(Bloomberg View) — Promises made by Donald Trump and Republicans in Congress to repeal and replace the Affordable Care Act are proving to be more complicated than they sounded on the campaign trail.
With reality now setting in, what’s most likely to happen?
I expect to see Republicans stage a dramatic early vote to repeal, with legislation that includes only very modest steps toward replacement — and leave most of the work for later. Next, the new administration will aggressively issue waivers allowing states to experiment with different approaches, including changes to Medicaid and private insurance rules. At some point, then, the administration will declare that these state experiments have been so successful, Obamacare no longer exists.
In other words, the repeal vote will be just for show; the waivers will do most of the heavy lifting.
I predict something like this will happen because of two core challenges that stand in the way of Republicans’ replacing the ACA through legislation: the need for so-called community rating and the need to have 60 votes in the Senate to pass a comprehensive new health-care law.
First, community rating. It is one of the basic building blocks needed to create a workable private insurance market — whether Democrats or Republicans are doing the building. If your insurance covers a pre-existing condition but at a cost of, say, $100,000, that doesn’t really help. Community rating requires that your premium be the same as that of other people in your area, no matter how unhealthy you are.
With community rating in place, the next step is to recognize how easy it is to game the system: People can just wait until they get sick, then buy insurance at the community rate. To discourage that practice, the system needs to give people some strong incentive to purchase insurance before they get sick. The Affordable Care Act used an individual mandate; most Republican plans instead propose a requirement for continuous coverage. That is, people enjoy access to community-rated premiums in the future only if they have kept themselves insured over some period of time in the past.
Given the costs involved, subsidies are also needed to ensure that low- and moderate-income households can afford the coverage. This overall structure means that younger, healthier people implicitly subsidize older, sicker people.
Such are the inescapable constraints imposed by community rating. Community rating could be discarded, as Mark Pauly of the University of Pennsylvania has argued. Pauly instead proposes that insurance companies be allowed to vary people’s premiums according to their health status, and that general revenue be used to pay sicker people’s higher premiums. This would require substantial new taxes, however, which is presumably a nonstarter in a Republican plan. In any case, it would only make the transfers to older, sicker people more explicit.
Column: There are two core challenges that stand in the way of Republicans’ replacing the ACA through legislation: the need for so-called community rating, and the need to have 60 votes in the Senate to pass a comprehensive new health-care law. (Photo: iStock)
The second challenge is more nakedly political: Without a substantial change in Senate procedure, a bill to fully replace the Affordable Care Act, including changes to insurance rules, will require 60 votes. Republicans have only 52, so at least eight Democratic senators would need to be persuaded to go along. This is a much tougher assignment, especially since the administration will already be calling in legislative favors on ongoing confirmations, the debt limit, tax reform and other issues.