November 15, 2016

Lets Get Real About Repealing And Replacing Obamacare Shall We

By Melvin J. Howard

It is not clear President Trump, and Republican majorities in the House and Senate, whether full repeal is even possible and what replacement might look like. There are several reasons for this. First, Trump would face political and financial fall-out from a repeal. Second, even with Republican majorities now in the House and Senate, it would be hard to repeal the entire bill. It includes not only the establishment of the exchanges, in which people buy insurance, but also cost-saving and quality-improvement measures. Many health care professionals, systems, and tax payers welcomed these. In addition, repealing and replacing the Affordable Care Act with something entirely different without severely reducing access to care may be impossible. That’s because it’s the only system devised so far that uses the private market to increase coverage and that stops short of single payer government-run programs. The health reform framework that became the Affordable Care Act or Obamacare has a long history and many champions from all political philosophies. While the ACA will long be associated with President Obama and is most often called Obamacare, many other politicians and policy makers had been working on similar plans for years.

In the 1992 presidential election campaign, both incumbent George H. W. Bush and candidate Bill Clinton had health care reform plans. Both plans were structured similarly to the Affordable Care Act. They both created insurance purchasing pools (similar to the ACA marketplaces), eliminated pre-existing exclusion clauses, and had individual mandates and subsidies for low-income families. After the election, when it became apparent that the Clinton administration plan would be different from those plans, a group of Republican senators led by Sen. John Chafee (R-R.I.) developed a proposal that had all of these attributes.

Then-governor Mitt Romney of Massachusetts asked his staff to find ways to reduce the burden of the uninsured on the Commonwealth of Massachusetts. Searching for a market-based approach, they found their options narrow to a plan similar to Sen. Chafee’s. At the time the individual mandate penalty was described not as a tax, but as a measure of personal responsibility for paying for one’s own health care.

The Massachusetts plan became the model for the Affordable Care Act. The reason all of these proposals resemble each other and the Affordable Care Act is that there are limited options for creating a sustainable private insurance market that allows individuals access to affordable health insurance. Trump may be able to repeal the law and return to health care coverage as we knew it in 2010. Consequences, however, will be a sudden drop in access to care not just for those who lose coverage, but for many others who will lose access to care because their local hospital closes, or nearest doctor moves out of areas with high percentages of uninsured. Replacement requires something that looks like the ACA. The individual mandate of course is a little more complicated. At one point, it was seen along most of the political spectrum as a promising way to reduce the number of uninsured people in the United States; requiring healthy people to sign up for coverage was supposed to ensure that premiums were affordable. The idea was originally floated by the conservative think tank the Heritage Foundation and was first brought to Congress by Republicans in the 1990s. The mandate has since become one of the most despised aspects of the law.

But there isn’t a clear policy proposal with bipartisan support for how to get more healthy people into the insurance market in the absence of an individual mandate and insurance subsidies. Trump has proposed creating high-risk pool insurance programs, essentially plans that people with pre-existing conditions can buy into. These types of plans existed in many states before the passage of the ACA and by design are not self-sustaining because members use significantly more health care than they can afford. That means they require significant federal dollars ($25 billion in the case of a plan from Ryan), which is one of the many reasons high-risk pools are divisive among Republican lawmakers. I’ve written in the past that I was skeptical of whether it was feasible to just repeal the Affordable Care Act by  illustrating the forgotten man. So let’s just take a look at what would happen without some key important health care mandates from congress in the form of the forgotten man once again. When A takes from B to give to C, the world is well aware of the benevolence of A and of the plight of C; but B is the forgotten man.

The relevant point for us is not that B is being treated unfairly; the point is that B isn't going to stand still for this. He'll look for ways to prevent A from stealing from him. He may begin avoiding or evading taxes; he may earn less so that less will be taken from him; he may move out of A's jurisdiction; or he may start pretending to be C.

The end result is a society in which everyone wants to be C (or A), and no one wants to be B. But B was the person who originally financed A's generosity; and without him, there will be little to redistribute. In addition, if C doesn’t have to pay for his own needs, it's inevitable that his need will grow larger. Society develops that it has boundless needs and no one to pay for them. We can see how this happens if, we look at one sample of the A-B-C process in the health care reform debate. Health care advocates believe, for example, that people have a "right" to free medical care. Since no "rights" can be asserted against nature, the advocate must not be thinking of a right to live without disease. They are, in fact, thinking that no citizen should have to pay for medical treatment that it should be free.

