Freedom Caucus tried its best, but Obamacare bill is still lousy
Doctor on a tablet

Freedom Caucus tried its best, but Obamacare bill is still lousy

Posted April 26, 2017 12:19 PM by Daniel Horowitz Doctor on a tablet
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What is a conservative member of Congress to do when his party makes it clear that, despite campaign promises, hell will freeze over before it fully or even significantly repeals Obamacare?

That is the quandary the leaders of the Freedom Caucus find themselves in today. Some members might decide it’s not worth giving their conference cover for a phony repeal bill that will never survive in the Senate, and may instead try to expose their duplicity and elect likeminded patriots. Others feel it’s better to make the best of a bad situation and try to secure a deal that might offer some outlet for some potential easing of pain in a handful of states. Moreover, they have the weight of the entire Republican Party, a president, and rich Republican voters blaming them for stalling “tax reform” all on their shoulders. It’s a tough decision, and I personally respect members who choose either path.

But for those supporting this latest Obamacare bill, let’s be clear to call it what it is: a potential 10-30% repeal rather than definitive full repeal. Unlike the original version of the bill, which manifestly had no chance of ever reducing premiums and creating more choice, this bill — in the estimation of its supporters — at least gives us some fighting chance. A hail mary. That is a fine pragmatic choice … so long as the American people don’t think that this is our vision for health care or what repeal of Obamacare looks like. To its supporters, this is the cost of trying to get the best they can for consumers when dealing with lying weasels in their conference. I don’t envy their position.

The details of the new amendment

First, it’s important to remember that the proposed amendment is not a replacement of the original bill, it is added to the original RINOcare bill. Therefore, it still maintains Medicaid expansion and the entire premise of subsidies for the middle class, which distort the market. In terms of Obamacare’s regulations, the bill still maintains every morsel of the ACA and its exchanges. What the amendment does is grant states the opportunity to request a waiver from HHS from some of the regulations — community rating and essential health benefits — if they register in the federal high risk pool program funded in the broader bill or implement their own risk pool to deal with the chronically ill.

To be clear, the regulations would not be statutorily repealed and would remain on the books, but HHS would have the option of granting reprieve in some form upon request.

Some supporters are messaging this bill as de facto full repeal of Obamacare for red states and a laudatory exercise in federalism. While probably the best we can get from an irremediably broken Republican Party, this bill falls far short for a number of political and policy reasons:

  1. It proves Speaker Paul Ryan, R-Wisc., was lying all along:
    The fact that Republicans are now discussing a waiver to relax the regulations (but not repeal them) demonstrates once again that the entire assertion that regulations cannot be repealed through reconciliation was a lie. So why not repeal them outright as originally (and incessantly) promised by congressional Republicans and President Trump during election campaigns?

    Moreover, Speaker Ryan previously said that, under current law, HHS Secretary Tom Price would have flexibility to waive the regulations. This offer is seemingly an admission of what we already knew — that, under current law, Price would not be able to waive most of the regulations. Now that we have caught them lying, it’s time for them to “get to yes” on our position, which is the GOP platform: full repeal and starting over.

  2. Not enough certainty to lower prices and heal the market:
    The key to any repeal bill is to actualize a dramatic drop in premiums and a surge in new insurers entering the market. A tenuous promise from HHS to offer some sort of relief is too fragile for the market to respond with lower prices. And it certainly won’t bring new insurers into the market (or for those that left the individual market to reenter).
    And even if these companies were certain that HHS Sec. Tom Price would waive the regulations for all or most of the states, that promise only lasts for the duration of this administration. Insurers won’t create a business model or start new companies based on a four-year promise that can (and most likely will) be reversed. Although the bill guarantees a default approval if HHS fails to act on the request within 60 days, there is no mechanism, from my reading of the text, preventing HHS from actively rejecting a waiver, something that would clearly be done by the next secretary of HHS, who will likely be a Democrat, thanks to the GOP’s broken promises.
  3. Tom Price doesn’t want to repeal most regulations:
    Let’s not forget: We already proved that the process excuses were just a façade to mask the reality that the GOP doesn’t want to repeal the regulations. Republicans refer to them as “vital patient protections,” and Tom Price himself has praised them. Does anyone really believe he will follow through with this waiver authority in a meaningful manner, enough to lower premiums?
  4. Guaranteed issue remains:
    It appears that the deal would only grant HHS waiver authority to relax community rating, but not guaranteed issue. This means that insurers could charge more to sicker customers but must still offer plans to anyone no matter the circumstances. While repeal of community rating would be a significant step in the right direction, guaranteed issue is still the 800-pound gorilla in the room.

    This is not only for sick people, but to prevent young people from gaming the system. Given that the individual mandate will be repealed and prices will still be relatively high, not enough young people will be deterred from gaming the system and make it even more insolvent. If anything, this bill allows even more flexibility to waive the penalty against those who don’t purchase insurance. That would be fine if not for the fact that most states will retain the regulations and keep premiums high in this de facto national market.

