Obamacare Was Built With the Flaws Trump Now Exploits

(Bloomberg View) -- Like his predecessor, President Donald Trump has been frustrated by lack of action in Congress on Obamacare. Like his predecessor, he has resorted to executive fiat to get around that obstruction. Only instead of frantically trying to save the troubled program, he is yanking out the life-support cords installed by President Barack Obama.

This week saw two executive actions. With the first, Trump is trying to expand health insurance options outside of the Obamacare exchange for individual insurance plans (which will have the side effect of making on-exchange policies less attractive to healthy customers).

The second is even more serious: After threatening it for months, the president has finally ended the cost-sharing reduction payments to insurers, which subsidize the provision of special policies with lower out-of-pocket expenses for people who make less than 250 percent of the federal poverty line. At the very least, this will probably mean a further increase in premiums, and growing instability in at least the parts of the individual market that aren’t eligible for subsidies to offset the increase. At worst, especially if it gets bogged down in lawsuits, it may cause insurers to say “enough is enough,” leaving broad areas of the country without any firm willing to sell individual policies through the Obamacare exchanges.

While the Congressional Budget Office has issued a delightfully counterintuitive forecast that ending the subsidies could actually increase insurance coverage, there’s little question in my mind that these policies are bad for the exchanges. At the very least, I think we can all agree that they put the exchanges at greater risk. There is also little question that this is at least part of the reason that the administration is pursuing them. And yet, believe it or not, there are still arguments for both.

It has become evident that millions of uninsured Americans are uninterested in buying insurance on the exchanges, because it’s too expensive, or the “narrow networks” don’t cover enough doctors and hospitals. The new options the administration aims to create could be a genuine boon to those people.  If you have spent years bemoaning the dire fate of the uninsured, you have to take that benefit seriously.

As for ending the subsidies … what am I, some sort of monster? Do I just hate the poor so much that I can’t stand to see them getting help paying for health care? Well, no. I have no particular objection to the payments as policy. Except for one small thing, which is that they seem to be sort of illegal.

But at this point, such arguments are moot. It might be more fruitful for Obamacare’s supporters to ask what role they themselves played in bringing us to this pass.

A few years ago, as we all stood gaping at the disastrously bungled launch of the Obamacare exchanges, I was invited by Intelligence Squared to participate in a debate: “Resolved: Obamacare Is Beyond Rescue.” Longtime readers know that my motto is “Predictions are hard, especially about the future.” I was thus reluctant to declare, without equivocation, that Obamacare was already dead, dead, dead. But I’m a huge fan of Intelligence Squared, so I accepted, and then I resorted to a time-honored debate-weasel:  I reframed the question.

Thus I chose not to argue that Obamacare was going to collapse and be repealed in its entirety, but rather, that Obamacare would not, and could not, be the program that had been promised or intended. It had already failed to deliver on key promises for coverage, affordability and of course, the infamous promise that “if you like your doctor, you can keep your doctor.” It was also dangerously unstable, requiring steady executive intervention just to keep the program from collapsing. I argued that these executive interventions, enthusiastically supported by the law’s proponents, were setting a precedent that would eventually be used against it. Worried that health care was too hostage to the vicissitudes of the markets, Democrats had instead made it the prisoner of politics.

“Essentially they've made it so that Republicans can undo two-thirds of this law with a stroke of the presidential pen,” I said at the close of my opening statement. “Obamacare is now beyond rescue. The administration has destroyed their own law in order to save it.” Four years later, we are watching those dominos fall.

I have made some spectacularly bad predictions in my time, and sadly, published many of them on the internet where I can be regularly reminded of my lack of prescience. So I am not claiming to be Cassandra. Nor do I take any pleasure in having been right about this. What’s worth noting now is that the debacle was indeed foreseeable, and foreseen, by me and many others.

