House healthcare bill draws heavy flak

Reader feedback at end.

After weeks of discussion and negotiation, H.R. 1628, the American Healthcare Act (AHCA) was put to a vote in the House of Representatives on May 4 and squeaked through (217-213) without a single Democratic vote. Later that day, there was a GOP ceremony in the Rose Garden.

The vice president set the stage by acknowledging the presence of some key players (Republicans all) to celebrate “the beginning of the end of Obamacare” and praising the president for his leadership.

The president spoke for some 5 minutes about the magnitude of what had been achieved, how hard everyone had worked, etc. Senate approval was still needed, but he was confident it would be forthcoming. GovCare was a disaster, but after the AHCA went into effect, premiums and deductibles would start coming down and people would be able to buy the healthcare insurance they needed. Remarks by President Trump on healthcare vote in the House, whitehouse.gov,
5/4/17.

And I will say this, that as far as I’m concerned, your premiums, they’re going to start to come down.  We’re going to get this passed through the Senate.  I feel so confident.  Your deductibles, when it comes to deductibles, they were so ridiculous that nobody got to use their current plan -- this nonexistent plan that I heard so many wonderful things about over the last three or four days.  After that, I mean, it’s -- I don’t think you’re going to hear so much.  Right now, the insurance companies are fleeing.  It’s been a catastrophe.  And this is a great plan.  I actually think it will get even better.  And this is, make no mistake, this is a repeal and replace of Obamacare.  Make no mistake about it.  Make no mistake.  (Applause.)

The celebratory tone of this event seemed premature, as there was every reason to believe that the Senate review of the legislation would prove long and arduous. No Senate Republicans were introduced at the event; no doubt they had other things to do.

Also, claims about what the legislation would accomplish were so general as to fuel doubts about their credibility. Would passage of the AHCA be like rearranging the deck chairs on the Titanic? Disgrace in the White House Rose Garden, Renee Garfinkel, Washington Times,
5/8/17.

The mean-spirited House of Representatives’ American Health Care Act and the victory lap in the Rose Garden that followed its passage were a disgrace to America’s spirit and reputation. The slogan, “America First!” is a mockery if our medical system is the least caring in the developed world. It will take a large dose of political will and a great deal of courage to make the changes necessary to treat the American sickness.

Democrats wasted no time in decrying House passage of the AHCA as a radical step that would deprive millions of Americans of access to affordable healthcare, while conservatives (mostly Republicans) slammed the legislation as far too timid.

An analysis of the conflicting claims may be helpful in assessing this legislation. Would it be a step in the right direction? Is it politically feasible? Are there better alternatives? We’ll cover the liberal perspective in this entry and conclude the discussion next week.

Left-leaning criticism of AHCA has been muddled and emotional. Consider the editorial coverage in our local newspaper. House health[care] plan sickens us, News Journal,
5/7/17.

The theme of this editorial is that the “wealthy and healthy” (from the president on down) have zero compassion and can’t wait to deprive the less fortunate of affordable healthcare insurance coverage. A cartoon below the editorial shows a Trump-like devil with horns, who has a drink on one side and a “Trumpcare” bottle on the other. “I don’t always turn healthcare for millions into a massive windfall for billionaires, but when I do . . .”. What evidence is there to support such fiendish intent? (1) About half of Americans (or perhaps it’s 130 million Americans, as indicated at another point) have a pre-existing condition. (2) The ACA makes it illegal to deny coverage to those with chronic conditions or to set premiums based on a client’s health. But the Republican bill “tosses that aside,” thereby “theoretically allowing insurers to make coverage unaffordable for the sickest of us.” Sure, the bill provides for “so-called high risk pools,” but these pools would be underfunded by $20 billion annually so good luck with that. (3) Perhaps it was insensitive of Democrats to celebrate the passage of the bill as dooming many Republicans in the 2018 mid-terms, but House Republicans and President Trump were cruel to celebrate House passage of a “repeal and replace” bill that the president says will result in premiums and deductibles coming down and is “a great plan.” This isn’t the first time we have questioned Trump’s grip on reality. (4) Perhaps no one told the president that “millions could lose coverage under this proposal,” or he was told and couldn’t or wouldn’t comprehend that this was so. Whatever, “he’s worth $3.5 billion and says he’s healthy,” so why should he care? Clearly, he couldn’t care less.

Hmm, sounds like anyone who is wealthy (or even moderately prosperous) and healthy should be heartily ashamed of themselves. But let’s consider whether the underlying points justify such a conclusion.

1. Millions would be deprived of affordable healthcare insurance – AHCA in its current form has not yet been scored by the Congressional Budget Office, but two previous drafts were – most recently on March 23 – so we have a pretty good idea of what the scoring on healthcare insurance (HCI) coverage will be.

