So. What comes next on repealing ObamaCare?
The TrumpCare bill (AHCA) was a disaster. It was not a vote to repeal ObamaCare, but rather a vote to keep it, and tweak it. That’s not what Republicans promised to do, and it’s not good enough. We should not mourn its passing, but celebrate it. The defeat of the bill was glorious, and the members of the Freedom Caucus who opposed it are heroes.
The reason fans of the free market are angry is not because TrumpCare failed — but because of the statements by Paul Ryan and Donald Trump that they are done with trying to repeal ObamaCare. Those statements are wrong and dangerous. As Ted Cruz once said:
First principle: Honor our promise. When you spend six years promising, “If only we get elected, we’ll repeal Obamacare,” you cannot renege on that promise. Failure is not an option. Breaking our word would be catastrophe. The voters would, quite rightly, never again trust Republicans to deliver on anything.
The response to the defeat of TrumpCare is not to pick up the ball and go home. It must be to draft a bill that actually does what Republicans promised, and drives down costs through market-based mechanisms.
What should such a bill look like? As it turns out, Ted Cruz had a proposal that outlined an answer to that question. I blogged that op-ed before, but with the defeat of the AHCA, Cruz’s op-ed has renewed relevance, as a blueprint that could bring Republicans together and actually repeal ObamaCare. I think it’s worth giving his proposal another detailed look.
First, Cruz suggests something I have been pushing throughout this process: starting with the 2015 repeal bill.
First, begin with the 2015 repeal language. . . . Virtually every Republican in Congress voted for that language, and the parliamentarian has already ruled it as permissible. We should begin with that previously approved repeal language as the baseline.
Bingo. The recent debate over AHCA has shown that the previous votes to repeal ObamaCare may have been fraudulent show votes. But here’s the thing: if you’re a moderate, it’s easier to justify a vote against AHCA than it would be to justify changing your vote on the exact same language you voted for before.
A duplicate of the 2015 bill, we learned yesterday from Andrea Ruth, exists — today, in this Congress. It is languishing in committee. It needs to be pushed to the floor and voted on.
But the 2015 bill is not enough. So Cruz next focuses on areas that should provide broad consensus for Republicans. They include excellent ideas like “allow[ing] consumers to purchase insurance across state lines,” ensuring the ability to buy “low-cost catastrophic insurance on a nationwide market,” and the use of health savings accounts. These would all have the effect of increasing competition and lowering costs. But it’s what Cruz says next that I consider critical:
Third, we should change the tax laws to make health insurance portable, so that if you lose you[r] job you don’t lose your health insurance. You don’t lose your car insurance or life insurance or house insurance if you lose your job; you shouldn’t lose your health insurance either. And that would go a long way to[wards] addressing the problem of pre-existing conditions, since much of that problem stems from people losing their jobs and then not being able to get new coverage on the individual market.
Fourth, we should protect continuous coverage. If you have coverage, and you get sick or injured, your health insurance company shouldn’t be able to cancel your policy or jack up your premiums. That’s the whole point of health insurance.
These suggestions by Cruz are very important, and I want to discuss them at some length. Here’s where it gets tough, because there’s a bitter pill that, in my view, Americans have to swallow: we have to get rid of the ObamaCare provision that requires companies to insure pre-existing conditions. Now I can already hear a bunch of people yelling: hold up there hoss, that’s never going to work and people don’t want that. Do me a favor: hear me out. There’s a way to address the concerns people have about insurance companies’ refusal to insure against pre-existing conditions without this mandate. The answer lies in Cruz’s suggestions in his op-ed, which contains terms that may seem abstract to some people, such as “guaranteed renewal” and “equal tax treatment for individual plans” and “portability.” But if you stick with me for a moment, I’ll explain the reality behind these abstract terms, and how they can help solve the problem.
First, let me say that I understand why people wanted the provision requiring coverage for pre-existing conditions. Very simply: the situation before ObamaCare was untenable for a lot of people, and the recession made it worse. Here’s the scenario: you’ve been carrying health insurance for years through your job — but then the recession hits and you are laid off. You’ve been responsible all these years, but in the meantime you’ve developed a serious health condition. Because insurance is tied to work, you’re now thrown into the individual market, which is entirely dysfunctional and which may well reject you because of your “pre-existing” condition.
This is an entirely unacceptable state of affairs. It’s unfair, and Americans should not have to stand for it. And it seems to many people as though the easy answer is to tell insurance companies: hey, you have to cover these conditions! But here’s the problem: that leads you inextricably down the ObamaCare path, because if you mandate coverage for pre-existing conditions, most people just won’t buy health insurance until they develop those conditions. That’s clearly an unworkable situation for insurance companies, because they can’t make money by selling only policies that are going to lose them a lot of money. And that’s what led us to this Rube Goldberg contraption of ObamaCare, where the government decided to pad the insurance companies’ bottom line by forcing healthy people to buy insurance, and even forcing them to buy coverage for things they didn’t want and would never want (like maternity care for a single male).
So the pre-existing conditions requirement is not some perk that we can keep while ditching the rest of ObamaCare.
So what else can be done? Well, there’s always single-payer. If you liked socialism and think it worked well for the Soviet Union, North Korea, and Venezuela, you’ll love socialism in health care! The rosy Big Media descriptions of socialized health care in Canada, the UK, and elsewhere often leave out the plight of people who die waiting for their operations, and are simply neglected by a system that has no real incentive to improve their health. There’s also a corrosive effect of nationalized health care on your ability to criticize the government. If you think politicians making decisions about your life is a good thing now, just wait until they have power over whether you live or die. Dissent is going to be a little more difficult then, isn’t it?
