The Republican Health-Care Debate

By Yuval Levin

Tuesday, January 17, 2017

Where do things stand among Republicans in Washington regarding the repeal and replacement of Obamacare? Every day seems to bring fresh twists in the story, and the basic thread can be hard to follow. Is this the beginning of an arduous but ultimately fruitful legislative process? Is it the painful end of an illusion? Will it yield in a quagmire or a vindication for the party that has made the fight against Obamacare its foremost mission for more than half a decade?

One lesson I’ve learned from working on public policy in and out of government is that in a complex legislative debate, success and failure often feel exactly the same while they are happening. They both feel pretty much like pandemonium. During the lengthy period when some basic questions of strategy and substance are still open, everything seems up for grabs and the entire edifice always looks on the edge of collapsing. So it is not easy to judge the prospects for success by orderliness or discipline along the way. A better yardstick is whether there is a plausible strategy being championed by a critical mass of people on both sides of Pennsylvania Avenue.

By that measure, the effort to replace Obamacare is in some trouble. On its face, the legislative strategy lawmakers are now pursuing is not a good fit for the substantive policy objectives it is expected to achieve, and Republicans have yet to come to terms with the mismatch. But we are very early in the process, there is a growing awareness at all levels of the inadequacies of the approach, the incoming administration has yet to truly have its say, and ample opportunity remains for Republicans in Congress to correct their course as they go. That course will inevitably change several times before the story ends.

What follows, with due apologies for its length, is one observer’s general sense of where things stand. I’ll lay out the logic of the reigning strategy, take up its faults, consider the role the incoming administration has played, and offer some reflections on where things might be headed.

Repeal and Delay

Immediately after the election, it seemed as though congressional Republicans had quickly chosen a course on health care. The idea was a dual-reconciliation strategy for repealing and replacing Obamacare.

The reconciliation process allows budget-related legislation to get through the Senate without the threat of filibuster — and so with only a simple majority. Because no budget resolution was enacted last year, Republicans have the option of advancing two separate reconciliation bills in 2017, where normally only one per year is possible. The plan was to begin the year with a quick reconciliation measure, enacted by the end of February. It would repeal significant pieces of Obamacare (though by no means all, because only provisions related to spending or taxes can be included in reconciliation bills). Then, later in the year, a more comprehensive reconciliation bill would include both tax reform and key elements of a conservative health-care reform as an Obamacare replacement. Repeal and replace would both be written to take effect in two or three years, together, but they would be enacted separately.

The logic behind this approach was basically threefold. First, and most important, was a logic of momentum: It would allow Republicans to move very quickly on what had been a key campaign commitment for years and not lose time and focus as usually happens with major legislative initiatives. They even had a bill already written that they knew the Senate parliamentarian would deem eligible for reconciliation. When Republicans took over the Senate in 2015, they sent President Obama a short, simple reconciliation bill repealing, with a delayed effective date, Obamacare’s subsidies, mandates, taxes, and Medicaid expansion but not touching the law’s insurance regulations (which probably aren’t removable by reconciliation). Everyone understood that Obama would veto it, but the idea was to do a test run of a partial repeal by reconciliation. Now with Trump in the White House, Republicans could just send him the same bill, get it signed into law, and then get to work on a replacement before the repeal took effect, having clearly signaled their seriousness.

Second, there was a logic of inertia, which reaches back well beyond this year: The movement to repeal and replace Obamacare was born with 2012 in mind. Obamacare was enacted in 2010 but would not take full effect for four years, and there was a presidential election in the middle of that period. The idea was that if Republicans won in 2012, they would move swiftly to unravel the law before it took effect and then move more slowly and incrementally to enact conservative reforms that would enable a genuine consumer market in coverage for individuals.

The Romney transition team in 2012 developed a detailed strategy for such a two-step approach (including plans for an early repeal-by-reconciliation bill if Republicans took over the Senate). They effectively locked it away in a glass box marked “break in case of Republican president” – and left it unbroken in 2012. But after Trump’s unexpected victory, the first instinct of some Capitol Hill Republicans was to break the glass and get going.

