I wrote in Issue 39 of the Outsider Perspective about the new Obamacare replacement plan, the American Health Care Plan (AHCA). Due to time and space constraints, I wasn’t able to dig into the broader philosophies animating the bill or the political tactics involved. I do that here and explore the dynamics of those two areas on the current health care debate. The situation in Congress is far more fraught and nuanced than is being sold by pundits or the media.
There are two animating forces at play in the AHCA: 1) A binary choice emerging in Congress, and 2) A “Rubicon” moment for Republicans and conservatives on government expansionism in health care. The tension between these two forces explains the strife we see in media.
The Binary Choice
Are you ready for binary choice 2.0?
In the 2016 election, it was Clinton vs. Trump. That was your choice: “A” or “B,” no “C.” The second binary choice is about to be voted on by Congress. It’s going to be the AHCA vs. Obamacare. I’m not the one saying this. Paul Ryan (representing Congress), Kellyanne Conway (representing the White House), and Fox News and the WSJ (representing the top of conservative media) are pushing the binary choice.
House and Senate Republicans get the following decision, a vote AGAINST the AHCA means:
- A vote FOR Obamacare.
- A vote FOR the Individual Mandate.
- A vote FOR the Employer Mandate.
- A vote FOR higher premiums (average of 22% in 2017 and rising).
- A vote FOR higher Obamacare taxes.
- A vote FOR failing exchanges.
- A vote FOR the Obamacare death spiral.
- A vote AGAINST achieving other major Congressional initiatives (tax, regulation, infrastructure, and other reforms).
Voting against the AHCA means telling members of Congress to go back to their constituents and say: I own Obamacare. I own all the consequences of Obamacare. I own all the mandates and taxes of Obamacare. Obamacare is no longer a Democratic program. It’s a Republican program. The GOP couldn’t compromise and pass reforms, and now the original Obamacare is the only option left. Despite those constituents voting in Republicans for the sole purpose of repealing Obamacare.
That is, to put it mildly, a suicide mission. Senators not up for reelection won’t feel the heat of this choice. But every other member of Congress WILL feel the heat. Every member of the House, Senators up for re-election in 2018 and 2020, and state Governors responsible for navigating the healthcare law will feel the heat. It’s now or never for those politicians. There is no waiting or delaying for them.
2017 is the make or break year for the GOP on Obamacare. Republicans won’t touch healthcare reform in 2018, an election year. Amending healthcare in 2019 depends on seat gains made in 2018. 2020 is off the table due to the Presidential election. So for all the conservatives scrambling to denounce the bill and telling Congress to vote against it, you need to return to political reality. That actuality says this: Republicans do not have a filibuster-proof majority in the Senate. Any repeal/replace/reform plan for Obamacare MUST be able to make it through the Reconciliation Process in 2017. Republicans have one chance.
President Trump won’t save the GOP from this decision. Trump wants three things: the expansion of Medicare and the end of the mandate Obamacare taxes. He gets all 3 in this bill and can sell it to his voters. Trump will say he is saving people from Obamacare, mandates, and Medicare collapse. If the AHCA is defeated, Trump can pivot and blame Paul Ryan and the GOP for not protecting his supporters.
The burden falls on Republicans. If you think they’ll vote for a binary choice that keeps Obamacare intact, you’re not realistic. Republicans have to show something for their years of promises on Obamacare. Leaving Obamacare fully intact is not an option. The 2009 townhalls are not a distant memory. AHCA will pass in some form or another.
The Rubicon Moment
In 49 BC, Julius Caesar stood at the Rubicon river contemplating whether or not to cross. Law at the time prevented a military commander like Caesar from leading an army across the Rubicon into Rome. To break that law was to announce civil war and end the Republic. While considering his choices, he allegedly said, “Alea iacta est,” “the die is cast.” He had already decided. His crossing sparked the Roman civil war and ended with Caesar enthroned as Emporer of Rome.
Due to the political realities of the binary choice, I fear we’re at a Rubicon moment for Republicans and Conservatives. Is this the point when Republicans and conservatives cede the ground that universal healthcare is inevitable? The binary choice says defeating the AHCA leads to a further entrenched Obamacare. But the danger of passing the AHCA is probably sending us towards universal Medicare.
