Memoirs of the Addams Administration 19.

In late March 2017, House Republicans had to pull the American Health Care Act (AHCA) because they couldn’t cobble together a majority from the disparate Freedom Caucus and moderate factions of the party.  In early May they took another stab at it.  This time the bill passed the House of Representatives by a razor-thin (as the cliché goes) margin.  The new and improved AHCA ended the mandate[1], but allowed insurance companies to charge extra for people who let coverage lapse and then applied in a hurry once they got sick; granted the states the right apply for waivers if they wanted to allow insurance companies to offer plans with fewer “essential services” than mandated by the Affordable Care Act (ACA)[2]; “rolled-back” the expansion of Medicaid (which observers predicted would cut 25 percent/$880 billion in health-care spending over a decade); replaced the income-based subsidies of the ACA with age-based tax credits[3]; allowed  insurance companies to charge old people much more than young people[4]; and encouraged states—through a promised $138 billion in federal subsidies–to create high-risk pools for those with pre-existing conditions that insurance companies wouldn’t touch with a ten-foot pole.[5]  The right-to-life-but-not-to-medical-care-once-born crowd insisted on defunding Planned Parenthood.[6]

Republican Senators, who live in a radically different political environment than do Republican Congressmen, didn’t like the handiwork.  Senate majority leader Mitch McConnell set up a baker’s-dozen of Republican Senators to save the party from an electoral disaster in 2018.  They are expected to sketch a fig-leaf with regard to things like Medicaid spending, and coverage of the Emma Lazarus people: “Give me your tired, your poor, Your huddled masses yearning to breathe free, Your people with pre-existing conditions.”

Is there any way to make a Republican plan work?  Yes, if you aren’t a 100 percent Democrat.  The ACA expanded entitlement programs to provide health care to the poorest Americans.  It had little effect for most Americans.  It did not create health-care insurance for most Americans, nor did it seek to rein-in the rising costs of health-care.  Most people receive their health care through their employers or through Medicare.  The Republican plan poses no serious threat to these people.  Republicans are betting that health care lite for the poor will be politically acceptable to most voters.  Are they correct?

One contested issue lies in the effect on taxes.  Democrats jeer that the AHCA will lead to a $1 trillion cut for the richest Americans over a decade.  However, the ACA imposed a $1 trillion additional tax on those same richest Americans.  This casts into doubt the claim that the mandate is necessary so that poorer young people will subsidize richer older people.[7]

[1] This is an acknowledgement that many young people don’t want or need insurance, or—if they do—resent being ordered around by the government as if they’re the hired help.  There probably are about 14 million of these timid fugitives currently on the rolls of Obamacare.  Millions more have not signed up because the Internal Revenue Service does not require that taxpayers actually submit proof of coverage.

[2] This is a concession to the people who were promised by President Obama that “if you like your insurance, you can keep it” and then had the rug pulled out from under them.  Sad to say, attention to detail proved not to be Obama’s strongest quality.  See: “Healthcare.gov roll-out.”  Lots of times “big picture” people aren’t good at this.

[3] So people in their 20s would get up to a $2,000 credits, while people in their 60s would get up to a $4,000 credit.

[4] Up to five times as much, compared to the ACA’s limit of three times as much.  However, old people consume far more health care than do young people, so the ACA appears to be a taxing of low income people to support higher income people.

[5] “Health-care reform heads to the Senate,” The Week, 19 May 2017, p. 5.

[6] Still, last time I checked, condoms were a dollar each at CVS.

[7] “American Health Care Act: The winners and the losers,” The Week, 19 May 2017, p. 6.

Advertisements

Memoirs of the Addams Administration 13.

Once upon a time, old people depended upon their savings and their families to cover the living costs of their few last years.  Then, people started to live longer and the individual safety net eroded.  We got Social Security.  Once upon a time, the business cycle visited prosperity and hardship on people in varied measure.  Then came the Great Depression.  We got Keynesian counter-cyclical spending.  Once upon a time, doctors couldn’t do much to cure illness.  Then, the combination of science and medicine opened an Aladdin’s Cave of health solutions.  These cost a lot of money, so we got Medicare and Medicaid.  Once upon a time, America was a meritocratic society and poor people had to take their lumps.  Then came the Sixties and Seventies, which altered assumptions.  The Forgotten suffered in misery, so we got the Affordable Care Act (ACA).

Lots of people didn’t like the ACA.  Moreover, the ACA has problems all its own.  Those problems appear not to be fatal or crippling.  The Congressional Budget Office (CBO) projects that, left to its own devices, the ACA will “naturally stabilize” in most of the country in a few years.[1]  President Trump, or the Republicans in Congress acting without President Trump, can shove the ACA downhill if they want it to fail.  They can do this most easily by just not enforcing the individual mandate.  That would allow about 14 million younger-and-healthier people to drop out of the system.  The loss of their premiums might fatally destabilize the ACA.

The first major step in the Trump Administration came in the effort to co-operate with the real Republicans in the legislature.  Republicans campaigned against the ACA for seven years, then got the chance to repeal-and-replace.[2]  In contrast to the Democrats’ year-long construction of the ACA and disciplined passage of the bill, the Republicans adopted a “Hey, we can put on a show, we can use my dad’s garage!” approach.  The Affordable Health Care Act (AHCA) repealed the unpopular and nonsensical individual mandate, substituted limited age-related subsidies for open-ended income-based subsidies, and cut down the Medicaid expansion.  Public opinion—especially among Trump’s core supporters—disliked the AHCA.