This may seem like silly reasoning for a legislative strategy, but it’s actually a very common way of thinking about policy. Clever plans denied their chance by lost elections or failed votes often grow only more brilliant in the imagination of their champions; these plans are then the first default when those champions have their next opportunity to act. A great deal of the misbegotten structure of Obamacare itself can be explained by such reasoning (with its roots in the failure of Hillarycare), as can a lot of the policy landscape. Public programs are often designed to win the last war, ignoring crucial changes over time.

When it comes to Obamacare, one very important thing has changed since 2012: The law has now been implemented for several years, so that millions are insured through its mechanisms. A repeal and replacement today would need to provide some kind of bridge for at least some of these beneficiaries and so would probably need to connect its repeal and replace elements fairly explicitly.

Conservative health wonks have proposed various ways to do this. (Here is one general overview and one fairly specific proposal I’ve been involved with, and many others have offered a variety of good ideas.) A quick repeal with no hint of replacement would create at least a temporary situation in which there was no such bridge; this would cause great uncertainty for the people involved and also put great political pressure on Republicans. But the inertia of the quick repeal idea has driven some Republicans to overlook or minimize that challenge.

And third, the idea of a dual-reconciliation strategy was driven by a logic of tax reform. The first reconciliation bill, by eliminating the Obamacare taxes, would lower the revenue baseline against which an eventual Republican tax reform was measured — making deeper tax cuts possible later in the year. And the second reconciliation bill, by providing some tax credits for insurance to lower-income people at the same time it enacted corporate and personal income-tax cuts, would improve the distribution tables of the Republican tax reform, making its benefits less skewed toward higher-income people. Since repeal and replace would take effect at the same time (in two or three years under this hopeful scenario), the effect on health policy would be the same as one bill, but the tax-reform effort would be much aided by splitting them up.

In different combinations, these three arguments have added up to a case for a dual-reconciliation strategy over the past two months. In the immediate aftermath of the election, the Trump team also pressed congressional Republicans for quick action on health care. They even asked whether a bill could be ready for signature by inauguration day, which added to the pressure for speed and for starting with legislation that was already written and tested. And the dual-reconciliation approach soon also became the preferred strategy of Senate Republican leader Mitch McConnell, who has long maintained a studied agnosticism about the substance of health reform.

McConnell’s priorities are procedural and institutional. He wants the Senate to work and not to be paralyzed, and he wants to avoid massive, comprehensive legislation that cannot possibly be legible to legislators. Splitting repeal and replace, and then perhaps further dividing any replacement effort into smaller steps, would be more like the way he wants to see the Senate work. And it would avoid making incremental progress dependent on full agreement in advance about the specifics of the ultimate reforms.

If Republicans can pass one bill now that all of them would support, and then worry about the next step later, why should they wait?

The Trouble with Delay

But by early December, as they began to focus on the details and contemplate the politics, some Republicans in Congress (especially in the Senate) became increasingly uneasy with this strategy.

Their worries were straightforward. A repeal bill pursued without a replacement would be scored by the Congressional Budget Office as significantly increasing the number of uninsured Americans (as the CBO has already signaled this week), and Republican Members of Congress did not relish answering questions about that score with assurances that a plan would be forthcoming later. Leaving Obamacare’s insurance regulations in place while eliminating its taxes, mandates, and subsidies (and offering no plan for further changes) could also hasten the departure of insurers from the system during any transition period, leaving Republicans with the blame.

But most important, dividing repeal from replace could leave the prospects for a replacement much bleaker, since support for any particular approach to reform is likely to be narrower than support for even a partial repeal. This would also mean that any further steps toward full repeal would be more difficult. And there is no guarantee that a second reconciliation deal this year will be possible: Arriving at a ten-year budget trajectory that 50 Republican senators can accept without being able to assume further savings from Obamacare’s repeal (which will have been enacted by then), and apparently without entitlement reform, will be no simple matter. In effect, the dual-reconciliation strategy threatens to undermine both repeal and replace while leaving Republicans with some of the blame for Obamacare’s ongoing collapse.

These concerns built up quietly in December, expressed in meetings of members, or in closed conversations with health wonks. But when members returned for the new Congress in January, it became apparent that the worries were widely shared and were not being answered; senators in particular then began to complain in public. This has helped create the sense that the strategy’s fate is in doubt. That’s true, but as long as no alternative strategy is out there, the danger to the dual-reconciliation approach is probably not fatal.

