to those people, will they lose coverage under your plan?
RYAN: Well if you… what I encourage people to do is to go to better.gop, its number 5 on our plan, we put the most detail out about anybody who has put out an Obamacare replacement plan and it is to have an answer for everyone with pre-existing conditions people who are the uninsured. The point I would say is this Jake, we can have a healthcare system in America where everyone, regardless of income or health condition can get affordable health insurance, affordable health care. This is what we propose. We think a patient centered system is the right way to do that and you can have that system without a costly government takeover like Obamacare that is cranking up premiums, that is making deductibles so high, it doesn’t even feel like you have health insurance. Obamacare is failing, it must be replaced. We’re going to do that, we’re excited about it. And the point I would put peoples minds at ease is we can fix these problems, we can fix what was broken in healthcare without breaking what was working in health care and that is exactly what we’re proposing. And if you want to get any level of detail on this, just go to better.gop and see what we’ve already offered.
First, Avik makes the point that the individual mandate has failed.
Obamacare cheerleaders argue that the law’s individual mandate was essential to the success of Obamacare. How has that worked out for them? By 2016, 21 million people were supposed to be enrolled in Obamacare’s insurance exchanges. In reality, only 12 million were. Strangely, the individual mandate didn’t succeed in coercing those extra 9 million to sign up. ….
[The mandate] didn’t work, because the fines were minimal relative to the cost of insurance, and because the mandate was riddled with loopholes like an old slice of Swiss cheese.
The last three years have demonstrated that the individual mandate and penalty is largely ineffective at getting people to enroll, because policies are too expensive. Increasing the individual mandate’s penalty perhaps would nudge more people into the risk pool, but that would also require an increase in the level of subsidies paid to insurers. Putting aside the problem of increasing the deficit, these subsidies would only affect the premiums people pay, and not the high-deductibles–which are the biggest cost in the post-Obamacare world. The effect of the mandate, however, has been to double the cost of health insurance premiums, to say nothing of the sky-rocketing deductibles.
Second, Avik explains that insurance companies routinely offer coverage to all people, regardless for their health, so long as it is provided through an employer plan. Insurers have experience pricing these policies.
The important question isn’t whether you offer coverage to those with pre-existing conditions. It’s how much that coverage costs. Insurers are more than happy to cover sick people, so long as they get paid back in premiums in proportion to how much those costlier patients incur. ….
So a replacement for Obamacare can quite easily guarantee coverage for those with pre-existing conditions. The key is to provide the right level of financial assistance to sicker people whose coverage costs more. That can be done through direct premium assistance, in the form of tax credits, as proposed in my own reform proposal, Transcending Obamacare.
Third, Robert Book provides some additional details of how this would work–subsidies should be based on a person’s health conditions, rather than income.
The ACA provides subsidies – but only based on income, not on health status. It seems that authors of the ACA believed that the only reason someone might be uninsured is that their income was too low compared to the insurance premium. But there’s another reason someone might be uninsured – maybe the premium was too high compared to the expected need for insurance (i.e., the person might have a long history of excellent health), making gold-plated comprehensive coverage look like a waste of money. Or, perhaps the premiums were too high because someone had a middle-class or higher income, but pre-existing conditions that made the insurance unafforable even at a high income. The ACA subsidizes coverage for people in lower-income brackets, mandates identical premiums regardless of health staus, and assumes that the rest will take care of itself. Clearly, that isn’t happening.
Here’s the solution: restructrure the subsidies so that they apply to health status, not (just) income. In other words, pay a subsidy to an insurance company when they enroll a person with pre-existing conditions (or equivalently, an above-average percentage of such people), to offset the additional cost, and keep premiums low for everyone else.
Through such “Risk-Adjustment,” insurers can price policies based on the “average patient in the population, not the average patient in the sicker-than-average adverse-selection-biased risk pool.”
One can expect that under this approach, premiums and deductibles will be substantially reduced. That will attract more health people into the market, making the required subsidies payment less than one would think looking at today’s enrollment pool. If additional subsidies are needed for the poorest individuals, that can be added without distruption the risk-adjustment subsidies.
More to the point, an individual mandate and the associated penalty would not be required.
