03.28.17

Obamacare Is the Law of the Land… Now What?

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This post was written by Andrew Hennessy-Strahs, a 2017 Global Health Law LL.M. Candidate at Georgetown University Law Center. Any questions or comments can be directed to adh75@georgetown.edu.

“Obamacare is the law of the land,” spoke Paul Ryan late Friday afternoon, following the collapse of support for his proposed legislation, the American Health Care Act (AHCA), which would have massively reshaped the health care landscape. The Onion, admittedly a satirical newspaper, proclaimed, tongue-in-cheek, “GOP Makes Good On 2009 Promise To Block President’s Healthcare Bill.” The AARP proudly issued a statement: “Controversial Health Care Bill is Pulled: Voices of Americans were Heard.”   Nancy Pelosi, House Minority Leader, forcefully opposed the proposed vote on her twitter account: “Every single Republican who votes for #TrumpCare will have this moral monstrosity tattooed to their foreheads forever. Every. Single. One.” She then celebrated the withdrawal of the AHCA, also on twitter: “This was a victory for all Americans. Democrats — united by our shared values — have stood strong against the disastrous #TrumpCare bill.”  Even the Heritage Foundation, the standard-bearer for the Conservative movement, led with the headline: “Broad Conservative Criticism Mounts Against GOP Health Bill.”

What was the AHCA? Why was it so lampooned? And most importantly, what is the future of health reform in the United States?

What did the AHCA actually propose?

For starters, the AHCA would have phased out Medicaid expansion, limiting the Federal government’s support for states in their endeavor to insure poor people, disabled people, children, pregnant women and new mothers. It also provides long term care to elderly and disabled people unable to afford it on their own. Medicaid is a state run program that provides health care and long term care for the poor. It is a welfare program, without which the poor would not receive the medical care they need because they simply cannot afford to pay for it and no one else is willing.

The AHCA would have eliminated the individual and employer mandates. These “mandates” are binding legal obligations to procure coverage, enforceable by a financial penalty. Their purpose is to inject younger, healthier people into the insurance marketplace, so that (1) these people are insured should they need care, but also so that (2) they can make the insurance pool more reflective of the American public, as opposed to reflective of people who use the medical system more often and generate more medical bills that insurance providers must pay for. In other words, someone who has a diagnosis, of say, brain cancer, knows they will generate medical bills and is willing to purchase insurance at all costs. An insurance pool needs people who do not know they will generate medical bills to function correctly by spreading the risk of disease over the population.

The AHCA would have created an alternative incentive of a 30% penalty for individuals who allow their coverage to lapse. This penalty might have incentivized people to keep their coverage. Conversely, people may have simply dropped coverage because they could not afford it, in which case, an increase in cost of 30% would have exacerbated their inability to afford it in the first place.

The AHCA would have switched from tax subsidies based on income to tax credits based on age. This means that a poor, young person may be left with higher costs than a relatively well-off, older person. The theory is based on subsidizing the cost of care, instead of increasing the affordability of care. This reflects a fundamental philosophical difference along traditional conservative lines, that the government should not be subsidizing people’s choices to pursue less lucrative careers. When combined with the elimination of the individual mandate, this truly does leave people the choice of not purchasing insurance if it is too expensive. Of course, this strategy neglects the glaring critique that poverty is rarely a choice.

The AHCA would have established a $100 billion fund to offset the costs incurred by states providing high risk pools. The theory is that by taking the people more likely to use medical services out of the insurance pool (e.g., patients with brain cancer), insurance would be more affordable for the rest of the population, because they would no longer have to subsidize this care.

The AHCA would have repealed taxes on “Cadillac” plans, tanning salons, medical device manufacturers, and branded prescription drugs. The theory here is more philosophical than economic; conservatives tend to favor lower taxes and allowing the market to function without government interference. Of course, the reason for these taxes in the first place, however, was that by taxing these industries, the government could discourage their use. “Cadillac plans” are typically a way to shift income from salary to health benefits to help high level employees pay less tax overall. Tanning salons demonstrably cause skin cancer. Branded prescription drugs artificially shift income from patients to pharmaceutical companies when a generic drug is pharmacologically equivalent. The medical device tax is admittedly more controversial, although the theory was that by expanding the amount of covered patients, medical device companies now had an expanded market; taxing medical device manufacturers was a small price the medical device companies would pay in exchange for more potential customers and profits.

So now what?

The Trump administration has indicated a desire for bipartisan reform. The president has also alluded to his desire that Paul Ryan should resign as speaker. He has also criticized the House Freedom Caucus, the most ideologically conservative wing of the Republican Party that vehemently opposed the AHCA as “Obamacare-lite.” Curiously, Trump has also blamed Democrats for failing to pass the AHCA, though they are not the party that proposed the legislation, and more importantly they are outnumbered by 44 seats in the House of Representatives. On March 27, Vice President Mike Pence proclaimed,” Even though Congress is not ready to do it yet, President Trump will not rest, will not relent until we repeal and replace Obamacare,” indicating an ongoing desire to renew efforts to craft new legislation.

Across the aisle, Bernie Sanders, champion of universal coverage in the 2016 election, on March 26 laid out his plan to sponsor a bipartisan plan to introduce a public option, which would provide insurance for all via a single-payer system. He acknowledged the political difficulties of this option, however, though he cited President Trump’s campaign pledge to provide “insurance for everybody.”

The most likely option, however, is not that President Trump and Bernie Sanders will work together to steward a bipartisan universal coverage plan through Congress and into law. The path forward is perhaps far more sinister. The journey ahead may lie in executive power and with Tom Price as Secretary of the Department of Health and Human Services. According to Spencer Perlman, director of health-care research at Veda Partners: “If they want to completely sabotage it they probably could, and call it a self-fulfilling prophecy.” He added, “purposefully sabotaging the exchanges and the ACA probably isn’t difficult. [And the HHS is] probably the only game in town right now [that can do it.]” President Trump, himself, tweeted on Saturday: “ObamaCare will explode and we will all get together and piece together a great healthcare plan for THE PEOPLE. Do not worry!” Presumably, the administration could purposefully undermine the Affordable Care Act through executive power and force new legislation after causing sufficient damage to the healthcare landscape.

For the sake of all Americans, let us hope that cooler heads prevail and that the problems of the Affordable Care Act are managed with prudent stewardship in an effort to optimize the existing system, rather than rending the health of Americans completely asunder.

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