It’s important to see that the debate is more about legislative strategy than policy substance. The story most frequently told these days about the sources of the chaos around health care in Congress suggests that the problem is that Republicans just can’t agree on policy. And they are certainly far from unanimous about health reform. But Republicans have actually made a great deal of progress toward broad agreement on a general policy approach over the past half-decade, albeit more so in the House than in the Senate. That approach, now most fully embodied in legislation authored by Representative Tom Price, combines returning insurance regulation to the states, a federal tax credit for coverage in the individual market, and continuous-coverage protection to cover Americans with preexisting conditions. And Donald Trump has chosen Price to be his Secretary of Health and Human Services.

It is a general approach that could take a number of different forms in practice. Some of these would allow the states to auto-enroll uninsured people in plans with premiums equal to the federal tax credit for which they are eligible; these could amount to a kind of “universal catastrophic coverage” policy, nearly zeroing out the uninsured and then enabling a competitive market for more comprehensive coverage above that. (This is the form that would seem best aligned with Donald Trump’s rhetoric about the uninsured.) Others might employ income-based credits but a less aggressive enrollment strategy. Others might deliver a subsidy for coverage through the states, allowing each state to tailor the benefit differently. And various approaches to Medicaid reform have been proposed.

The differences among these proposals involve serious tradeoffs, and it certainly remains the case that most congressional Republicans have not thought deeply about them and are not immersed in the details of health care. But the Republican health-care debates now occur mostly within the general boundaries of an approach long laid out by various conservative health experts, translated into legislation in different ways by Price, Senator Bill Cassidy, and others, and backed by House Speaker Paul Ryan and the relevant committee chairmen in both houses.

There are important opponents, of course, and there are arguments about important particulars within the boundaries of this approach. But the raging debates about its basic elements have faded some. On the substance of health reform, Republicans aren’t that much further from agreement than Democrats were about their own approach eight years ago.

Making Health Care Great Again

But the Democrats got from a general outline to a legislative process only after a Democratic president took office and advanced a particular version of their overall approach. And that brings us to Donald Trump.

It is strange that we should reach him this late in our story, but that is how the post-election Republican health-care debate has worked so far. And that fact underlies a fair bit of the chaos. Getting from a debate to a law was always going to require a president who settles some of the open questions and pushes the process forward. Whether that will happen under the incoming president is still unclear, and that is a primary reason that the fate of the effort to repeal and replace Obamacare is itself hazy.

For one thing, the attitude of Trump and his team toward the dual-reconciliation strategy has sometimes been unclear to many Republicans. Almost everything Trump himself has said in public so far has suggested he is not a fan of the strategy. From his earliest post-election interviews, he has said he does not want to see a period of uncertainty after a repeal is enacted before some replacement takes shape.

In a November 16 interview with 60 Minutes, his first discussion of the subject after the election, Trump was asked what would happen in the period between repealing and replacing the law. He said:

We’re going to do it simultaneously. It’ll be just fine. We’re not going to have, like, a two-day period and we’re not going to have a two-year period where there’s nothing. It will be repealed and replaced.

In a January 11 press conference, in response to a similar question, he said:

It’ll be repeal and replace. It will be essentially, simultaneously. It will be various segments, you understand, but will most likely be on the same day or the same week, but probably, the same day, could be the same hour.

Everything he said publicly in the intervening two months made the same point, albeit equally obliquely: Repeal and replace would be simultaneous. Public reports from people who spoke with Trump privately about this (most notably Senator Rand Paul) have suggested the same. And Trump’s own tweets on health care have vaguely pressed Republicans to be careful on this front.

On January 15, in an interview with the Washington Post, Trump even suggested that his team would propose its own health-care reform, and that it would cover everyone now covered and at lower costs. And he again distanced himself from any approach that would separate the repeal of Obamacare from its replacement.

And yet, this repeatedly expressed view of the president-elect’s has had remarkably little effect on the Republican debate about strategy. This seems in part to be a price of Trump’s style. The way in which he has expressed himself on this question (and others) suggests to people immersed in the issue that he is talking off the cuff, without command of the particulars.

