How to Fix Paul Ryan’s ‘Obamacare Lite’ Plan

‘Repeal Plus’ is neither—but could easily be both.

Health policy expert Betsy McCaughey has a helpful and timely article in today’s Washington Times.

She points out that House Speaker Paul Ryan’s forthcoming ‘Repeal Plus’ bill is tantamount to Obamacare Lite—but can be easily fixed.

Here, for the busy reader, is a brief summary:

Voters sent Republicans to Congress to do two things with respect to Obamacare:

1. Repeal it.
2. Make insurance affordable again.

Unfortunately, based on public and private reports about the emerging plan, and this 17-page GOP brochure, it appears ‘Repeal Plus’ fails on both counts:

• It retains Obamacare’s core insurance mandates, which drive up costs for everybody.
• It replaces Obamacare’s tax credits with Republican tax credits that, like Obamacare’s, pay healthy people to buy overpriced insurance.
• It imposes a back-door version of Obamacare’s individual mandate to purchase health insurance—a 30 percent “continuous coverage” penalty on the insurance premiums of people whose health insurance has lapsed or been interrupted for more than 60 days in a one-year period.
• And it imposes a Republican version of Obamacare’s so-called “Cadillac Tax” on generous workplace health benefits.*

In short, it’s not full repeal, it’s Obamacare Lite.

And more importantly, it won’t make insurance affordable again.

But it can be fixed. With two small tweaks:

1. Repeal all of Obamacare’s insurance mandates (and strip out the Republican “continuous coverage” mandate).**
2. Adequately fund state-administered pools for people with preexisting conditions.

Doing those two things would halt the insurance death spiral and—unlike the current bill—substantially lower premiums.

Preexisting conditions pools (often referred to as “high risk pools”) are essential, because they target money directly to the sick, instead of having to waste it on subsidizing the healthy.

(Those pools also make the Republican tax credits superfluous, and thus reduce the justification for the Republican health-benefits tax, which is designed to pay for them.)

Although Ryan’s current bill does include some preexisting-conditions-pool funding, the amount is insufficient: only $2.5 billion a year. Not enough to make it work. The needed amount is more like $16 billion. Which may seem large, but it’s a small amount compared to Obamacare’s $56 billion.***

Of course, if Republicans retain the core ACA insurance mandates, as they currently intend, then the needed amount is higher.

Betsy McCaughey is right. ‘Repeal Plus’ is currently neither, but can easily become both.

Republicans have 10 weeks to get this right, because insurers must finalize their 2018 premium bids by late April.

Dean Clancy, a former senior official in the White House and Congress, writes on U.S. health reform, budget, and constitutional issues. Follow him at deanclancy.com or on twitter @deanclancy.

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NOTE

* For reference, the insurance mandates I’m referring to are: guaranteed issue, community rating, essential health benefits, actuarial value percentages, minimum loss ratios, annual and lifetime limits, under-26, and the contraceptive mandate. These mandates, especially the first, needlessly interfere with market forces and drive up premiums. They are why premiums in the individual market have doubled since 2013, and why Obamacare’s exchanges are collapsing. None of them is necessary. All can and should be handled at the state level.

** Update, March 7: Republicans have decided to drop their version of the Cadillac Tax. Instead, in newly released legislation, dated March 6, they propose to retain the Democrats’ Cadillac Tax, which is slated to take effect in 2020, but push the effective date back to 2025. This is a budget gimmick. Republicans must have decided a Cadillac Tax of any kind is too politically unpopular to impose and yet is too fiscally attractive in terms of projected future revenue to repeal. So they “compromised” by keeping it on the books, to make future deficits look smaller, while preventing it from taking effect before the next election. And not just the next election—they postponed it by four elections. (P.S. 2025 is eight years from now, which means Trump can leave the problem to his successor. Sad!)

*** Update, Feb. 24: A detailed working draft of the emerging Paul Ryan bill, dated Feb. 10, has been leaked to Politico. It reveals House Republicans propose to offer states $10 billion a year for “state innovation grants,” which could be used on a number of health-care related projects, including funding preexisting-conditions pools. In 2018 and 2019, the funding would be $15 billion, and then it would drop to $10 billion in 2020 through 2026. Now, $10 billion a year is certainly better than the $2.5 billion initially reported, but I worry that the block grants are too loosely defined. They need to be focused on helping people with preexisting conditions. Otherwise, states could fritter the money away on fluff, boondoggles, and pet constituencies. Obamacare’s great mistake was to try to overhaul the entire health care system for 100 percent of the population, and spend hundreds of billions a year doing it, when the only reform needed is to provide financial help to a tiny handful of Americans (the people with preexisting medical conditions that are so expensive they simply can’t obtain private insurance). This tiny group represents no more than about 500,000 people, or less than one-half of one percent of the U.S. population. Republicans can reverse Obamacare’s great mistake by doing the two things suggested in this article.

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