I have long contended that people with these sort of pre-existing conditions should be treated differently, and directly subsidized by the government. The universe of such people was always fairly finite. Even before the ACA, people who received insurance through their employers would not be charged extra for pre-existing conditions. Avik explains:
In addition, contrary to Democratic talking points, very few people are uninsured because they have a pre-existing condition. A pre-Obamacare Congressional Budget Office study found that, among the uninsured, only 3.5 percent were uninsured because their health was too poor to qualify. On the other hand, 71 percent said they were uninsured because of the high cost of insurance.
Further, under the terms of HIPPA, so long as insurance coverage was maintained, people could not be dropped. A similar approach, Book suggests, could be used to minimize the cost of customers that need extra protections.
If an additional incentive is desired, the risk-adjustment subsidy could be made only for those who enroll in the first year of the program, and/or maintain continuous coverage.
Such a requirement would prevent one of the largest abuses of the ACA–sick people who sign up coverage, use treatment, and drop their policy. This sort of behavior should not be permitted.
In any event, the insurance companies are panicking–most of them“I’m concerned about the fear factor of what is going on,” said Bernard J. Tyson, the chief executive of Kaiser Permanente, the system based in California that includes hospitals, doctors and an insurance plan. He said the company was already getting calls from people worried about whether they would still be able to get coverage. :
The problem is that, until now, top executives from the biggest insurers have not heard from Mr. Trump or his close advisers about his plans. In fact, the industry as a whole made no contingency plans for a Trump victory and does not yet appear to have developed a strategy. In the last few days, executives have huddled hurriedly with their boards and advisers to discuss how to react.
In mapping out various election result possibilities, “this wasn’t on the sheet,” said Mark Bertolini, the chief executive of Aetna. “We had no idea how to approach it.”
“I’m concerned about the fear factor of what is going on,” said Bernard J. Tyson, the chief executive of Kaiser Permanente, the system based in California that includes hospitals, doctors and an insurance plan. He said the company was already getting calls from people worried about whether they would still be able to get coverage.
The Trump administration and Congress “are not going to pull out the rug from people,” said Dr. J. Mario Molina, the chief executive of Molina Healthcare, a for-profit insurer. He predicted that the earliest the law could be repealed was 2018, and that it would be replaced with something like a modified version of Medicaid, the government insurance for poor people. “The debate is not around the what, but around the how,” he said.
I discussed in my National Review piece how the reconciliation process could be used to repeal parts of, but not all of Obamacare. Several of you have contacted me asking me to explain this more in depth, which I will do here.
First, it is commonly explained that the Affordable Care Act was enacted through the budget reconciliation process. This is only partially correct. In January 2016, the former Senate Parliamentarian wrote this letter to the editor of the Washington Post.
The Senate did not use the reconciliaton process to pass the ACA. The act, comprising 906 pages, is the basic comprehensive substance of Obamacare. It was passed on a bill that was filibustered, and a supermajority vote of 60 was required to end that filibuster (by invoking cloture under Senate Rule 22). It was signed by the president on March 23, 2010, and became Public Law 111-148.
A second bill, which was a reconciliation bill, was passed after that date to make a series of discrete budgetary changes in the ACA. That act, the Health Care and Education Reconciliation Act of 2010, was signed by the president on March 30, 2010, and became Public Law 111-152. It comprises 54 pages, 42 of which dealt with health care. Like the reconciliation bill in 2010, the reconciliation bill that the president vetoed this month made discrete budgetary changes in existing law. That vetoed bill did not “repeal” Obamacare. It amended several of the law’s budgetary components while leaving the basic structure of the law in place.
So it is not so simple to use the reconciliation process to repeal the entire 900-page ACA, as opposed to the 54-pages of budget-related amendments. Speaker Ryan’s bill last year that purported to “Repeal and Replace” Obamacare did no such thing. It only affected specific budgetary aspects of the reconciliation bill. Elements that have tangential effect on the budget would still be subject to a filibuster. For example, the bill does not mention the statute’s “preventive care” mandate, that has given rise to the “contraceptive mandate.” Tapper asked Ryan about the contraceptive mandate:
TAPPER: Obamacare also provides birth control to women at no cost, is that going to end or will that remain?
RYAN: Look I’m not going to get into all the nitty gritty detail of these things.
