This is the first part of a two-part article. The full version appears in the Spring 2017 issue of The American Prospect under the title: “The Republican Health-Care Unraveling: Resist Now, Rebound Later.” This is the “resist” part. Subscribe here to the magazine.
Imagine if Donald Trump had been a genuine populist and followed through on his repeated promises to provide health insurance to everybody and take on the pharmaceutical and insurance industries. Populists in other countries have done similar things, and Trump might have consolidated support by emulating them.
Of course, Trump’s promises about health care weren’t any more genuine than his promises about Trump University. But even if he had been in earnest, he would have still faced a problem. Unlike right-wing populists elsewhere, Trump did not come to power with a party of his own or well-developed policies. He came tethered to the congressional Republicans, entirely dependent on them to formulate and pass legislation. That dependence will likely complicate Trump’s ambitions in such areas as trade policy. But nothing so far has made more of a mockery of Trump’s populism than the health-care legislation introduced in early March by Paul Ryan and the House Republican leadership and fully backed by Trump.
The Ryan bill is abhorrent for many reasons. It calls for a massive tax cut for people with high incomes, while costing millions of other Americans—24 million by 2026, according to the Congressional Budget Office—their health coverage. It would turn Medicaid from a right of beneficiaries into a limited grant of funds to the states, and it pays for the tax cuts for the rich with cuts in health care for the poor. The bill’s reduced tax credits for insurance make no adjustment for low income, while some credits would go to people with incomes over $200,000.
But what is most amazing about the bill is how badly it treats constituencies and states that voted for Trump and the GOP. The changes it calls for in the individual insurance market would hammer older people (those between the ages of 50 and 64) and residents of red states and rural areas. Republicans appear to be so determined to cut taxes on top incomes that they are willing to sacrifice the interests not only of the poor—we knew that—but of many of their own voters. The same pattern is evident in the federal budget that Trump has proposed.
While the whole effort to “repeal and replace Obamacare” poses an enormous political risk for Republicans, it presents an equally significant political opportunity for liberal and progressive Democrats. I am not talking only about short-term resistance to the Republican rollback of the Affordable Care Act. Now that Republicans have shown their true hand on health care, they are creating new possibilities for long-term progressive organizing and policy alternatives.
The struggles to achieve health insurance for all in the United States have long suffered from one fundamental political handicap. The uninsured and underinsured (people enrolled in plans riddled with exclusions and limits) have been an inchoate population without any organization or voice of their own. The combination of measures America adopted in the mid-20th century produced a large, protected public: employees with good fringe benefits, seniors and the disabled with Medicare, veterans, and the low-income groups that qualified for Medicaid. The people who were left out—mainly low-wage workers, people in part-time work, the unemployed, and individuals with pre-existing conditions—did not share a common identity or cohere politically.
But the Republican effort to undo the ACA could provide the long-missing organizational impetus. It is one thing to go without health insurance; it is another thing to have that insurance threatened or taken away. It also matters who would be losing coverage. Overall, according to the CBO, the Ryan bill would raise the number of uninsured in 2026 to 52 million, or 19 percent of the nonelderly population (compared with a projected 10 percent under the ACA). But the uninsured under Ryan’s legislation would be concentrated among 50- to 64-year-olds. That’s primarily because the bill would allow insurers to charge 60-year-olds five times as much as 20-year-olds, instead of the 3-to-1 ratio in the ACA. (The adjustments for age in the bill’s tax credits do not come close to offsetting the higher premiums; a last-minute amendment, allowing increased tax deductions for medical expenses, provides little or no benefit to low-income people but may be changed in the Senate.) When twenty-somethings don’t have insurance, many give it little thought because they may not expect to need medical care. But older people aren’t so oblivious. Take away their health insurance, and they are going to be angry.
Besides pushing a lot of older people out of coverage, the Ryan bill is brutal on states with high health costs because it would provide a flat tax credit that doesn’t vary according to geography (unlike the ACA, which provides greater subsidies in high-cost states to make coverage affordable). The Ryan bill’s tax credits are substantially smaller on average than those in the ACA, but people in high-cost states would face especially sharp increases in premiums because of the way the bill structures its tax credits.
According to an analysis by the Center on Budget and Policy Priorities, Ryan’s bill would reduce premium tax credits by more than half in Alaska, North Carolina, Oklahoma, Alabama, Nebraska, Wyoming, West Virginia, Tennessee, Arizona, South Dakota, and Montana. The net cost of insurance would rise dramatically as a result. Notice something about those states? They elect a lot of Republicans—or at least they did.
