Let’s Not Pretend That Obamacare Doesn’t Need To Be Fixed

This is a good time to take a clear-eyed look at Obamacare.

Trump and the House Republicans have taken the proposed Ryancare bill off the table, and it doesn’t look like they will take a second run at health care legislation anytime soon.

Republicans say that Obamacare is in a death spiral. Their plan is to let it implode, at which time Democrats will cry uncle and come crawling to Trump, begging him to work with them on a health care bill that replaces Obamacare with something better.

Actually, Trump’s plan may not be to simply let Obamacare implode. His plan may be to make sure that Obamacare implodes.

There are many ways that Trump and the congressional Republicans can sabotage Obamacare. They have already taken down ads urging people to enroll. And it’s unlikely that they will do anything to enforce the core mandates that make Obamacare work.

There is one specific action they could take right away. Trump could instruct the Attorney General to drop the Obama administration’s appeal of a federal District Court Judge’s ruling in a case called House v. Burwell.

Buried within the bombastic Republican rhetoric are some very legitimate critical observations about Obamacare.

In late 2014, House Republicans filed a lawsuit claiming that the Obama administration had been improperly funding certain Obamacare subsidies. Last May, U.S. District Court Judge Rosemary M. Collyer, a George W. Bush appointee, ruled in favor of the House Republicans. Judge Collyer found that while Congress had approved the subsidies, it had not appropriated the money for them. Since “Congress is the only source for such an appropriation, and no public money can be spent without one,” Judge Collyer ruled that payment of the subsidies was unconstitutional.

That decision is now on appeal to the D.C. Circuit Court of Appeals. The ruling has been stayed pending a decision on the appeal, so for now the money is still being paid out.

The Trump Department of Justice could deal a crippling, if not fatal, blow to Obamacare by withdrawing the Obama administration’s appeal of Judge Collyer’s decision. That would halt the Obamacare subsidies to millions of low-income Americans, force insurers to sell policies for a price lower than the cost of the coverage, and generally wreak havoc.

But let’s not kid ourselves into believing that Obamacare will be in trouble only if the Trump administration takes actions to sabotage it.

Just because Trump and other Republican partisans use overheated and misleading rhetoric to predict the imminent demise of Obamacare doesn’t mean that Obamacare doesn’t have real problems.

Buried within the bombastic Republican rhetoric are some very legitimate critical observations about Obamacare.

The stories about insurance companies dropping out of Obamacare pools, people having only one choice in significant portions of the country, and deductibles so high that people effectively have nothing but disaster insurance are true. It’s not everywhere, and it’s not as widespread as Republicans make it out to be, but it’s not made up either. It’s really happening.

And we know why it’s happening.

Why hasn’t Obamacare succeeded in bringing sufficient numbers of young, healthy people into the insurance pool?

Obamacare has not succeeded in bringing sufficient numbers of young, healthy people into the insurance pool to provide insurers with the incentive to offer affordable coverage to everybody else. In consequence, many insurers have bowed out altogether. Others have raised premiums and increased deductibles to levels that are unaffordable or unacceptable.

Why hasn’t Obamacare succeeded in bringing sufficient numbers of young, healthy people into the insurance pool?

The answer is that the Individual Mandate hasn’t done what it was designed to do. The Individual Mandate was the Obamacare provision that required most people to have health insurance, or pay a penalty. As I discussed in “Ryancare Sparks Debate Over Core Values,” the Mandate was designed specifically to bring millions of young, healthy people into the insurance pool, thereby spreading the risk and making coverage more affordable.

But the Individual Mandate hasn’t done that because it has no teeth. The fine for failing to enroll is much too low. If you can afford health insurance but choose not to buy it, the current penalty starts at $695 per year. The penalty is calculated on a formula based on income, but it is capped at $2085 per person.

So the Individual Mandate isn’t really a mandate at all. It’s just an option. And it’s a more expensive option than its alternative.

It doesn’t take much analysis to understand why so many young, healthy people have chosen the less expensive option. Paying a small penalty makes more sense to them than buying an expensive insurance policy. Remember, they are young and invulnerable. And maybe they are financially strapped. They may have a high enough income to meet the government’s definition of who can “afford” to buy coverage, but they feel strapped anyway.

And it’s not just that it costs less to pay the penalty than to buy the insurance.

Many don’t do either.

What could be done to ensure that Obamacare doesn’t go into a death spiral, especially with Trump… trying to kill it?

If you don’t pay the penalty, the government doesn’t come knocking on your door threatening to break your legs. The penalty doesn’t enforce itself. The Trump administration can undermine it simply by choosing not to enforce it.

So, what’s the way out of this? What could be done to ensure that Obamacare doesn’t go into a death spiral, especially with Trump and the Republicans trying to kill it?

Economist Robert Litan summarized four options for fixing Obamacare in an excellent Wall Street Journal article last year (“Obamacare’s Inherent Weakness, and Four Options for Health Care Moving Forward”).

Litan’s four options are:

1. “Assist low-income Americans in buying insurance with age-adjusted refundable tax credits, and allow insurance companies to design plans to meet the resulting demand;”
2. “Have the federal government expand risk adjustment subsidies to include insurers that take on unusually high-risk populations;”
3. “Require much higher penalties for those who choose not to buy subsidized insurance;” and
4. “Drop the Affordable Care Act and shift to a Medicare-for-all approach, or single-payer”

Options 1 and 2 can be summarized in two words: “More money.” But does anybody think that the Republican Congress is going to appropriate more money to strengthen Obamacare, when its obsessive focus has been to repeal it?

Option 3 also can be described in two words: “Fat chance.” Don’t hold your breath waiting for Republicans to require a higher tax on failure to comply with the Individual Mandate, given that they view the Mandate as a tyrannical affront to freedom.

Option 4 can be described in one word: “Hah!” On what planet do Congressional Republicans, who see Obamacare itself as socialism and want to replace it with a “free market” solution, get behind a single-payer, Medicare-like government program?

Discouraged yet?

Don’t look to me to get you out of this.

All that’s likely to happen with this President, and this Congress, is that at some later date they may be able to ram through another health care bill similar to, but slightly modified from the one that just failed.

If Trump leans toward the center to try to gain some moderate support, the new Trumpcare may be a little better than the old Ryancare, but it could still be a disaster. If he goes right to appease the Freedom Caucus, it could be even worse.

Maybe we’ll just limp along for the next four years with a somewhat broken Obamacare.

Or maybe Trump is right about one thing. Maybe it will take a crisis to bring Democrats and Republicans together to actually do something constructive.

Don’t hold your breath waiting for that to happen.

But do hold on to your health insurance for as long as you can.