 This sort of executive action was built into the foundation of the program as soon as Obama started frantically overriding his own law in an attempt to keep it together. And indeed, long before that, when Democrats used parliamentary maneuvering to pass a badly drafted and unpopular piece of major legislation on a straight party-line vote.

Democrats assumed that as long as they had the formal power to make Obamacare into law, the rest of the country would have to go along. Whatever drafting problems there were in Obamacare would be fixed, because they would have to be; whatever lingering opposition there might be among the Republican Party would eventually wither in the face of an immutable “fact on the ground.”

But laws that are big enough for the public to notice need political legitimacy to survive. Democrats ignored that need at their own peril, and that of the insurance markets.

Remember how we ended up with the particular version of Obamacare that became law. Democrats had 60 votes in the Senate, and a growing sense that they were on the verge of a second New Deal. They thought they didn’t need Republicans, and they thought they couldn’t get Republicans, so they made little effort to involve Republicans in drafting, beyond offering token concessions to a handful of liberal Republicans who might have made nice bipartisan window-dressing at the signing ceremony. Republicans, predictably, spent a year talking down the bill, and by the time it was nearing passage, a majority of the public opposed it.

Then Massachusetts -- Massachusetts! -- sent Republican Scott Brown to Ted Kennedy’s old Senate seat, a phenomenon that was widely (and in my view correctly) put down to a desire to block Obamacare. Rather than saying “if we’ve lost Massachusetts, we’ve lost America,” Democrats rushed a draft version of the bill into law through a parliamentary procedure that obviated the need for Brown’s vote.

This draft bill, unsurprisingly, had problems. It also overhauled almost a fifth of the economy. It also had the implacable hostility of the opposition, and a public that was pretty angry at politicians for passing it. By the end of the year, Democrats had lost control of Congress, and with it, any hope of making all the changes they’d fantasized after they passed the bill and found out what was (and wasn’t) in it.

That put Obama in the nasty situation of presiding over a program that couldn’t work as written, and couldn’t be legislatively altered. So he proceeded with the only avenue open to him: dubious executive measures that temporarily shored up the program, but weakened even further the slim foundation of political legitimacy that held it up. And here we are seven years later, watching as one by one, those supports sway or snap.

And thanks in part to the voter revolt that Obamacare triggered, those powers have now been handed over to a president who doesn’t simply take political legitimacy for granted, but seems actively hostile to it. The scramble to pass and sustain Obama’s signature initiative may have badly hurt the cause: to make the health-care system fairer, broader and more efficient.

If Obamacare dies now, in this way, the country will be worse off than if it had never passed. And I’m not just talking about the growing notion among both parties that the idea of elections is to get into power and exercise whatever power you can, by whatever means you can get away with, until voters take your toys away again.

In the worst-case scenario, large swathes of the country will have “bare” individual markets where everyone will be magnificently equal in their inability to purchase insurance. And the memory of Obamacare staggering onward for years, down a trail of broken promises and underwhelming results, will make voters reluctant to trust any politician who suggests that we embark on another such journey.

Is Obamacare beyond rescue? If not, it could certainly use some. And at this point, it’s hard to see who is going to swoop in to save the day.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”

  1. I am second to none in my admiration of the CBO, but I think there are some major flaws with the model it’s using to project health care results. In this case, while the subsidized portion of the market will be largely insulated from premium increases, that insulation is somewhat limited by an obscure provision in Section of the PPACA, which states that once subsidies hit percent of GDP by my calculations we’re almost halfway there now further subsidy increases become tied to inflation rather than “whatever premiums cost.”  Wild growth in the cost of silver plan premiums, which is what this action seems likely to cause, will push us there faster. Moreover, about 40 percent of the folks in the individual market (on- and off-exchange) are unsubsidized their premiums will be affected by this in ways that are apt to push many of them out of the market.

  2. Hey, it’s better than what we all argued as high-school debaters: that X will lead to nuclear war. With a little massaging, it turns out that anything -- from changes in farm policy to rock and roll might increase the risk of nuclear war.

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