After Rand Paul announced he had spoken with Trump, who agreed with him about making repeal and replace simultaneous, one congressional staffer suggested at a Capitol Hill meeting on health care that his boss could call Trump and get him to say the opposite. After Trump’s news conference last week, several members and staffers suggested (independently) that Trump must mean that repeal and replace should take effect simultaneously, rather than that they should be enacted simultaneously, in which case congressional Republicans were already on the same page as Trump. (And of course, that could very well be what Trump meant.) After Trump’s Washington Post interview this past Sunday, the conservative health-care universe, including some people on Trump’s own team, quickly concluded that the separate administration plan he described was entirely a figment of Trump’s imagination.

But another reason that Trump’s statements about repeal and replace have not shaken up the strategy is that Trump’s team has, at least since the new year, mostly been cooperating with House and Senate leaders in advancing the dual-reconciliation approach and looking for ways to improve it. On health care, Trump’s policy team (which includes some conservative health-care experts, lawyers, and former officials) has cut a very different figure than Trump himself. They have been careful, steeped in the details, and engaged with key players both in Congress and in the health sector.

That engagement so far seems largely to have focused on developing a set of executive and regulatory actions that could help stabilize the individual-insurance market during any transition period. Conservative health experts did an enormous amount of detailed work on this front well before Trump was elected (or even nominated), with an eye to a possible Republican president, and Trump’s team has built on that work. With regard to legislative strategy, meanwhile, they have not resisted the dual-reconciliation approach but have encouraged congressional Republicans to include some elements of a replacement in an early reconciliation bill along with a partial repeal, rather than leaving it all for later.

Congressional Republicans have tried to ignore Trump’s inscrutable statements to reporters and Olympian potshots delivered through Twitter and, instead, just deal with his staff. It is a disposition they may need to hone in the coming years to contend with a kind of standing crisis in the executive that seems unlikely to abate. But they should also notice that in this instance, as will probably be the case in many others, Trump is actually steering them toward caution, despite his bombastic style. And warnings to be cautious should not simply be ignored.

For politicians, populism is after all frequently a form of timidity, a way of never straying far from the most intensely engaged voters. Such an attitude generally cannot lead the way, but it should influence it. That way of understanding the utility of Trump’s instincts — unmoored as they are from both political ideas in a traditional sense and many practical realities yet sensitive to certain crucial voter impulses — will not come easily to Republicans. But it could help them make the most of the circumstances in which they find themselves. Seeing Trump as a kind of empowered one-man focus group of cable-news viewers, for good and bad, could help all involved and might even mitigate some of the dangerous dysfunction of this period just a little.

For now, Republican leaders have responded to Trump’s statements and the urgings of his staff by suggesting that they might include some elements of a replacement in the early reconciliation bill, and by stressing that the two parts will take effect at the same time even if they are legislated separately. At a CNN town hall on January 12, for instance, House Speaker Paul Ryan said, “We want to do this at the same time, and in some cases in the same bill.” The same day, Senate Finance Committee chairman Orrin Hatch said in a statement, “We should definitely work on making the largest possible down payment on the Obamacare replacement with the budget reconciliation bill.”

It remains to be seen — and to be decided — just what this down payment could consist of. Members have talked about some loosening of the rules governing Health Savings Accounts, and some measures to keep insurers from bolting the exchanges during a transition, and returning some regulatory power to the states. But they may be open to considering whether more ambitious steps toward a conservative health reform could make it into an early reconciliation.

Beyond this adjustment in response to Trump’s remarks, congressional Republicans are still unsure how to work with the incoming administration. Trump’s style, some uncertainty about who is in charge on his staff, and a touch of resentment at his vague public criticism of their strategy has left many uneasy about committing to any path. They fear getting far down the road toward legislation only to have Trump hear it criticized on Morning Joe and then declare on Twitter that he’ll veto it.

But in the absence of a real alternative, the dual-reconciliation strategy remains the default. Both houses of Congress passed the preliminary budget resolutions needed to pave a path for that strategy last week. That doesn’t mean the votes will be there for an early partial-repeal bill. But it means that’s the plan.

Repeal Plus

Can the strategy work? It’s possible, but it would probably require the early reconciliation bill to involve a more robust down payment than is now in the works.

For a dual-reconciliation strategy to actually enable repeal and replacement, the first step would have to enable the ones to follow rather than undermine them. That means the early reconciliation bill would have to ensure that the individual insurance markets continue to function during the transition period to a post-Obamacare health-care system, and it would have to clearly lay the policy foundations for conservative reforms to follow. A carbon copy of the 2015 reconciliation bill would not achieve these goals.