    This is another reason why you can’t half-ass regulations repeal. There are a number of other regulations that would remain in place and don’t seem to be under discussion. We need an understanding of both the economic cost of each regulation individually and how they affect one another in terms of market cause and effect. This cannot be done overnight without a careful study of the market effects for adverse selection.

    Also, once we have agreed to handle chronically ill consumers through taxpayer-funded high risk pools, why keep guaranteed issue?

  5. Most states will keep Obamacare, almost none will significantly repeal it:
    Here is why this is not a pro-federalism scheme: If Republicans actually kept their promise and fully repealed the regulations, the default position would be an unregulated market unless states actively pass their own forms of guaranteed issue and community rating. Conservatives could mobilize to prevent most states from passing such laws. However, if the default position is that the federal regulations remains in place unless governors request an HHS waiver — which would be the case under this latest proposal — most governors will never make that request. Keep in mind that the same way congressional Republicans fear the repeal of the coverage regulations, most GOP governors (much less Democrat ones) fear it as well and will never ask for a waiver. I would be surprised if a single governor asks for a full waiver and more than a handful of governors ask for a significant waiver. Most likely, the majority of governors, much like their friends in Congress, are too scared to even touch the regulations. The patchwork of a quilt this will set up will not be enough to heal the market.
  6. Will promote cronyism:
    Connected to the previous point, governors will only ask for tailor-made deals, not categorical repeal, which sets up the specter of political corruption whereby the HHS secretary can be bought off by different states, allowing politics instead of markets to drive a patchwork of regulatory labyrinths. Federal bureaucrats working with state bureaucrats and insurance lobbyists will drive the system instead of consumers and statutes passed by elected representatives in state legislatures. Again, this might be better than 100% statism and the original bill, but this is not how federalism works.
  7. Subsidies remain:
    All along, Republicans have refused to negotiate away Obamacare’s subsidies and Medicaid expansion. Many conservatives have said they would compromise and vote for these elements if — and only if — the regulations were completely repealed. But if they plan to half bake the regulatory repeal only through a tenuous waiver scheme, the retention of the subsidies will just further distort the market and make this entire scheme not worth the political fallout. Prices won’t come down enough because insurers will still compete for government health care between the narrow confines of subsidies, exchanges, and lobbying the HHS on specific regulations rather than compete for consumer demand unencumbered by any regulations or subsidies. And although the GOP bill has less costly subsidies, as I’ve noted before, they are politically unsustainable and will seamlessly flow into both age-rated and means-tested subsidies.
  8. It only gets worse in the Senate:
    Remember, even full repeal of the regulations (but retention of Medicaid expansion, subsidies, and funding high risk pools) was already a compromise. If the GOP adds to this a compromise of regulatory changes, this bill will only get watered down further to a complete excrement sandwich by liberal Republicans in the Senate. Why begin the process from such a “compromised” position? “Art of the Deal,” anyone?
  9. Sounds a lot like Cassidy-Collins, which is worse:
    The broad messaging of this plan, which is being mislabeled as choice and federalism, seamlessly flows into the preferred plan of the Senate moderates — “Cassidy-Collins” — which is much worse. Although the Cassidy-Collins plan doesn’t offer any options for waiving regulations, just the subsidies, it’s broad messaging of “letting states decide” will be empowered by this latest House proposal because we’ve already learned that individual details can’t get in the way of broad platitudes.
  10. Deceptions on high risk pools:
    Republicans are advertising an additional amendment to the bill that would supposedly fulfill the conservative request to deal with pre-existing conditions through a “Maine-style” high risk pool. The problem is that conservatives intended this to replace the regulations, not be built on top of them. Once we are spending $115 billion on high risk pools, keeping the subsides, and keeping the Medicaid expansion, why have the regulations in the first place? The proof is in the pudding. The draft text only appropriates $15 billion for the Maine-style invisible risk pools within the broader $100 billion pool. That is a tiny sum of money spread out over seven years and is clearly not designed as a replacement plan but as a talking point and another slush fund. Moreover, the draft text of the amendment doesn’t include the key details from the Maine model that ensured the program wouldn’t turn into another cost-inflating open-ended subsidy program. It merely outsources to the details … to HHS!

Bottom line: The entire premise of these negotiations is backwards. The real question should be how Trump and Ryan “get to yes” on the conservative plan, which was their own promise: full repeal and the starting over on high risk pools as the replacement and broader free market reforms. If they have no intention of fully repealing Obamacare, they must honestly go before the American people and say they have changed their mind and will spend the right amount of time to fully vet an alternative plan. To break from that pledge and pass some half-assed and insolvent patchwork, all the while demanding that members do it immediately without any policy analysis and scoring, is weapons-grade stupidity, a betrayal of their promise, and an unfair request of individual House members.

Nonetheless, the Freedom Caucus has done everything they can do with their limited platform to make this runaway train better. Now it’s time for Senate conservatives (the few who remain) to step up to the plate and restart the narrative from a position of strength. They should use the House bill as a floor, not a ceiling for repealing Obamacare. And that floor must spring forth an array of ideas to move health care away from government control instead of doubling down on it.

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.