Michael Meeropol: Why The Repeal And Replace Obamacare Bills Must Be Resisted

Jul 7, 2017

On June 26, 2017, forty economists including six Nobel Prize winners sent a letter to Senator Mitch McConnell voicing strong opposition to the bill that was crafted in secret by the Senate and made public the week before the July 4 recess.   McConnell had initially hoped to sneak the bill through before the Senators went home for that recess because he feared that when they were home they would hear so much opposition that some of them might lose their nerve and vote against it.   As it was, by the time he had pulled the bill and sent it back to be re-worked (which is still happening as this commentary was being delivered), nine Senators had (for varying reasons) announced opposition to it.

The entire letter is available here but I reproduce some of the reasoning here:

“The Senate bill will expose millions to increased out-of-pocket health care costs. It would base tax credits on a plan with greatly increased cost sharing and deductibles that could run to $12,000 per family or more. Far from improving Obamacare, the Senate bill would reduce assistance for the millions of people who buy coverage through the state and federal marketplaces.   Many now eligible for tax credits would be denied them entirely.   States would be allowed to opt out of regulations that allow less healthy people to buy insurance at reasonable rates.   The savings from slashing health subsidies and coverage would go largely to bestowing tax cuts on upper income tax filers. The richest 0.1 percent of tax filers would receive tax cuts averaging over $200,000 per return”

It is probably worth reminding readers that the subsidies to low and moderate income people so that they could afford to buy insurance on the exchanges as well as the Medicaid expansion were financed by adding a .9% surcharge to the payroll taxes of individuals making more than $200,000 per year and couples making $250,000. There was also a new 3.8% tax on net investment income for individuals and couples making those same incomes. These are the taxes that both the Senate and House bills want to cut out. The audacity of these promised tax cuts have led many opponents of the repeal and replace laws to assert that these laws are just tax cuts masquerading as health care bills.

Before I get to the heart of what I focused on in my commentary, I think it is important to warn readers that over the next week or so, there will be a lot of publicity about how much the Senate bill has been “improved.” The amount of tax reduction will be lowered, allowing some so-called “moderates” to claim that they significantly improved the bill. The cuts to Medicaid will be less. The subsidies to help lower income people buy insurance will be increased. The important thing, though, is to look at the bigger picture. If a $800 billion cut to Medicaid suddenly becomes $600 billion or $400 billion that is still a horrible reduction in services. If some of the promised tax cut is clawed back, it still represents another example of Robin Hood in reverse. Please do not be hoodwinked by so-called improvements in the bill.

In my commentary on July 7, I emphasized two things – Republican lies about how horrible things are under the affordable care act and the attempt to destroy Medicaid as we know it.

Let’s deal with the first and biggest of the lies. It is simply not at all true that the current system is collapsing under its own weight. The first hint that this story is bogus, is that fact that everyone who has insurance from their employer and everyone who is currently receiving Medicaid or Medicare is in exactly the same position as they were last year. The so-called collapse of the insurance market only applies to the market for individual policies available on the exchanges. Given the rhetoric from Republicans, you would think that a very high percentage of Americans have no insurance plan they can buy as insurers flee the individual marketplace.

On June 23, 2017, VOX published an interesting piece on line which gave the lie to these claims: (See Sarah Kliff, “Republicans’ main argument for Obamacare repeal is a lie”)

The article notes that far from there being virtually no insurance companies in the market selling individual policies, there are only FORTY SIX counties (out of over 3100 counties and parishes and other jurisdictions that take the place of counties in the entire country) that have no insurance company currently offering policies for calendar 2018. (And by the way, there are many months to go till 2018 so some of those counties may see new companies coming in.) Meanwhile, there are 967 counties offering 3 or more choices of plans. Rather than work to reduce the uncertainty about continuing the subsidies in the Affordable Care Act to help citizens buy policies on the exchanges, the Trump Administration is exacerbating that uncertainty with a game of chicken where Trump muses about whether he will just not pay the subsidies and let the system that makes the individual market work collapse. To the extent that some individual markets have only one or no insurance company selling policies, that is because of sabotage by the Trump administration.

Recently, Trump’s own Department of Health and Human Services in the annual report about the ACA’s risk management provisions (the elements that determine whether insurance companies can make a profit by offering coverage) contradicts the general Republican lies about the “failures” of Obamacare. According to the report, Obamacare is… “working as intended.” Insurance companies are being “protect[ed] … from unexpectedly large risks” and “… premiums for consumers” are increasing at moderate rates. In addition, “the customer base is getting healthier and the risk pools have been stabilizing.”

(See Michael Hiltzik, “As GOP moves toward repeal, a government report shows Obamacare is working well”) [I guess diehard Trump supporters will have to claim that the HHS report was falsely described in the press (“fake news”) or that workers within the Department deliberately falsified the report. My guess is those on the other side will just ignore the existence of the report. It would be fascinating to see if the news media will ask HHS Secretary Price about that report. I’m sure he’ll have a slippery answer --- they always do!]

Let us recall the protections built into the Affordable Care Act (protections that Republicans promise to keep when in fact the new proposed laws create sufficient loopholes so as to make the protections useless). All individuals who receive insurance through their employers and from the exchanges are now protected against the old tricks that insurance companies played to cherry pick healthy individuals to insure. Let us recall that insurance companies are in business to make money – providing services is a means to an end. It is not profit-maximizing behavior to write insurance policies for people who are already sick or likely to get sick and charge the same premium that you would charge for a relatively healthy person with no pre-existing conditions. The higher premiums for elderly people – the refusal to insure those with pre-existing conditions – the lifetime caps on payouts --- all of these are ways for insurance companies to stay true to their goal of maximizing profit (sometimes in the business literature it is referred to as “maximizing shareholder value” which amounts to the same thing if the horizon for profit maximization is adjusted appropriately). Thus, the only way to preserve the private insurance system AND avoid the kind of discrimination that existed before the Affordable Care Act was to write prohibitions into the law.