But since nature doesn't provide medical care, it must come from other human beings. So one person's right to medical care is a claim upon some other person's time, energy, money, or knowledge. The man on whom this claim will be made is B, the forgotten man. Now the politician offers free medical care, but he never says, "You will have free medical care because we are going to force B to pay for it. The plan becomes unrealistic from the start in that it assumes that B will submissively pay the bill without looking for loopholes. It's unrealistic, also, to believe that the costs of the program won't change when the economics of it change.

The politician sees that people presently spend $100 billion per year on medical care. So he plans to collect $100 billion on new taxes or ( medical insurance "contributions"), and use the money to pay for doctors, nurses, medicine, X ray etc. He believes that this will make medical care free. But once the program is underway, the economics change drastically the 100 billion was what people had spent yearly when the money came from their own resources. Now that medical care is free their medical needs suddenly in­crease. Why forgo that operation, checkup, or treatment that might have some value.

Or if your lonely, why not go talk to your doctor? Or if you need a place to stay check into the hospital; they'll find something wrong with you many people will see that this is wasteful-for the nation. But for each individual, the consideration is always that it costs zero dollars to obtain something that might prove to be valuable so free medical care turns out to cost far more than $100 billion per year. And after a while B decides that he’s tired of paying for what he deems these loafers and he checks into the hospital, too from stress. Or at least he stops working so hard. His income is taxed to pay for free medical care and for all the other government programs. And so, leisure (unpaid and therefore untaxed) seems more attractive to him. He earns less; and he saves less, too, because he'd just have to pay tax on the interest his savings earn. And because he and all the other Bs are earning less taxable income, the politicians must raise tax rates even higher than they planned—to collect the money they need for free medical care.

Because even the government's resources are limited (it can't tax what doesn't exist), it is forced eventually to do something to limit the costs of the program. Naturally it won't end the program that’s political Armageddon; it will declare that a crisis exists and impose rationing. So when the cost of free medical care has reached double or triple or quadruple the original estimate of $100 billion, the government announces that it will decide who gets to see the doctor first. You will have to go without—unless you have the right disease or fill out the right form or know the right people.

And most people will have no choice but to wait in line for free medical care. The billions spent on the program will have bid up the price of medical services; only the very wealthy (of whom there are fewer) will be able to afford to hire a doctor on their own. Just as promised, medical care is free; it just isn't available. We would be sobered by the medical situation in Canada and some European countries. Government medical and "Social Security" pro­grams are far advanced there, compared to the U.S. The shortage of medical care is chronic because doctors emigrate to the U.S. and other countries where there are greater op­portunities to earn more money. Waiting lists sometimes are years long and Mr. B. has long since disappeared.

I've used this as an example of the way the health crises develops. The crisis is always a conflict between the government's goals and the actions of individuals. Many in­dividuals will sympathize with the government's position, but none will sacrifice his personal interest.

It isn't a matter of selfishness vs. unselfishness. Every indi­vidual acts in his own self-interest; that's a principle of hu­man action. The conflict is between the individual who selfishly pursues what he believes is best for himself and the politician who selfishly wants the individual to act under his direction. Until the ACA is actually repealed, all its rules and benefits are still in place. There’s an open enrollment period right now. Despite several large insurers scaling back participation in the exchange market in 2017, many health care consultants believe major payers will return next year with recalibrated plans.

There is a feeling of stability within the individual market despite the turmoil of exchange exits by large insurers like Humana, Aetna, and UnitedHealth. Payers are already developing slimmed down, technologically advanced “next-generation plans” with price points that are more suitable for the individual market. Although many have focused on the impact of insurers exiting state exchanges and subsequent concerns over reduced competition, some payers have quietly found success within the ACA marketplace by deploying narrow or tiered networks. Centers for Medicare & Medicaid Services has said the evolving regulatory landscape offers insurers an opportunity for experimentation and innovation.