The sounds of discontent continue to ring in Washington. Forget the continuing clamor of a dying and desperate media to loudly disclaim anything and everything Trump. This time, the whole Republican Establishment is in the hot seat. After over seven years of complaining and nine attempts at repeal, the right has suddenly forwarded a new “health care solution” to replace Obamacare. But is it a legitimate solution? Not at first glance. And the right has now put their foreseeable future into the hands of one piece of legislation. After much negotiation, the first attempt at replacing the Affordable Care Act has failed. Acolytes applaud, citing a more thorough and transparent process to follow. Critics continue to preach doom and gloom, citing any Republican solution as the death of healthcare in America.
While Paul Ryan and others ramp up the rhetoric, a close examination of what is being put forward reveals that the Republican solution does not reflect a careful development process, nor does it meet the “repeal and replace” mandate that voters expected, at least initially. Thus the withdrawing of the bill portends a more cooperative re-examination. According to most knowledgeable analysts, the new bill still contained the subsidies, mandates, and expansion of Medicare that contributed to the ballooning costs of the original Affordable Care Act under Obama. Critics labeled the bill “Obamacare light”. And those critics would be mostly correct. To understand the current hassles in fixing this problem, a bit of history is in order. That history should be examined through four concepts: wealth redistribution, entitlements, government control and protectionism.
The first and perhaps most relevant concept is wealth redistribution. And that, in fact, was one of the pillars of the original Affordable Care Act (one of the great misnomers of all time). It was not so much about healthcare as it was the most massive wealth redistribution scheme in American history. Any time the government forces a citizen to purchase anything that involves paying a premium that can be used to subsidize someone else (the constitutionality of which is highly suspect) it is a redistribution of personal assets. The fact that the challenges to the original Act went to the Supreme Court and Obama’s advocates won their case by openly declaring the law an Act of taxation, says all we need to know.
The second, interrelated concept is that of entitlement. Once the premiums collected under the Affordable Care Act were being channeled into subsidies for lesser economic strata, an entitlement was created. While specific mandates for coverage were outlined in the Act, such as maternity coverage for sixty-year-old men and elimination of pre-existing conditions as a barrier of entry, premiums would be set to subsidize an entire group for all available services, needed or not, and not the requirements of specific individuals or sub-groups. The past menus of optional preventive coverage and/or catastrophic stop-loss measures were absorbed into a government mandated “one size fits all” risk pool. This creates an unwanted expense for one client with good health while providing a comparative windfall for another with failing health.
The bottom line for all of this is government control. The original law set up government mandates and empowered the IRS, among other bureaucracies, to enforce the mandates. Controlling healthcare is a solid tenet of socialist control. Do not expect either party to simply relinquish such control without a battle. Just because a member of Congress has an R in front of their name is no guarantee that they subscribe to open market individualism when it comes to healthcare. This sector of the economy is too large to expect bureaucrats to simply let go. This legislation is a true litmus test for Republicans. Are they moving left like the Democrats? Will they actually be able to craft a free market mandate and unwind the tentacles of unnecessary government oversight in our healthcare system?
The final leg of this fiasco is the protectionist stance that the government takes towards the insurance companies. A perusal of history will reveal that Obama worked closely with major insurers to craft his original legislation. It is a collusion of mutual back scratching. The government gets wider and more exclusive control; the insurers get larger pools with forced participation, particularly among the younger (and healthier) demographic. Keep in mind that insurance companies are essentially just money clearing houses. They collect premiums and then distribute benefits according to rigid plan guidelines. The more they collect and the less they distribute the more profitable they are. Obamacare only tightened large insurers’ monopolistic grip on their markets and increased their gross numbers. The new bill actually increases risk pool subsidies to protect insurers, further strengthening the ties between government and insurers.
But somewhere in the expected execution, something went wrong. Insurers discovered the original actuarial assumptions were not working to their benefit. Young people were not signing up to subsidize older and less healthy participants. The fiction Obama peddled about savings to families, keeping doctors and so on quickly morphed into a distressed and failing system. And it is a fair argument to say that the system was indeed designed to fail from the outset. With what goal in mind? To require an eventual revision into a single payer system completely under government control, also known as socialized medicine. Had Hillary Clinton been elected the proposal of such legislation was guaranteed as the system is already collapsing upon itself.
But now Donald Trump is President. And he made some bold campaign promises and is intent on keeping them. And it seems he caught the Republicans with their pants down. The very fact there is not a well thought-out, well-crafted replacement at their fingertips is most telling. Perhaps those nine attempts at repeal were mere window dressing. Pure political theater. It begs the question: Do Republicans really want repeal? Or do they want their version of control over one-sixth of the economy? Either way, the Republicans are now on the spot to create a fair, open market system that will not fail. The first attempt has not impressed anyone apparently.
HHS Secretary Price claims the bill is just a starting point, which is hopefully more fact than rhetoric. But one thing is clear. If the Republicans do not get this right, and by right meaning taking the shackles off of insurance regulation and unleashing free market solutions with minimal government interference, the Republicans will now be blamed for future health care failures. A solution that resembles Obamacare light will only fail at a reduced pace from current Obamacare trajectories. The Republicans have one chance to get this right. They had better tighten up their thinking caps, for once. There may not be a second chance. They are now at strike one and counting.