Luckily, the free market has another way. It’s called guaranteed renewability — the same concept as the “continuous coverage” described by Cruz in his op-ed. Guaranteed renewability is described in this excellent paper from the Mercatus Center:
[G]uaranteed-renewable insurance permits consumers to renew their coverage at the same premium, regardless of whether they have developed any new chronic health conditions since obtaining the insurance.
If you really want to go deep into the policy analysis, I recommend reading that paper. But the essence of the idea is that, like term life insurance, annual premiums are lower if you buy in when you’re young and healthy. This way, the money that insurance companies need to cover people who have developed serious health conditions is provided voluntarily by younger people who want to buy into guaranteed renewal coverage early, rather than by a government-ordered mandate enforced by penalties (or if you prefer, Justice Roberts, by “taxes”) imposed on people who don’t comply.
Why didn’t this happen pre-ObamaCare? Actually, it did — but it was unworkable for a lot of people who lost their jobs, because insurance was not truly portable. The Mercatus Center paper says that “most individual market plans were indeed sold with this guaranteed-renewable provision” — but if you lost your job, you’d end up having to convert from a health plan sponsored by the employer to an individual health plan. This would subject you to rejection for a pre-existing condition — the very same unacceptable racket described above. The HIPAA law in 1996 attempted to address the issue of portability, but did not really fix the problem.
A large part of the reason health insurance is not fully portable is the differential tax treatment between employer-sponsored and individual plans. Insurance premiums paid by employers are not taxed, while premiums paid by individuals are.
How could we even out the tax treatment of employer-sponsored and individual plans? We could follow the lead of most economists and rescind the tax exemption for employer-sponsored plans, but that would be very unpopular. The Mercatus Center instead suggests “modification of the tax code to extend the tax break for health insurance beyond the employment-based market into the individual market.” In other words, give the tax exemption to everyone. This would still amount to a subsidy by the federal government — but employees already enjoy this subsidy, and the unequal treatment of individual plans is not equitable and distorts the market. The key is treating both types of plans equally under the tax code.
Of course, we can’t just snap our fingers and achieve all this overnight. As the Mercatus Center paper acknowledges, “a transition to this market-oriented arrangement would likely have to be coupled with high-risk-pool coverage for those who already have pre-existing conditions, but the need for these high-risk pools would decline over time.” You can’t just yank the rug out from people who have no choice but to depend on the ObamaCare system in the near term. But moving towards a market-based system will lower costs and premiums.
We also have to move away from the situation where a third party pays for everyday costs. Basic health care should not be covered by insurance. Your car insurance does not cover oil changes, and health insurance should not be used for basic care like checkups and treatment of everyday illnesses. When people have to make their own choices about how much to spend, prices will fall — and so will insurance premiums.
What about the people who can’t afford insurance (or who are simply irresponsible and do not buy insurance)? Well, first of all, with the above reforms, there would be far fewer people in that situation than there were in 2008, before ObamaCare was passed. But in the end, this is a separate question from the basic policy of how to repeal ObamaCare. There will always be the less fortunate in society who can’t afford some of the basics of life: housing, food, health care, and the like. And there will always be people who are irresponsible and don’t plan for their future, whether it’s in the area of health insurance, life insurance, retirement, their kids’ education . . . the list goes on.
For these groups of people, there will always be a tension between people like me, who recommend that such issues be taken care of by charity and the private sector when the problems to be addressed are serious or life-threatening, and leftists who want the government to take care of everybody. Either way, the reality of the world is that resources are scarce, and not every need can be met. This will always be true under any system. Government cannot simply decree that everyone will receive the best possible care for every illness. Any system, whether public or private, will result in some people not being able to access scarce resources. No government health care system is a panacea, and anyone who keeps their eyes open and watches for stories of people being mistreated under socialized health care will find them. The VA is just the tip of the iceberg.
But the solution is not to give ideal care to people who could have bought insurance but chose not to. Imagine doing that with any other type of insurance: Gallant buys a fire insurance policy and Goofus does not — but Goofus knows that government will buy him a new house if his house burns down. Goofus is not going to buy insurance in that scenario — and Gallant won’t either. The concept of insurance is destroyed by such an arrangement. Some Goofuses are going to suffer in the free market — but again, no resources in this world are unlimited, and Goofus will never have all his needs met without contributing to society.
Finally, let me briefly revisit a topic I covered before — because the reigning assumption appears to be that repealing ObamaCare would leave millions uninsured and worse off. This is completely bogus, and the fallacy of that argument must be central to any discussion of what to do next. For the full argument, I commend to you my post from March 8. Here’s the summary: to the extent that health care coverage has increased, that increase has resulted from two factors: a) gains in employer-sponsored insurance, and b) an expansion of Medicaid.
The former (increased employer-sponsored insurance) is not due to ObamaCare but rather is due to the (tepid) recovery and millions going back to work. Indeed, private coverage has been harmed by ObamaCare, since ObamaCare has hampered the recovery and hurt employers’ ability to hire more people. Since the passage of ObamaCare, believe it or not, “the share of Americans with private insurance has declined.” Yes: declined. So ObamaCare does not get credit for expanding private health insurance.
The latter factor (expansion of Medicaid) is not a net gain for Americans because outcomes under Medicaid are worse than outcomes of the uninsured. Under ObamaCare, age-adjusted death rates increased in 2015 after declining for decades — and life expectancy fell for the first time since 1993.
Repeal will not cost lives. If anything, full repeal with no replacement will save lives.
We can’t give up. Republicans promised repeal. The time to deliver is now. Republicans need to stop buying into the false premise that ObamaCare has helped people. Republicans need to enact real market-based reforms.
The principles articulated by Ted Cruz would be an excellent place to start.