By Avik Roy
Tuesday, March 28, 2017
House speaker Paul Ryan declared on Friday that
“Obamacare is the law of the land . . . for the foreseeable future.” I foresee
a different future, but only if conservatives learn the right lessons from the
demise of the American Health Care Act.
Republican and conservative leaders failed the cause of
free-market health reform in three principal ways. First, they failed to make a
moral case for replacing Obamacare, as opposed to purely repealing it. As a
result, they then failed to unite the hard-line and pragmatic wings of the GOP
around a coherent health-care-reform proposal. And due to the ambitions of the
100-day legislative agenda, and the peculiar legislative calendar associated
with the Senate’s reconciliation process, they chose not to invest the time in
getting health-care reform right.
The moral case for
replacement
Conservatives intuitively understand the moral case for
repealing Obamacare. The law significantly expands the role and scope of the
federal government in determining Americans’ personal health-care choices. Its
individual mandate is a constitutional injury. And its Rube Goldberg-like maze
of insurance regulations has made health insurance unaffordable for millions.
But when it came to replacing Obamacare, Republicans
usually presented the case in exclusively political terms: Replacement was
necessary because the alternative would be daily front-page stories of the
millions thrown off of their health-care plans by the GOP Congress.
Conservatives rarely attempted to make a moral
case for replacing Obamacare. Indeed, if you believe that the federal
government has no legitimate role in helping the uninsured afford health
coverage, your intuition is that there isn’t
a moral case for replacing Obamacare.
That intuition is understandable, but mistaken, because
it is in fact the federal government that has made health insurance so costly
through seven decades of unwise policies. Those policies include the exclusion
from taxation of employer-sponsored health insurance, an outgrowth of World War
II-era wage controls. They include the enactment of the Great Society
entitlements, Medicare and Medicaid, in 1965. They include the EMTALA law,
signed by President Reagan, that guaranteed free emergency-room coverage to
everyone, including the uninsured and illegal immigrants. And they include
Obamacare.
(To those who say that the employer tax exclusion is no
big deal because “it’s your money,” I say this: If the government only deigns
to give “your money” back to you when you elect to work in a W–2 job and hand a
fifth of your income over to health-insurance companies, your money isn’t
really being treated like it’s your money.)
This seven-decade pileup of federal intervention in the
health-care system is directly — and exclusively — responsible for the
astronomical costs of the present-day American health-care system. It is not
right, when confronted with such a state of affairs, to shrug our shoulders and
say “tough luck” to those who can’t afford insurance. Indeed, we have an
affirmative duty to reform federal policies so as to make health insurance once
again affordable for the working poor.
In America today, we spend hundreds of billions of
dollars a year subsidizing health coverage for wealthy Americans through the
employer tax exclusion — which disproportionately helps those in high tax
brackets — and Medicare, a universal entitlement under which taxpayers are
forced to fund generously subsidized government insurance for Warren Buffett,
Mitt Romney, and Hillary Clinton. Those federal policies have, for seven and
five decades respectively, divorced 200 million Americans from the cost and
value of the care they consume.
Large, incumbent companies are addicted to the employer
tax exclusion because it makes it harder for employees to leave them for
start-up competitors or freelance work.
Put simply, the U.S. health-care system does not reflect
the principles of a free market, but rather those of crony capitalism. It is a
system designed to benefit C-suite executives and multinational corporations at
the expense of hourly wage workers and mom-and-pop businesses.
To advocate for a fiscally fairer system — in which we
subsidize the wealthy far less while covering more of the uninsured, with less
total federal spending as a result — ought to be in the wheelhouse of a
conservative movement that aspires to support opportunity for all and
favoritism to none.
But unfortunately, it is often the case that the loudest
opponents of replacing Obamacare are the loudest defenders of the crony
capitalist status quo ante, fighting to preserve the health-care interests of
the Fortune 500, and expressing outrage over Obamacare’s federal mandates while
saying nary a peep about Medicare’s.
A freer, fairer health-care system — one that is more
affordable and more conservative — would move away from entitlements favoring
the wealthy, such as Medicare and the employer tax exclusion, and toward a
market-based safety net that helps blue-collar Americans get through rough
patches and back on their feet.
Toward a real
conservative health-policy consensus
Was the AHCA the ideal bill to achieve those goals? Not
really, though that was not entirely the fault of its drafters; President Trump
opposes Medicare reform, and even if he didn’t, the reconciliation process
would prohibit the consideration of Medicare-related legislation.