TAPPER: With all due respect I don’t know that the average woman of childbearing years out there who relies upon contraception provided by health insurance mandated by the affordable care act I don’t know that she would think that that’s just a nitty gritty detail.
RYAN: Your asking me details about legislation
This question is somewhat misguided, because Obamacare does not pay for the coverage–it is paid for by employers (except for very few cases where the government reimburses insurers for certain religious employers).
The main problem with last year’s reconciliation bill is that it maintained the ACA’s insurance market regulations. These include the rules that all insurance meet or exceed Washington-dictated standards for what benefits they cover, as well as pricing rules that substantially raised the price of insurance for younger and healthier people. These rules have resulted in ACA plans proving attractive only to people who qualify for large taxpayer-funded subsidies and have led many to wait until they need medical care to purchase coverage.
But there are alternate views. In 2015, Michael F. Cannon and Paul Winfree wrote in The Hill that all of Obamacare can be rescinded through reconciliation.
Under Senate rules, a reconciliation bill can only contain budgetary provisions. For instance, if the parliamentarian rules a provision’s budgetary effect would only be incidental to its primary effect, the provision needs 60 votes to pass the Senate. …
A full-repeal bill, by contrast, would recognize that ObamaCare creates a single, integrated program of taxes and subsidies that work in concert to expand coverage, and would eliminate that entire program as a whole. Itsprimary effect would be budgetary. According to the Congressional Budget Office (CBO), full repeal would eliminate $1.7 trillion of spending and “would reduce deficits during the first half of the decade.” Retaining ObamaCare’s spending cuts would ensure that repeal reduces deficits in perpetuity.
Cannon and Winfree find support for their position in the King v. Burwell and NFIB v. Sebelius briefing, which contended that the subsidies are part of a single, comprehensive program–without the tax credits (which are budgetary) the rest of the bill (including non-budgetary provisions) would collapse.
ObamaCare’s authors, including Harry Reid and Nancy Pelosi, filed a briefin King v. Burwell where they flatly rejected the idea that those regulations are, or were intended to be, separable from the statute’s “interdependent statutory scheme.”
The Obama administration arguedin King that these regulations are part of an “interdependent,” “interlocking,” and “integrated” set of measures that are “designed to function together” as “a comprehensive program”—as evidenced by the fact that “they would take effect on the same date, January 1, 2014.” In NFIB v. Sebelius, the administration argued “the guaranteed-issue and community-rating provisions…are inseverable from” the individual mandate.
In NFIB, the Supreme Court held that ObamaCare creates “a comprehensive national plan to provide universal health insurance coverage.” In King, the Court—including all four Democratic appointees—explicitly rejected the argument that these regulations are separable from the broader coverage-expansion scheme. Those regulations, the Court wrote, are part of an “interlocking” and “intertwined” system that “would not work”without all of its component parts. Echoing ObamaCare’s authors, the Court held it is “implausible” that Congress saw these regulations as independent or separable.
To treat ObamaCare’s health-insurance regulations as separate from that larger scheme is to renounce the Supreme Court’s King ruling and everything ObamaCare’s authors have said about how the law works. It would amount, to quote the Obama administration, to “seizing on isolated phrases [and] giving them a meaning divorced from statutory context [to] advance a radically different conception of the Act’s operation.”
In Politico this week, Winfree, along with Brian Blase provide a roadmap to repeal Obamacare through reconciliation.
The repeal effort therefore must address these insurance market regulations. One way would be to include the repeal of those regulations in the reconciliation bill. The reason they were not included in the first place is because all provisions of a reconciliation bill must have a nontangential budgetary impact. Congress chose not to litigate that issue with the Senate parliamentarian last year. But it is clearthat those rules are inseparable from the rest of the ACA’s structure. In fact, the Obama administration argued this before the Supreme Court in King v. Burwell, the case over whether enrollees who buy insurance through the federal exchange are eligible for subsidies. As a result, Congress may repeal those regulations via reconciliation.
I’ll provide more updates throughout the week.
Update: Here are some highlights from Trump’s interview on 60 Minutes.
He discussed Obamacare with President Obama:
Donald Trump: Well, what I really wanted to focus on was– the Middle East, North Korea, Obamacare is tough. You know, healthcare is a tough situation.
Lesley Stahl: Oh, I bet he asked you not to undo it.