I fear Republicans sit at this crossroads. One one of the proposals in the AHCA expands Medicare beyond levels seen even under Obamacare. As Avik Roy noted in Forbes:
As I wrote last month, the AHCA creates a steep benefit cliff between those on Medicaid (subsidizing approximately $6,000 per patient per year), and those just above the poverty line who will get tax credits of about $3,000. People just below poverty will be strongly disincentivized to make more money, effectively trapping them in poverty.
Unlike in the February 10 leaked draft, in which the tax credits were available to everyone regardless of income, the AHCA begins to phase them out for those earning $75,000 a year, or $150,000 for joint filers. For every $1,000 in earnings above those thresholds, the value of the credit phases down by $100. Hence, for a single 40-something, the credit would phase out at $105,000 in income.
Amazingly, these thresholds are far more generous than Obamacare’s. Obamacare’s tax credits phase out at 400 percent of the Federal Poverty Level, or $48,240 in 2017. The AHCA’s tax credits would phase out somewhere above 850 percent of FPL.
As I note in Transcending Obamacare, the means-tested tax credit should actually go in the other direction, phasing out somewhere around 300 percent of FPL. According to the Congressional Budget Office, the vast majority of people making more than 300 percent of FPL have access to employer-sponsored coverage and don’t need an individual-market tax credit.
Roy goes on to note the impact of expanded tax credits and Medicaid: Employers will be incentivized to drop employer coverage. Employees will get better health insurance by taking on the tax credits. This plan would lead companies to encourage employees to rely upon credits instead of employer-based-coverage. His research has shown people don’t need the credits at around 300% of the poverty line because most people above that line have employer coverage. Obamacare’s cutoff was 400%. The Republican AHCA plan: 850%. Republicans are exploding the size of government subsidies along with Medicare (points echoed by Pradheep Shanker at Decision Desk HQ).
Unlike Republicans selling the bill, I’m not optimistic the subsidies or Medicare expansion will shrink over time as proposed. The Ratchet Effect Theory of government postulates that once government power or grants expand, they only ratchet up. They never ratchet back down. There are a variety of reasons for why this happens, but the central idea is: once people get power, they are reticent to let it go. The same applies to subsidies. There is always some public interest group that relies on that gift. People don’t like giving up free money or power once they have it.
Until now, conservatism has opposed an expansionist federal government. The primary objection during the Obamacare debate was that it was a gross overreach of government power. But with the AHCA, Republican reforms are creating that very expansion. Further, they are ceding Democrats have won the central philosophical argument, as Philip Klein notes in the Washington Examiner (emphasis mine):
Whatever the argument is as to whether voting for the Republican plan is better than doing nothing, objectively speaking, it is not a free market plan. It still rests on the premise that the federal government should play a significant role in subsidizing and regulating insurance markets in an attempt to ensure broad coverage. Thus, despite the political failures that resulted from Obamacare, the clunky legislation still moved the ball ideologically to the left. The argument isn’t over whether the government should require all insurers to cover people with pre-existing conditions. The argument is about whether the government should pay for it by forcing healthy people to purchase insurance under the threat of a penalty, as Obamacare does, or by threatening anybody who doesn’t maintain continuous coverage with a 30 percent late fee, as the GOP prefers. Liberals, in other words, have won the central philosophical argument, and Republicans are reduced to fighting over the mechanics.
We aren’t arguing, with the AHCA, over what the governing worldview should be in healthcare. We’re arguing over regulatory mechanisms created by a progressive philosophy. Obamacare is a fundamentally liberal creation steeped in a progressive ideology that says universal healthcare is inevitable. With the AHCA, Republicans are tinkering with the mechanism without changing the governing philosophy. And by ceding that philosophical ground to the Democrats, Republicans appear to be signaling a single-payer system is inevitable.
Conservatives, then, have moved from a free market approach to healthcare, as espoused from 2009 on, to a Europeanized conservative worldview that focuses on reforming mechanisms instead of changing the underlying governing philosophy. Medicare and subsidy expansion is a bell that cannot be un-rung. If conservatism is only arguing about who ratchets power and subsidies up more efficiently, they’ve abandoned any claim to a limited government philosophy.