The expected prognosis is that this legislation would result in far fewer Americans with HCI coverage, essentially reversing coverage gains since the Affordable Care Act was enacted, but it’s instructive to consider where the projected changes would take place (see the data below) and why. CBO scoring of the AHCA,
3/23/17.

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Reduction of Medicaid coverage would be a function of curtailing (arguably not fast enough) heavy upfront federal subsidies for adding Americans to this program by raising the income ceiling for eligibility. In effect, under the ACA, Medicaid in states agreeing to expand the program was being converted from a support program for the poor and disadvantaged into a more mainstream entitlement program.

Medicaid provides HCI coverage on paper, but the care provided to participants has been mediocre due to the tendency to set low reimbursement rates for healthcare providers. The rapid run-up in outlays for Medicaid is problematic given the government’s overall fiscal problem. Debate on Obamacare repeal centers on Medicaid, Here’s how states that expanded it are doing, Melissa Quinn, dailysignal.com,
3/8/17.

Based on the latest CBO estimates, the AHCA would reduce federal Medicaid outlays over the next 10 years by $839B. That’s not a budget cut for Medicaid, but a reduction in its rate of growth – a down-payment, if you will, on a sorely needed overhaul of all government entitlement programs – while giving states more operational flexibility. Entitlement reform at last, Stephen Moore, townhall.com,
5/9/17.

Moving toward a block grant system for Medicaid will give states less money over time, but will allow the states the flexibility to devise their own quality programs at lower costs. If states realize they are wasting their own healthcare dollars, rather than Uncle Sam's, they will be more conscientious about controlling costs. This block grant formula has worked in states such as Rhode Island and Indiana to sweat out costs and improve services. Medicaid is blowing up the federal and state budgets at the same time. It is already a quarter-trillion dollar annual program and growing.

As for shrinking HCI coverage for individually purchased and employee-provided plans, the basic driver would be the elimination of the ACA mandates (which can only be legally avoided by paying a “tax” to the government) for individuals to acquire HCI coverage and for larger employers to provide it to their employees. This isn’t a matter of “taking away” anyone’s HCI, it’s a matter of allowing people to decide – given the terms and cost of available coverage – whether they want to purchase (or in the case of employers provide) it or not.

2. Billionaires would get a windfall – House Republicans and the Trump administration are working on a tax cut plan, and the wealthy would certainly benefit. But the stimulus effects of a tax cut would benefit the entire population, and there isn’t much evidence so far (details of the plan are being worked on) that the wealthy would benefit disproportionately. A tax cut is appealing, but could we afford it? 5/8/17.

Granted that the AHCA would reduce two taxes paid primarily by the affluent, namely a 3.8% tax on small businesses & investment income and a Medicaid surcharge for higher income levels, these taxes were included in the ACA to target the affluent in the first place so their elimination doesn’t seem like a windfall.

3. HCI coverage could be denied for “preexisting conditions” – On its face, this claim is erroneous; the AHCA would explicitly preserve the “preexisting conditions” ban.

Nothing in this Act shall be construed as permitting health insurance issuers to limit access to health coverage for individuals with preexisting conditions.

While states could seek waivers from various provisions of the ACA, this would require a showing that the continued availability of affordable HCI coverage would be assured, e.g., by placing people with very costly medical conditions in subsidized high risk pools, which would permit lower premiums and deductibles for everyone else and thereby hopefully avert a “death spiral” of the individual HCI coverage market.

The AHCA would provide substantial funding for high risk pools, and the purported shortfall ($20B per year in the News Journal editorial) seems overblown. Fact checking healthcare hysteria, Karl Rove, Wall Street Journal,
5/10/17.

The bill [includes] $8 billion over five years to help states with waivers set up high-risk pools to cover people with expensive illnesses. [Economist Jonathan Gruber] dismissed this as “trivial.” Yet the Kaiser Family Foundation  found in 2011—before Obamacare kicked in—that 35 states had high-risk pools covering 226,000 people with $2.6 billion in claims. Some $1.4 billion was covered by the premiums these patients paid, and the states had to toss in only $1.2 billion. That’s $400 million less than would be available each year under the GOP bill.

Moreover, there are additional funds provided in AHCA that could be used for high risk pools. Extra billions from health[care] bill? Researchers say it’s still not enough, Reed Abelson & Margot Sanger-Katz, New York Times,
5/3/17.

The American Health Care Act would also provide $100 billion to states over a decade to stabilize their markets, though states would have to match some of the federal spending. Amendments to the bill will provide another $30 billion to states, with only a few strings attached. If states pieced together all of the money and used it all for high-risk pools, about $138 billion would be available for such programs.

4. There would be an “age tax” – Under the AHCA, insurance companies could increase the spread between HCI premiums for older people and young adults from 3:1 to 5:1. Based on medical cost data for these age cohorts, a 5:1 spread would be realistic, while the 3:1 spread ensures that young adults (aka “invincibles”) will be overcharged relative to their elders and therefore may be discouraged from buying HCI.

