Is there room for compromise on the Affordable Care Act? Besides building a wall on the southern border, few campaign promises from Donald Trump remained as consistent and resolute as repealing Obamacare. His campaign website still lists “repeal and replace Obamacare” as his top priority in health care policy.
Among the “key issues” listed by the Trump campaign are skyrocketing premiums and deductibles, along with insurer flight from the exchanges, as well as the increasing number of people forgoing medical care because of the cost burdens associated with Obamacare.
Despite the president-elect’s consistency on Obamacare during the campaign, Trump signaled this week that he might be open to keeping parts of it in place. In doing so, he credited a meeting with outgoing President Barack Obama for a potential change of direction. Trump told The Wall Street Journal that Obama suggested ways to preserve the structure of Obamacare during their initial meeting to discuss the transition in January and that he’d consider them before acting.
“I told him I will look at his suggestions, and out of respect, I will do that,” Trump said. “Either Obamacare will be amended, or repealed and replaced.”
“Amended” set off alarm bells among conservatives, for whom the repeal of Obamacare had been one of the very few points of unity among the Republican Party’s factions. Not one Republican voted for Obamacare, and its elimination held the party together through four successive victories in the House of Representatives. The disastrous rollout of Obamacare helped drive the GOP to Senate control in 2014, and the rapid escalation in premiums and deductibles played no small part in keeping that control despite long odds on November 8th.
That concern is probably misplaced, for a couple of reasons. First, Trump has good reason for some ambiguity when it comes to working with Obama. The success of that transition depends on building a working relationship with an outgoing administration that sees Obamacare as its key legacy and isn’t likely to cooperate with dismantling it.
Besides, Trump isn’t going to write the proposals to reverse Obamacare; he’ll work with Republicans in Congress who have already created a framework for its repeal and replacement. House Speaker Paul Ryan laid out the key goals and strategic direction in “A Better Plan” this summer. And in fact, the proposal plans to keep the two points cited by Trump in his post-election remarks to 60 Minutes last weekend – insuring those with pre-existing conditions and allowing those under 26 years of age to remain on their parents’ coverage.
Of the two, the need to protect those with pre-existing conditions is far more problematic. The objections to allowing 25-year-olds to be considered “children” were mostly cultural. Insurers typically allowed parents to carry their adult offspring on their policies if they were full-time students anyway, an exception that generally lasted through the age of 23. The cost impact of expanding that to 25 for all adult offspring was relatively minimal because provider utilization from young adults typically is very low anyway.
That is precisely why “amending” the ACA as the means to deal with pre-existing conditions will fail. Obamacare includes three mandates which form the heart of the program: an individual mandate for comprehensive policies (including specific coverage mandates), a mandate on insurers to sell policies to those with pre-existing conditions (guaranteed issue), and a community rating mandate which prevents insurers from putting the risk burden on those with pre-existing conditions. The latter only allows deviations from normal pricing on age, location, family size, and tobacco use, and places strict limits on price changes even on those factors.
This results in a severe distortion of the risk pool, one that forces everyone within it to bear the costs of that risk regardless of whether they contribute to the risk of excess utilization or not. Obamacare forces younger and healthier consumers to buy comprehensive insurance policies, which they will almost certainly never use, to fund that risk – essentially creating a wealth transfer from younger, healthier, and less wealthy consumers to those older, less healthy, and more wealthy. The failure to convince healthier consumers to absorb that risk has resulted in risk-pool distortions that necessitated massive increases in premiums and deductibles.
Those mechanisms can’t be “amended” out of Obamacare; they are Obamacare. The mandate for guaranteed issue and the way in which the federal government forces insurers to handle that risk cannot exist without the other mandates. Eliminate the individual mandate, and especially the limitation requiring comprehensive policies, and you eliminate the wealth transfer necessary to subsidize older and less healthy consumers.
The Republican plan calls for a return to state-based oversight of health insurance, with a new twist on allowing insurers to sell across state lines. That will provide more competition than Obamacare exchanges have, especially now with insurers bailing out of those markets. The GOP also returns the issue of pre-existing conditions back to the states, recommending the use of state-based high-risk pools to establish coverage in the first year and then transferring to private health insurance afterward with normal risk-based pricing.
This allows those with legitimately low risk to get pricing that reflects the risk they actually present rather than subsidizing others. That, plus the return of scalable insurance partnered with health-savings accounts will restore stability to the individual insurance markets, and allow consumers to make rational choices about their health care.
Those are Trump’s options – a take-it-or-leave-it system with Obamacare, or repeal and replace with sustainable market-based solutions that give Americans real choices and rational pricing. The Byzantine design of Obamacare makes “amending” it impossible.