As tax credits and government programs expand to people who, frankly, don’t need it, we’re allowing government expansion to creep into all parts of society. In many respects, this is similar to how Social Security grew, over time, to encompass more and more Americans. FDR’s initial plan was simply to provide assistance to widows and impoverished elderly. The first number of people who received benefits was a little over 53,000 people. Now, well over sixty million people receive Social Security benefits. 64% of elderly beneficiaries receive at least half of their income from Social Security. The AHCA grows Medicare in a similar fashion to Social Security.
Instead of slowing the growth of Medicare and getting people into a free market alternative, the AHCA accelerates growth, pointing the country towards a “Medicare for all” future (which was a plank of Bernie Sanders campaign[!!!]). Instead of moving away from single-payer, it’s easy to imagine a situation where the Trump and Republicans say: everyone either has Medicare or a private plan, and we’ll just try to incentivize the private plans over Medicare (this never works).
All of this because Republicans have accepted the central idea Democrats have pushed for decades: Access to health insurance equals access to healthcare. Instead of focusing on quality of care and reducing costs.
Here we sit at the Rubicon moment: Does the GOP move down a path towards an expanded Medicare for all approach? I have no faith that the expansion will be allowed to decrease at the proposed timeline. Subsidies are nearly difficult to ratchet down. Has the GOP resigned itself to a single-payer system? If so, it’s an incredible fall from the “Complete REPEAL” crowd. It’s a betrayal of conservative political philosophy, and of all conservative activists who elected Republicans from 2010-2016 in an attempt to stop the Obamacare.
Why we have these consequences
Taking everything above into account, I don’t believe this is a full-scale betrayal by Republicans. But there are troubling signs with the AHCA. As I discussed in the Outsider Perspective, Republicans have limited options. They’re constrained by two things: 1) The small majorities they have in the House and Senate, and 2) the Budget Reconciliation Process. Each of these restraints feeds off the other and amplifies the consequences of the binary choice.
Republicans lack the numbers to push through a full repeal and replace program. To completely repeal and replace Obamacare, Republicans would have to make it past a filibuster by Senate Democrats. That type of vote requires 60 votes. Republicans have 52, and there simply aren’t 8 Democrats who would cross the line to vote on a repeal and replace program. Which means the only option available to Republicans is the Budget Reconciliation Process, which requires only 51 votes in the Senate. The Reconciliation Process limits what Republicans can do. Legally speaking, some sections can’t be touched, others can, and other sections can only have costs shifted.
The proposed solution is the AHCA, which is an amended Obamacare plan. The AHCA tries to make Obamacare palpable to conservatives. The AHCA sends the country precipitously close to future Medicare for all. It expands Medicare and health insurance subsidies well beyond any point where they are needed. Instead of only trying to care for those who are in need of help, Obamacare expanded requirements to everyone. The AHCA attempts to make those requirements a lighter burden on people.
Thus the quandary: what direction do you take with the AHCA? The problem is not “RINO’s” or “spineless Republicans in Washington.” I know, for instance, that Paul Ryan would prefer a free market-based approach. All his previous reforms and those of other Republicans have been much better. I understand that this may be the “best” option they have in Congress. But there are distinct risks involved with both selections in the binary choice.
On the one hand, the AHCA risks sending us towards an inevitable slow march towards Medicare for all. The AHCA expands the role of government. In this scenario, you depend on Republicans winning a larger majority in 2018 to reform Obamacare more in 2019. You rely on the AHCA winning over both the conservatives and Trump’s base. Remember, those two groups are not the same. If Republicans lose seats in 2018, Democrats will almost assuredly make the expanded subsidies and Medicare permanent.
On the other hand, if you defeat the AHCA, and you face three immediate consequences: 1) Obamacare continues fully intact. 2) The effects of extending Obamacare shift from Democrats to Republicans. 3) You’ve likely killed the political capital of Republicans to advance other major initiatives for President Trump (tax reform, infrastructure, deregulation, etc.). The corollary for Republicans on this is George W. Bush’s ill-fated attempt to privatize Social Security in 2005 and Barack Obama’s failure to accomplish anything major after Obamacare. When the White House loses political capital in a major Congressional fight, it’s difficult to recover.
I hope you see the real fight here. The fight isn’t over whether the bill is conservative or not. The fight is over what set of consequences Republicans are going to choose. Each option has significant risks.
Which way is the die cast? That’s the question Republicans and conservatives need to be asking. Because whichever option wins, there is no turning back. Republicans need to know the full consequences that could beset them. I pray they choose wisely.