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Republican Health Plan Should Be More Ambitious

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(Bloomberg View) — Health care continues to vex Republicans, with the demands of conservatives, moderates, the Senate parliamentarian and the public at large seemingly incapable of being reconciled.

Related: What the Senate Health Care Fight Means for Advisors)

Ross Douthat, a conservative columnist for the New York Times, thinks he has found a way out. He counsels Republicans to think small.

The “timid” bill he recommends would have four parts. It would

  • 1) repeal the fines on people who go without insurance, and in its place impose a waiting period if those people try to return to the insurance rolls;

  • 2) repeal some of Obamacare’s taxes, such as those on medical devices, but not all of them;

  • 3) “maintain the stabilization funds that the Senate legislation pays to states and insurers to help cover the sickest Americans and keep exchange prices from spiraling upward”; and

  • 4) put a per-person cap on Medicaid spending, but a less “draconian” one than the one in the Senate bill.

Parts one and three of Douthat’s proposal are already in the Senate legislation. What he wants, then, is the Senate bill with smaller tax cuts and smaller cuts to future spending.

Under the Senate bill, the federal government would cover a smaller share of the costs of Medicaid beneficiaries who are above the poverty line: less than the current 90%, but still more than half. While Douthat does not spell it out, I think his argument makes the most sense if he has in mind cutting that percentage by a smaller amount.

Douthat does not suggest that this fiscal retreat would lessen Democratic opposition to the Republican bill. And it wouldn’t. Greg Sargent, a liberal columnist at the Washington Post, has signaled how Democrats would react: Raising the levels of taxes and spending in the bill while leaving the rest of it in place, he writes, would be a Republican “scam.”

I suspect that the bill would remain roughly as unpopular as it is now. The chief rallying cry of the opposition has been that the Senate Republican bill would throw 22 million people off the insurance rolls. That’s the estimate of the Congressional Budget Office, which is generally taken as holy writ in this debate even though the assumptions behind the estimate are dubious.

Crystal ball (Photo: Thinkstock)

(Photo: Thinkstock)

The CBO says that around 15 million of those people would leave (or never join) the insurance rolls because of the end of the fines. Reduced Medicaid enrollment would account for four million of those people.

Let’s say that Douthat’s softer reforms to Medicaid lead the CBO to estimate coverage losses of 17 million instead of 22 million. Would that sound much better? Would Democrats note that the vast bulk of the “lost coverage” would happen because people will voluntarily drop coverage once allowed to do it without fines? Would much of the press make this point? I think the answers to these questions are all no.

And under either Douthatcare or the Senate bill, millions of people will blame any adverse development in their coverage, such as higher premiums, on the Republicans — just as millions of people blamed such developments on Obamacare, whether or not a causal link truly existed. (And, really, given the complexity of this legislation and insurance markets, you would have to have access to an alternative universe to truly know.)

Forget the politics, then. And forget the CBO, too.

Let’s assume, more realistically, that the Senate Republican bill would save less money and result in higher coverage levels than the CBO believes. Would it make sense to raise the coverage numbers even further — that is, to fix it so the bill does less to reduce coverage — by increasing the share of Medicaid costs that the federal government picks up?

Keeping in mind what a lousy form of coverage Medicaid is, I think it would make more sense to direct any additional federal resources to help people with low incomes get private insurance. The bill could provide those who need it with larger tax credits, or with money toward their deductibles. Amending the bill this way would have the additional advantage of broadening the pool of people in the individual insurance market.

It wouldn’t make the legislation popular, or make it a repeal and replacement of Obamacare. But a bill with this modification would make the best of the Republicans’ bad situation. Compared with both Douthatcare and the current Republican bill, it would do more to expand private and freely chosen insurance.

What Republicans should do, in other words, is make the bill slightly more ambitious rather than less.

— Check out 5 Possible Weird Senate Health Bill Effects on ThinkAdvisor.


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