So, under the ACA, Insurance companies are limited by how much more they can charge older people than younger ones. They cannot charge women more than men. They must permit children to stay on their parents’ family policy up to age 26. And, of course, they cannot discriminate against those with pre-existing conditions. In addition, all insurance plans have to cover a wide variety of medical needs. (Including mental health, pregnancy, drug treatment to name a few.) Now some critics of this comprehensive requirement argue that this is Washington forcing people to buy a policy that they don’t want. Instead, these Republicans claim, the repeal and replace laws are creating policies that the people can choose. Of course, what that would do is reduce the pool of people who are purchasing these policies and therefore drive up premiums. I may not want to buy an insurance policy that covers pregnancy. (I could be a man or a woman past menopause.) But by making everyone contribute to the insurance pool for all such policies we guarantee lower premiums for all. By forcing me to buy a policy that includes some coverage I don’t need, the government is protecting me from rapidly rising premiums. All of the protections in the ACA go out the window with the various repeal and replace laws because they permit states to opt out of some of these regulations.

In just the few short years that Obamacare has been operating, the reduction in the number of uninsured has led to improved health outcomes. According to economist Dean Baker, “West Virginia’s Medicaid enrollment went from 354,000 in 2013, before the expansion, to 562,000 in the most recent data, almost one third of the state’s population. In Kentucky, enrollment more than doubled from 607,000 in 2013 to 1,248,000 in the most recent data, also almost a third of the state’s population.” (For details see Dean Baker, “Republicans Craft Health Care Plan to Screw Trump Voters,” Huffington Post, July 3, 2017,)

And these increased Medicaid enrollments led to better health outcomes. The new Medicaid recipients began to get normal preventive care. A study surveyed 9000 low income adults in Kentucky (which expanded Medicaid), Arkansas (which created a private version of the Medicaid expansion) and Texas which did not. They determined that the Medicaid expansion made a difference for the two states as opposed to in Texas. “Expansion … was associated with significantly increased access to primary care, improved affordability of medications, reduced out-of-pocket spending, reduced likelihood of emergency department visits, and increased outpatient visits. Screening for diabetes …., and regular care for chronic conditions all increased significantly after expansion. Quality of care ratings improved significantly, as did the number of adults reporting excellent health.”

[For details, see: https://www.hsph.harvard.edu/news/press-releases/medicaid-expansion-aca-lbetter-health-care-improved-health-low-income-adults/]

These benefits from the Medicaid expansion are a good example of what Vice President Biden meant when he whispered to President Obama that passing the ACA was a “big bleeping deal!”

So the first thing people have to realize is that the Republicans are just lying about how horrible things are under the Affordable Care Act.

Even if the general public does not know all of these facts, the one thing they apparently do know is that the House Bill to repeal and replace and the Senate version that was recently revealed are both abominations. I personally think the worst part of it is the attempt to use that bill to destroy Medicaid as we know it.

Luckily, it appears that the majority of people understand that Medicaid is not just for the poor --- for example, over 60% of nursing home residents are on Medicaid—and this includes many middle class people who have outlived their savings. The percentage of the elderly on poverty is about 10% -- so the 60% of the elderly in nursing homes have to include many who are not poor.

The Senate Bill ends Medicaid as we know it, because it would not merely reverse the Medicaid expansion but would put the entire program on a budget ending the guarantee to cover all expenses. Right now Medicaid and Medicare do not have budget caps. If you qualify for either, they reimburse your health care providers for the services they provide you. It is true they are able to negotiate what they pay. Your doctor may bill you $1000 for something and Medicare or Medicaid will say, well, you get $200. But never does Medicare or Medicaid tell you --- well, you’ve exceeded your budget outlay for the year, you have to pay the rest out of pocket. Imagine the politically powerful outcry if some President proposed a budget to CAP Medicare expenditures. Of course, the Republicans are cynically hoping that the majority of voters will think Medicaid is only for poor people. I think the evidence is that they have misjudged the level of selfishness in the general population.

Medicaid is an extremely important part of the entire health care system. Close to 50% of all births are covered by Medicaid and as a result of the expansion under the ACA, there has been a significant increase in the amount of money available to treat OPIOD addiction. With hundreds of millions of dollars cut from future Medicaid budgets, many of the improvements in care that were associated with the Medicaid expansion since 2014 will go away.

[For details see Robert Pear and Thomas Kaplan “Senate Health Care Bill Includes Deep Cuts to Medicaid” The New York Times (June 22, 2017) and Alison Kodjak, “From Birth To Death, Medicaid Affects The Lives Of Millions.” ]

There is a cynically clever Republican response to the legitimate outcry against the efforts to gut Medicaid in these bills. They boldly state that in total dollars, the Medicaid budget will rise over the period covered by the cuts I have been referring to. It is true that in absolute dollars spent, after the cuts have occurred, the total spending on Medicaid in 2025 will be higher than it is now. These Republicans therefore insist that the $800 billion reduction in Medicaid budgets are actually increases – just at a slower rate. No one should be fooled by this. With the population increasing and the cost of medical care increasing, the budget has to increase in absolute dollars just to keep the current level of services. With the $800 billion reduction built into the program, many people who depend on Medicaid will lose it.

Yes, it is true. THIS BILL IS AN ABOMINATION. Hopefully, people will continue to put tremendous pressure on their members of Congress to resist efforts to destroy Medicaid and create massive tax cuts for high income people as part of the effort to “repeal and replace” Obamacare.

Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author (with Howard Sherman) of Principles of Macroeconomics: Activist vs. Austerity Policies.

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