Donald Trump: Well, he didn’t ask me, no, he told me– you know, the merits and the difficulties. And we understand that.
Obamacare is the top priority:
Lesley Stahl: So you were with Paul Ryan, you met with the Republican leadership, what was the– one thing that you all agreed you want to get done right away?
Donald Trump: Well, I would say there was more than one thing, there were three things, it was healthcare, there was immigration and there was a major tax bill lowering taxes in this country. We’re going to substantially simplify and lower the taxes–
Lesley Stahl: And you’ve got both Houses?
Donald Trump: And I have both Houses and we have the presidency, so we can do things–
Lesley Stahl: You can do things lickety-split.
Donald Trump: It’s been a long time since it’s happened.
On the Supreme Court:
Lesley Stahl: One of the things you’re going to obviously get an opportunity to do, is name someone to the Supreme Court. And I assume you’ll do that quickly?
Donald Trump: Yes. Very important.
Lesley Stahl: During the campaign, you said that you would appoint justices who were against abortion rights. Will you appoint– are you looking to appoint a justice who wants to overturn Roe v. Wade?
Donald Trump: So look, here’s what’s going to happen– I’m going to– I’m pro-life. The judges will be pro-life. They’ll be very—
Lesley Stahl: But what about overturning this law–
Donald Trump: Well, there are a couple of things. They’ll be pro-life, they’ll be– in terms of the whole gun situation, we know the Second Amendment and everybody’s talking about the Second Amendment and they’re trying to dice it up and change it, they’re going to be very pro-Second Amendment. But having to do with abortion if it ever were overturned, it would go back to the states. So it would go back to the states and–
Lesley Stahl: Yeah, but then some women won’t be able to get an abortion?
Donald Trump: No, it’ll go back to the states.
Lesley Stahl: By state—no some —
Donald Trump: Yeah.
Donald Trump: Yeah, well, they’ll perhaps have to go, they’ll have to go to another state.
Lesley Stahl: And that’s OK?
Donald Trump: Well, we’ll see what happens. It’s got a long way to go, just so you understand. That has a long, long way to go.
Trump also supported the elimination of the electoral college:
Donald Trump: Yeah, some of the election locations are. Some of the system is. I hated–
Lesley Stahl: Even though you won you’re saying that–
Donald Trump: I hated– well, you know, I’m not going to change my mind just because I won. But I would rather see it where you went with simple votes. You know, you get 100 million votes and somebody else gets 90 million votes and you win. There’s a reason for doing this because it brings all the states into play. Electoral College and there’s something very good about that. But this is a different system. But I respect it. I do respect the system.
Lesley Stahl: One of the groups that’s expressing fear are the LGBTQ group. You–
Donald Trump: And yet I mentioned them at the Republican National Convention. And–
Lesley Stahl: You did.
Donald Trump: Everybody said, “That was so great.” I have been, you know, I’ve been-a supporter.
Lesley Stahl: Well, I guess the issue for them is marriage equality. Do you support marriage equality?
Donald Trump: It– it’s irrelevant because it was already settled. It’s law. It was settled in the Supreme Court. I mean it’s done.
Lesley Stahl: So even if you appoint a judge that–
Donald Trump: It’s done. It– you have– these cases have gone to the Supreme Court. They’ve been settled. And, I’m fine with that.
Lesley really should have asked a follow-up here…
On the Obamacare repeal:
Lesley Stahl: Let me ask you about Obamacare, which you say you’re going to repeal and replace. When you replace it, are you going to make sure that people with pre-conditions are still covered?
Donald Trump: Yes. Because it happens to be one of the strongest assets.
Lesley Stahl: You’re going to keep that?
Donald Trump: Also, with the children living with their parents for an extended period, we’re gonna–
Lesley Stahl: You’re gonna keep that–
Donald Trump: Very much try and keep that. Adds cost, but it’s very much something we’re going to try and keep.
Lesley Stahl: And there’s going to be a period if you repeal it and before you replace it, when millions of people could lose -– no?
Donald Trump: No, we’re going to do it simultaneously. It’ll be just fine. We’re not going to have, like, a two-day period and we’re not going to have a two-year period where there’s nothing. It will be repealed and replaced. And we’ll know. And it’ll be great health care for much less money. So it’ll be better health care, much better, for less money. Not a bad combination.