But there were other features of the AHCA that got less
attractive over time. A leaked draft version of the bill from February
contained an important and robust reform of the employer tax exclusion, one
that was eliminated by the time the official version of the AHCA came out in
March. The final bill pushed the implementation of Obamacare’s Cadillac Tax —
Democrats’ ham-handed attempt at reforming the exclusion — back from 2018 to
2026.
The AHCA’s original flat tax credit — a new, universal
entitlement — would have moved us farther away from a health-care system in
which federal involvement is limited to those who truly need the help. While
the final bill contained some reductions of that new tax credit for the highest
earners, its structure was not designed to benefit the working poor; indeed,
the AHCA would have made premiums unaffordable for millions of blue-collar
Americans.
That gets us to the AHCA’s failure to roll back
Obamacare’s insurance regulations. Prior to Obamacare, the federal government
had no involvement in regulating health insurance for those on the individual
market; i.e., those who buy insurance for themselves and don’t receive coverage
from their employers or the government. Those new federal regulations — along
with the individual mandate — are the two key ways in which Obamacare expanded
the involvement of the federal government in the health-care system.
The AHCA didn’t do enough to roll back Obamacare’s
insurance regulations, because the bill’s tax credits were designed to remain
constant regardless of the regulatory environment, thereby making regulatory
changes “incidental” to a reconciliation bill which must, by rule, solely
concern taxing and spending.
Despite these flaws, before President Trump and Speaker
Ryan issued their Friday ultimatum, the contours of a deal were emerging
between hard-line Republicans and their pragmatic counterparts. Under such a
deal, the AHCA’s tax credits would be restructured to use a means-tested
formula that better served the working poor, a key consideration for
pragmatists. That means-tested formula would, simultaneously, allow for the
majority of Obamacare’s insurance regulations to be repealed via
reconciliation.
The AHCA was a leadership-driven bill; its core policy
planks were derived from conversations that Ryan had with the chairmen of key
House health-care committees. There was never any consensus among rank-and-file
congressional Republicans that “A Better Way” was, in fact, the best way
forward.
Governing is hard, as the Speaker rightly noted on
Friday. But there remain reasons to be optimistic that the GOP’s hard-line and
pragmatic factions can forge a deal that would result in better policy than the
AHCA, a deal that makes health insurance more affordable for those who most
need it to be so.
Take the time to
get it right
The most galling aspect of the AHCA was the process
itself, in which House GOP leaders recklessly put haste and politics above good
policy. The official draft of the AHCA was posted on congressional websites on
the evening of March 6. On March 24 — 18 days later — leaders pulled the bill
after issuing a failed ultimatum to its opponents. Worse yet, had the bill
actually passed the House, Senate Majority Leader Mitch McConnell was prepared
to immediately take it to the Senate floor, without hearings and with limited
opportunity for constructive amendment.
This rush to bad judgment about a bill that would have
reshaped one-sixth of the economy was so terrible that it made Nancy Pelosi
look like the standard-bearer of good governance. President Obama was sworn
into office in January 2009. The Patient Protection and Affordable Care Act was
enacted in March 2010. The fact that Democrats spent 14 months debating health
care did not prevent them from passing two other transformative pieces of
legislation in the interim: the 2009 stimulus and the 2010 Dodd-Frank Act.
The contrast with the current GOP-controlled government
is stark. Over the past month, I heard from numerous members of Congress who
said that they couldn’t get consideration for their constructive amendments —
and worse yet, that they couldn’t even design
constructive amendments — because leadership’s fealty to the GOP’s legislative
calendar meant that Republicans only had time for one or two more shots at
getting the AHCA scored by the Congressional Budget Office.
It should go
without saying that a bill affecting 67 million Americans on Medicaid, 24
million more on the individual insurance market, and 26 million uninsured ought
to get more consideration than that. But apparently it doesn’t.
Republicans need to take the time to think health care
through, and get it right. Those in leadership who believe they’ve done enough
thinking are wrong. The American Health Care Act’s flat tax credits were poorly
conceived. Its ad hoc policy giveaways had little economic rationale. Replacing
Obamacare via reconciliation was a late change in strategy, and leadership’s
ever-changing assessment of what could pass Senate muster reflected that.
Perfection should never be expected of federal
legislation, but few believe that the AHCA was the best the GOP could do.
Indeed, Republicans retain an opportunity to do far better, if they start
afresh and take the time to craft health-care reform the right way.
The consequences of failure are too high to give up now.
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