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Volume 8: Health Insurance, Part IV

Repeal and Replace?

“If the idea behind Obamacare was to get everyone covered, that’s one of the many failures. Many Americans who actually did get insurance when they did not have it before have really bad insurance that they have to pay for, and the deductibles are so high that it’s really not worth much to them.” – Mitch McConnell, R-KY

“If we’re just going to replace Obamacare with Obamacare-lite, then it begs the question, ‘Were we just against Obamacare because it was proposed by Democrats?’” – Raul Labrador, R-ID

Republicans do not like Obamacare.

They are quick to point out faults in the law, real or imagined. It doesn’t cover enough people. It forces people to have coverage. It requires people to pay too much out of pocket. It covers unnecessary benefits. It is a vast increase in government spending. Doctors hate it. Insurance companies are fleeing. It’s a giveaway to the insurance companies, or the drug companies, or the trial lawyers, or the bureaucrats.

While the ACA has problems – serious ones – it is a fact that in the seven years since it has passed, the Republican Party has not come up with a plausible alternative. After the 2016 election, they can no longer pass symbolic repeal measures – they will come up with a plan or be forced to admit they have nothing. But don’t worry – when the Democrats tried to fix it, the sailing was smooth.

  • What are the different ways to repeal the ACA?

  • What are the GOP proposals to replace the ACA?

  • What has the Trump Administration done so far?


A note from the writer:

Just as Volume 8 was in final draft stages, this document leaked to Politico. It is, without question, “a healthcare plan.” The provenance of the document is not yet clear. It could be an early draft, it could have been superseded already, or it could be The Real GOP Healthcare Plan.

It is not my goal here to write current events, so I did not substantively change this Volume after its release. Many of its features are described below. If this plan is The Plan, then I’ll certainly write more in the future. Others are on the case already; Vox and Axios are, as usual, some leaders of the charge.

But, I’ve said many times – including above – that “the Republicans have no plan.” This statement needs to be qualified, at least until we know more.




What are the different ways to repeal the ACA?

Virtually all Republicans agree on the goal of repealing the ACA. But they don’t agree on how to do so.

Some Republicans admit that portions of the ACA are working. Especially in the Senate, some hear their constituents’ concerns with repealing Medicaid expansion. Some understand limitations resulting from the rules of Congress. If the ACA is repealed, the manner of repeal is critical.

1. Repeal Obamacare Completely

Many Republicans are on the record saying the ACA should be repealed “root and branch”; nothing should be kept(1). We know what a full repeal means – Volume 6 showed the effects of the ACA. We can just reverse them.

At least 20 million people would lose insurance, split about evenly between those newly eligible for Medicaid (up to 138% of the federal poverty level) and those buying their own policies on- or off-exchange. The long-term Federal debt would increase. Medical bankruptcies would increase, as would provider losses due to bad debt. The Medicare Trust Fund would deplete sooner. Healthy people wouldn’t face the mandate penalty; but if they got sick, they would be out of luck.

Oh – and the top 0.1% of earners would get an average annual tax cut of $197,000. The top 400 earners in America would get $7,000,000 each(2).

2. Repeal Obamacare, keep the popular parts

Republicans have been challenged when asked about parts of the ACA that the public clearly likes. Specifically, protections against pre-existing condition and keeping dependents on their parents’ plans up to age 26. The GOP could repeal just the individual and employer mandates, essential health benefits, getting rid of the federal exchange and subsidies to purchase insurance. This would allot the same tax cuts as a full repeal(3).

In Volume 2, we talked about states which, pre-ACA, had Guaranteed Issue provisions without the two other legs of the healthcare stool. I call this the “Intentional Death Spiral.” The Urban Institute conducted an analysis of a “partial repeal,”(4) and determined that nearly 30 million additional people would be uninsured by 2019. In other words – everybody who got insurance through the ACA would lose it, and then 10 million more.

I think 30 million is a conservative estimate. What if people create small businesses, expressly to have a access to the small-group market. This will be a bad risk pool – less healthy people are more likely to do it. This is a recipe to cause a death spiral in the small group market, putting 17 million more people at risk to lose insurance(5). Let’s get crazy - the large group market, 100 million people covered. Those with pre-existing conditions would become more likely to work at large companies, as it would be their only way to get insurance. Adverse selection could even destabilize the large employer market(6).

Partial repeal has one advantage over full repeal: it could probably happen without the support of any Democrats(7). It already passed Congress last year without GOP support, but was vetoed by President Obama. At this point, I expect that no Democrats are going to vote to repeal Obamacare, so this is an important point(8).

3. Repeal Obamacare – but leave the Medicaid expansion

At least 11 million people have gained health coverage due to the ACA’s Medicaid expansion provision. Each state has the option of taking part in Medicaid expansion. Despite the Federal Government picking up 100% of the cost initially, decreasing to 90% in 2020 and beyond, nineteen states chose not to expand.

That leaves 31 states and the District of Columbia which expanded their Medicaid program. Those states have 20 Republican Senators(9). Given 48 Democratic Senate votes, only 3 of these senators could block the repeal of Medicaid expansion. At this point, it seems very likely that at least 3 would.

Keeping Medicaid expansion would reduce the number of newly uninsured by the 11 million in the expansion. In addition, if a repeal bill passed which left Medicaid expansion intact, some of the additional 19 GOP-led might choose to expand.

I think the effects of keeping Medicaid expansion are mostly unrelated to the rest of the repeal; it is a largely separate market. So, other than this 11 million, it would be similar to option #1 or 2 above, depending on whether the repeal was full or partial. However, keeping expansion would require funding(10). So, there would be some tax cuts, but the amount would be somewhat less than if the expansion weren’t kept.

What are the proposals to replace the ACA?

Contrary to popular belief, the Republicans have proposed ideas to “replace” the ACA. Many, many ideas. That’s the problem – there are so many ideas that they can’t all be part of a single plan.

Health insurance is complex. If two changes are made to the market, they will interact, making the effect different from what the changes would cause separately. Keeping this in mind, we’re going to go through some of the provisions proposed by Republican leaders, considering the effect each would have on the broader market.

1. Guaranteed Issue for Continuous Coverage