What might it take to achieve them? There are many steps the new administration could take to smooth the transition. Trump’s health-care team has a good sense of what these will need to be, which they have further sharpened in detailed discussions with the major insurers since the election. But congressional Republicans might have to take some key steps legislatively — for instance, by appropriating funds for Obamacare’s cost-sharing reductions during the transition period. And they might be wise to have the early reconciliation delay the termination of the individual mandate until the new system takes effect, rather than ending the mandate immediately. This would also significantly improve the CBO score of the early reconciliation bill’s effect on the uninsured rate.

Meanwhile, to lay the groundwork for replace, Republicans could include in the early reconciliation bill a provision for one or two years of a new funding stream — whether it is available as a credit to individuals or as a per capita payment to states that develop new insurance rules — that would help people in the individual market access coverage. This would take effect after the termination of Obamacare’s subsidies, taxes, and mandates (and so two or three years after enactment of the early reconciliation bill), could be used for the purchase of any state-approved insurance coverage, and would provide a bridge to a new system without yet fully defining it.

This approach might also help Republicans root out Obamacare’s federal insurance regulations, which otherwise probably cannot be undone in reconciliation. By creating an alternative funding stream that applies to insurance purchased under alternative rules, Republicans could effectively repeal the heart of Obamacare in the very process of replacing it. They would render irrelevant the insurance regulations they cannot yet repeal. If reconciliation is the only vehicle available to Republican reformers, then repeal simply might not be possible without replace.

But piling all of this into a quick early reconciliation bill would be an enormous challenge — perhaps more than the congressional committees can handle on short order. Ultimately, therefore, this advice may add up to arguing that Republicans should put aside the dual-reconciliation approach rather than expand it. Separating much of a repeal of Obamacare from most of a replacement for it, as the dual-reconciliation strategy would do, risks preventing both a full repeal and a real replacement.

A Year of Action

As an early reconciliation bill is developed and scored, many congressional Republicans will probably come to recognize this danger and may find other reasons — both political and practical — to grow uneasy with the dual-reconciliation approach. That could drive them to push for a more robust down payment on replacement, or it might undermine the strategy and send Republicans searching for another.

This would not be the end of the world. The momentum argument for early action is a strong one, but it need not be decisive. Republicans should consider their steps carefully and avoid some obvious mistakes — including those the Democrats made in enacting Obamacare.

If the dual-reconciliation strategy falls through, the first fallback would need to involve including the key elements of both repeal and replace in the later, fuller reconciliation bill for the 2018 budget year. It would of course also be wise to pursue any elements of a replacement that might be achievable outside the reconciliation process, with enough Democratic support to reach 60 votes. But the Democrats have little incentive to cooperate with any Republican health reforms, so while Republicans should seek their support and be willing to make some real concessions for it, they should not expect to gain it at this point. 

The danger of a trial-and-error approach to finding a legislative strategy on health care is that it will lead to inaction and a fallback to the status quo. But rather unusually, total inaction is not an option in this case, because the status quo is not sustainable. The economics of the Obamacare exchange system is untenable in many parts of the country. And if Republicans can articulate their vision of health policy — including a competitive individual insurance market regulated by the states and an approach to Medicaid reform — they will find that they can readily justify reforms that provide greater stability, help reduce insurance costs, give people more options, and make coverage more attractive to the young and healthy. Whether alone or with some Democrats, they will have to act.

At this point, the intra-Republican health-care debate is chaotic and uneasy. There is no unanimity on substance and not much of a margin for internal dissent. And it is still unclear whether the new administration can help steer Congress toward any particular path. But major legislative efforts are always chaotic and uneasy. They proceed in fits and starts and frequently seem on the verge of collapse. The difference between success and failure often depends upon a combination of strategy, luck, and a willingness to take action. 

On health care, Republicans have long lacked the latter in particular. But in that respect, at least, this time could well be different. The GOP has been preparing for this opportunity for years, and it now faces both a party electorate and a health-care system that will not allow for endless indecision. It is too soon to know what the final product will look like, and whether a series of reconciliation bills or some uneasy combination of partisan and bipartisan measures will emerge. But it does seem likely that a year of intense action on health care is beginning.