The change soonds reasonable, but some observers have blasted it. Older Americans oppose age tax in healthcare bill, Mary Hickey, aarp.org, 3/21/17.

“Older Americans want affordable healthcare, including less-expensive prescription drugs and continued protections for the most vulnerable,” said AARP Executive Vice President Nancy LeaMond.  “When Americans over age 50 look at the details of the House healthcare reform plan, they don’t like what they see. They don’t want big insurance and drug companies to reap massive profits at their expense.”

Historically, SAFE was founded to challenge policies of AARP and we certainly disagree with them on this point. No one wants to pay more for HCI, but there isn’t any good reason why young folks should be expected to subsidize their elders and in fact that policy is one of the main reasons why the current system is actuarially unstable.

5. People will die – This claim has been made against the AHCA by several prominent Democrats. It’s intended to evoke an emotional response, never mind that there isn’t much evidence to back it up. Democrats use shock value to blast Republican healthcare plan, Valerie Richardson, Washington Times, 5/7/17.

Sen. Elizabeth Warren of Massachusetts predicted on Twitter that “people will die,” and Sen. Bernard Sanders of Vermont accused Republicans of celebrating a vote to “let thousands of Americans die so that billionaires get tax breaks.”

And then there are the stories, such as Jimmy Kimmel’s account of how his infant son was born with a heart condition, which are intended to convey that anyone who doesn’t support universal healthcare is beyond redemption. The liberal lie so big it may one day split the country, John Hawkins, townhall.com,
5/13/17.

. . . Kimmel is essentially arguing that ONLY people who agree with him care about the healthcare of children and the rest of us want children to die. This sort of rhetoric has become commonplace on the Left and it’s not just dishonest, it’s evil. It’s bad for the country. It could even potentially split the country apart one day because we won’t be able to continue to live with each other.

Rebutting this type of rhetoric is difficult, although White House counsel Kellyanne Conway gave it a shot. Democrats use shock value, op. cit.,
5/7/17.

. . . [Conway] blasted the “people will die” message as “outrageous and untrue,” taking the mainstream media to task for acting as “enablers” for “not calling out those breathless, heartless predictions.” She cited Iowa, where 94 of 99 counties have just one insurance company under the Obamacare exchange, saying, “That’s not choice. That’s not competition, and that example is going on everywhere.

Some conservatives may be able to come up with sad stories of their own, but such an approach won’t necessarily elevate the public discourse. My husband would’ve died with Obamacare, Cheryl Chumley, Washington Times,
5/6/17.

6. The ACA isn’t perfect, but fixing it shouldn’t be so hard – After blasting the other side for supposedly breaking their healthcare promises, Senator Tom Carper went on to outline his vision of what should happen now. Trump and the Republicans’ broken health[care] promises, Senator Tom Carper, e-newsletter, 5/4/17.

Americans are counting on us to chart a better path forward. I, like so many of my colleagues, am passionate about improving our healthcare system, ensuring equal access to healthcare for all Americans, and reducing healthcare costs that have become unaffordable for middle-class Americans and small businesses. I stand ready to work with my colleagues on both sides of the aisle to do what’s right for our country.

If Democrats truly want to support an overhaul of GovCare, however, many of them haven’t shown it by their behavior and public statements. Notice how Senator Carper says Republicans should work with Democrats rather than the other way around.

More fundamentally, the availability of a “win-win” solution is far from apparent. “Ensuring equal access to healthcare for all Americans” implies further government intervention, and this runs counter to the goal of “reducing healthcare costs that have become unaffordable.” Government intervention has been the prime driver for rising healthcare prices, as SAFE pointed out back when the ACA was taking form. A “ready, aim, fire” approach to healthcare reform,
3/31/09.

NEXT WEEK: We’ll review conservative objections to the AHCA and discuss the path forward for healthcare reform.

**********FEEDBACK**********

#One of the voices crying out against the AHCA, and trying to fund raise funds off it, is the AARP. They characterize a more realistic differential for age in premiums as an “age tax.” - SAFE director

#Liberals don’t want the healthcare system to work, and they will obstruct any real reforms. – SAFE director

#President Obama deserves credit for getting the Affordable Care Act enacted, and now it’s time to improve on it versus the type of backtracking that seems to be under consideration. President Trump should facilitate the process rather than standing in the way. – Retired financial manager

Comment: The current healthcare system is out of whack, as President Trump and many others have pointed out, and this country cannot afford to keep pouring more and more money into it. A choice will ultimately be made between (1) a market-based system in which patients have an incentive to manage their consumption of medical services, and (2) a single payer system in which the government effectively rations care. SAFE favors the first approach. See the next entry for predictions.


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