Well, that didn’t work.  In the House the “Freedom Caucus” didn’t like it; in the Senate moderate Republicans didn’t like it.  The two Republican factions could not agree, so the AHCA got pulled before a vote.  (See: Face, egg on.)  The ACA survived.  Bitter recriminations ensued.

The stock market’s Trump Rally turned into a slump once the AHCA went up in flames like the Hindenburg.  The botched handling of the bill’s passage revealed that the deep fissures inside the Republican Party during the Obama years have not been healed.  It also raised suspicions that neither Trump nor House Majority Leader Paul Ryan have much understanding about how to manage their business.  Those revelations, in turn, cast a pall over the prospects for the other elements of Trump’s agenda that have real relevance for business conditions.  Tax cuts, renegotiated trade deals, infrastructure spending, and sweeping deregulation now seem in peril.[3]

Is the new “realism”/”pessimism” justified?  It is if you ask Democrats, but less so if you ask Republicans.  Having messed-up one thing right off the bat, Republicans have a strong motive to do better with the next project: tax reform.[4]  They had the same motive to pass AHCA.

Democrats chortled that people like the ACA.  The like Medicare/Medicaid and Social Security too.  With defense, such entitlements are driving the growth of the deficit.

[1] “Obamacare: Will it collapse on its own?” The Week, 7 April 2017, p. 16.

[2] “The GOP’s failed Obamacare repeal,” The Week, 7 April 2017, p. 4.

[3] “Markets: Health-care failure rattles Wall Street,” The Week, 7 April 2017, p. 36.

[4] “The GOP: can ‘the party of no’ learn to govern, The Week, 7 April 2017, p. 6.

Memoirs of the Addams Administration 11.

This is out of sequence for reasons beyond my control.  I apologize to both my readers.

Wanting a swift and emphatic break with President Barack Obama’s administration, the Republicans introduced the American Health Care Act.[1]  One much noticed difference between the Affordable Care Act (ACA) and its proposed replacement (AHCA) came in the financial assistance offered by the government.  The ACA offered open-ended subsidies of premiums linked to income.  The AHCA offered tax-credits of $2,000-$4,000 a year linked to age.  The income ceiling for people to receive the tax credits would be $75,000 for an individual and $150,000 for couples.  The AHCA also would substantially reduce Medicaid spending after 2020.  The ACA barred insurance companies from charging older, sicker clients more than three times as much as they charged younger, healthier clients.  The AHCA would have allowed insurance companies to raise deductibles.  The ACA paid for the new entitlement for poor people by heavily taxing people who make more than $250,000 a year.[2]  To the tune of $600 billion.

Are there flaws in the ACA that would have been changed by the AHCA?  Well, premiums began to rise sharply in the last year of the Obama administration, while some major insurance companies fled the markets.  Rising premiums would mean rising subsidies to freight the budget.  Shifting from subsidies to fixed sums could help contain this problem.  Then, the AHCA allowed insurance companies to charge older, sicker clients up to five times as much as they charged younger, healthier clients.  This more closely resembles the real cost to insurance companies.

Is the cure worse than the disease?  The media were full of adverse results.  Millions could be tossed off Medicaid; diluting or removing some of the services deemed “essential” by the ACA could harm a lot of vulnerable people; and the out-of-pocket costs could go through the roof, leaving millions no choice but to do without insurance at all.

You don’t have to take the Mainstream Media’s (MSM) word for it.[3]  The Congressional Budget Office (CBO) projected that by 2026, premiums would fall by 10 percent.  The budget deficit would be reduced by $337 billion over a decade.  Ending the mandate would allow 14 million unwillingly-insured people to escape the clutches of the ACA.  After the limits on Medicaid spending cut in during 2020, another ten million would eventually drift—or be pushed–off the system.  Allowing insurance companies to charge older, sicker clients more would lead to those clients paying “substantially more” for health care.

The AHCA brought Republican factionalism into high relief.  The 20 members of the conservative House “Freedom Caucus” opposed the bill because it didn’t go far enough in liquidating the ACA.  A bunch of moderate Republican Senators opposed the bill because it went too far in liquidating the ACA.  Their differences appeared unlikely to be composed.  Then, Donald Trump won the nomination as spokesman for many discontented lower income voters.  These are just the people projected as the losers from the AHCA.  His support for the bill puzzled.

[1] “Ryancare: Who wins, who loses,” The Week, 24 March 2017, p. 16.

[2] This reality makes a mockery of the Democratic argument that the mandate is necessary because younger, healthier people have to be included in the “insurance market” so that their premiums can off-set the high costs of older, sicker Americans.  That is the same as arguing that low income, little property people have to subsidize higher income, more property people.  The reality looks like a few rich people have to subsidize many low income people.  The “$660 billion tax-cut” for the wealthy which the NYT decried is the flip side of a $600 billion tax increase imposed by the ACA.  That’s fine as social policy, but it should surprise no one that rich people fought back.

[3] “CBO report roils Ryancare debate,” The Week, 24 March 2017, p. 4.