Piecemeal Repeal Is The Least Bad Obamacare Option


The demise of the Senate’s “skinny” repeal of Obamacare may be a blessing in disguise. Nobody should have mistaken that measure for genuine repeal of the Affordable Care Act — much less for the free-market healthcare reform that most of the GOP has long clamored for.

Yet the collapse of the Senate’s repeal-and-replace effort does not mean that Congress should give up on health reform. Health costs are spiraling upward because of Obamacare. The American people need relief.

Congress must give it to them, even if it has to do so in piecemeal fashion. Together with some strategic executive actions from the Trump administration, a more gradual plan of attack would achieve far more than “skinny” repeal could have hoped to.

Lawmakers can start by refusing to fund the law’s cost-sharing reduction subsidies. These subsidies — roughly $9 billion this year — reimbursed insurers for covering certain out-of-pocket costs for exchange customers with

incomes between 138 percent and 250 percent of the poverty level. For a family of four, that’s between $33,948 and $61,500.

They’re little more than an insurance-industry bailout. More important, they’re unconstitutional. Congress never appropriated the money to fund these subsidies. Yet the Obama administration — and now the Trump administration — has been funneling them to insurers since 2014.

Congress should insist that the president cease any further cost-sharing reduction payments — a position to which Trump is clearly sympathetic.

Insurers have said that ending these subsidies will send premiums skyward. But as healthcare analyst Chris Jacobs argued earlier this year, it’s business malpractice for insurers to count on receiving federal funding in violation of the Constitution. Why should taxpayers have to be victims of extortion by insurers?

The effort to defund Obamacare needn’t stop there. Republicans should also move to end the law’s ill-conceived taxes, which have hiked the cost of health care for consumers.

These include the 2.3 percent excise tax on medical devices — a levy that lawmakers on both sides of the aisle are on record opposing, and with good reason. Such a tax is destined to suppress job creation and innovation — while also raising prices — in a sector that is integral to our healthcare system.

Lawmakers could next target Obamacare’s health insurance tax, which is expected to cost insurers more than $142 billion between 2016 and 2025. Of course, consumers ultimately pay the tax in the form of higher premiums. Former Congressional Budget Office head Douglas Holtz-Eakin estimated that the tax would force a typical family to pay $5,000 more for insurance over a decade.

Yet another major Obamacare revenue source — the tax on branded prescription drugs — also deserves to go. This provision raises $27 billion over ten years through a fee imposed on drug manufacturers. And like the medical device and health insurance taxes, it’s all but guaranteed to raise the cost of critical medicines.

Rolling back Obamacare’s tax provisions in this way — and choking off the law’s funding — amounts to a “death by a thousand cuts” approach to repeal. That’s not ideal. But attacking the law’s taxes may be the only thing that can unify the entire Republican caucus.

The Trump administration could complement Congress’s efforts by, for instance, strictly enforcing the open-enrollment rules on Obamacare’s exchanges. This would prevent patients from gaming the system by signing up for coverage only when they get sick. This phenomenon is among the reasons why premiums have surged — the people in the insurance pool are disproportionately those who really need coverage because they’re facing high health costs.

The executive branch could also allow states to relax essential health benefit and actuarial value requirements prescribed by Obamacare. If insurers were allowed to offer less comprehensive plans, then premiums would come down. Some insurers might even think about re-entering markets they’ve previously exited.

The notion that Obamacare is somehow salvageable is simply unrealistic. One way or another, the law will implode. When that happens, Democrats will no doubt amplify their cries for a single-payer system to “fix” the insurance market.

That’s why Republicans can’t simply ignore health care. They can either take baby steps toward market-based reform — or by their inaction pave the way for a complete government takeover of the American healthcare system.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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