Within states, rural areas generally have higher premiums than urban areas. So the flat tax credits provide less help in affording insurance there, too. The big Medicaid cuts that Republicans are calling for will also have a severe impact in rural areas. The resulting declines in coverage will force some rural hospitals and clinics to close, with spillover effects on middle-class people who depend on the same facilities and services.
Ryan and other House Republicans have touted one CBO finding: After initially increasing insurance premiums, their bill would reduce premiums after 2020 compared with the ACA. But that’s because their measure would force so many older people to drop coverage that the average age of the insured population would drop. It’s nothing to be proud of. Trump and the Republicans promised more coverage and lower costs when they replaced Obamacare. It is now transparently obvious that they can’t deliver on that promise and that they are willing to deny health insurance even to millions of people who voted for them.
Blocking Trump’s Chaos Option
If Trump and the Republican Congress cannot pass legislation this year, they do have a fallback option. They can claim that the ACA is collapsing and make sure that it does. Then they can return to health-care legislation later and say they have no choice except to repeal Obamacare. This is the option Trump at times has seemed to prefer. “Let it be a disaster, because we can blame that on the Dems,” he told the National Governors Association on February 27. “Let it implode, then let it implode in 2018 even worse. … Politically, I think it would be a great solution.”
When Trump talks about Obamacare imploding, he is talking not about the entire program (although he seems to think so), but rather one specific part: the insurance exchanges in the individual market. The danger he and other Republicans invoke is a “death spiral”—a situation where rising premiums drive the healthy out of the market, forcing premiums up and more healthy people out, until the market fails. The exchanges are nowhere near that point. Although rates in the exchanges did rise sharply in 2016, they rose to the level originally projected by the CBO (premiums had come in lower than expected earlier). Moreover, the vast majority of individuals who buy insurance in the exchanges receive subsidies that cap the cost of their premiums; many of them also receive subsidies covering a share of deductibles and co-pays. Consequently, as the CBO and other studies have found, the exchanges have some protection against a death spiral—as long as the subsidies are fully funded and the individual mandate is enforced.
But the insurance exchanges could soon face a dire crisis because the Trump administration has created uncertainty for both insurers and enrollees about the survival of the program and enforcement of the mandate. If the administration doesn’t enforce the mandate—or if Congress eliminates the penalty for failing to insure, as the House bill would do for this year—the incentive for healthy people to pay for coverage will fall, threatening the viability of the market.
Some damage has already been done. As soon as the Trump administration came into office, it canceled outreach efforts in the final phase of the open-enrollment period for 2017. Since individuals who enroll early tend to be those who know they will have high medical costs, while late enrollees are a healthier group, the cutoff of late outreach not only reduced total enrollment but also led to a higher-cost pool. The Trump administration is also proposing to shorten the open-enrollment period for 2018.
Other measures the administration favors could encourage insurers to stay in the market, albeit with mixed effects on enrollees. The administration wants to tighten up special enrollment outside of the open-enrollment period, which may well be justified; it also proposes requiring people to pay any unpaid premiums before enrolling for the next year. In a step that would help keep premiums down, the administration has encouraged states to seek waivers to develop reinsurance programs for the individual market, as Alaska has already done. (Reinsurance spreads the cost of high-cost cases across the entire market.) Alaskans buying insurance individually faced a possible 40 percent rate increase because of 37 very high-cost cases, accounting for one-quarter of claims. The reinsurance measure adopted by the state, using funds from an existing premium tax, kept premium increases by Premera Blue Cross, the sole insurer in Alaska’s exchange, to 9.8 percent.
Insurance companies need to indicate by June whether they will offer coverage in the exchanges for 2018. Uncertainty about the rules is a recipe for chaos. If they believe the mandate will not be enforced, they are likely to jack up premiums or withdraw entirely from the market. About a third of the exchanges, mainly in rural areas, have only one carrier offering coverage this year; additional withdrawals for 2018 could create just the kind of crisis that Trump and the Republicans need as a pretext to undo the ACA.
This problem has a ready solution. If Republicans in Congress do not replace the ACA for the coming year, the Trump administration needs to make clear that it will enforce the law as it stands for 2018 and fully fund the program (including cost-sharing subsidies). Moreover, Republicans cannot plead there is no way to strengthen the individual market. The Ryan bill contains a Patient and State Stability Fund of $100 billion over ten years that the CBO believes states would use largely to cover high-cost enrollees in the individual market and thereby prevent a death spiral. In the absence of comprehensive new legislation, Congress should provide those funds in a separate measure to stabilize the market for 2018. The Republicans cannot blame a collapse on Democrats when they have it in their power to maintain coverage for the millions of people who depend on the market now.
Tomorrow: The Next Progressive Health Agenda