Senate's Obamacare Replacement Is a Suicide Mission
(Bloomberg View) -- Republicans want to kill you. Worse than that, they want to kill you so that they can give your money to rich people who don’t need it.
If you’ve been reading social media over the last week, that’s the main message you’d take away. It started when the Senate released its long-awaited health-care bill, the culmination of nearly a decade’s promises to repeal and replace Obamacare. This bill was not so much a repeal as an adjustment, and not so much an adjustment as a tweak. But it did propose to eliminate most of the taxes used to fund Obamacare, including the reviled individual mandate. And alter the funding structure of both Medicaid and the premium subsidies to make them somewhat less generous. So obviously: Republicans want to kill you. Their rich donors need your bodies to use as mulch on their diamond plantations.
These cries are only going to get louder now that the Congressional Budget Office has released its score of the bill. The headline numbers won’t surprise anyone who’s been following along at home: According to the CBO, the Senate bill would increase the number of people who are uninsured by 22 million in 2026, relative to current law. That’s slightly fewer than the House bill would, but obviously, rather more than Obamacare, which is going to make it a little hard to sell on the stump.
An easier sell will be the deficit reduction numbers -- a cumulative reduction of $321 billion over 10 years. That’s a massive improvement over Obamacare, and a substantial improvement over the House version, which was projected to save only about a third as much in a similar time frame.
How they get to those numbers, however, is apt to cause some political headaches, particularly in swing states. According to the CBO, this bill cuts Medicaid by $772 billion over the course of the decade, thanks to the switch to per-capita grants, and the gradual reduction of the extra funding that Obamacare provided for newly eligible Medicaid participants. It slashes $408 billion from various tax credits, notably premium subsidies and the “cost sharing reduction” subsidies, which provide special plans for people making less than 250 percent of the poverty line, offering lower deductibles and co-payments. Then it sends $541 billion back out the door in the form of tax cuts. Anyone who read the bill last week already knew the broad outlines, but these numbers put some flesh on the bones -- and in the political spotlight, that flesh is not going to look particularly comely.
As we prepare for the coming week of Democratic senators leveling charges of mass homicide against their colleagues, it seems worth asking a few questions, like “Is it true that this bill will kill people?” And “If it’s so deadly, how can Republicans possibly get it passed?” Voters don’t like taxes much, to be sure. But most of them are, I think, even less fond of death.
First, then, the score itself. How reliable is it? Unfortunately, this score has the same problems that plagued the Congressional Budget Office’s score of the House bill: Its estimates of the number of uninsured, while undoubtedly made in good faith, seem rather implausibly large. However little liberals may like this bill when they compare it to Obamacare, when compared to the pre-Obamacare status quo ante, it offers many billions of dollars’ worth of subsidies for health insurance -- premium tax credits for people buying insurance in the individual market, and substantial funds to insurers and states in order to stabilize the market.
It seems hard to believe, as the CBO predicts, that the net result will be almost no reduction in the number of uninsured people, relative to what you’d get if Obamacare was simply repealed and replaced with nothing. I do think this number is directionally right, and the net result of this bill would be a substantial decrease in insurance coverage. But I’m nearly equally sure that there is some deep problem with the CBO model that causes it to spit out unlikely results when fed this particular combination of insurance regulations, subsidies and penalties.
Digging deeper into the report offers some suggestion of what those problems might be. That net loss of 22 million covered people would come about, says the CBO, “primarily because the penalty for not having insurance would be eliminated.” This puts a whole lot of policy weight on a mandate that is, by the consensus of most experts I’ve spoken to, already far too weak to do the job it was designed for (namely, forcing healthy folks to buy insurance).
The mandate penalty actually phased in over several years -- starting at $95 or 1 percent of income in 2014 (whichever was higher), rising to $325 or 2 percent in 2015, and maturing to its full adult size of $695 or 2.5 percent of income in 2016. Given how much stiffer the mandate penalties got as the years progressed, if the mandate were very effective at getting people to buy insurance, then I’d expect to see substantial growth in the number of folks buying insurance on the exchanges as folks got hit with an ugly tax bill, and decided they’d be better off paying premiums to insurers than penalties to Uncle Sam. Instead we saw a flood of new customers the first year, a slowing trickle in subsequent years, and in 2017, a slight ebb tide. This does not look to me like a mandate that’s doing a lot of the heavy lifting in Obamacare’s coverage gains. And I’m not the only one who looks at the mandate and sees … not much there.
I’d place a lot more weight on the subsidies, which make insurance a very good deal for people whose incomes are relatively close to the poverty line. The CBO seems to have the relative weights reversed. And that was fair enough, in 2010, when the office was projecting the effects of a vast, hard-to-forecast experiment. But the experimental results have been filtering in, and I’m not sure the forecasters have adequately updated their hypothesis.
That’s going to have major implications for scoring the Better Care Reconciliation Act. The Senate bill basically keeps the Obamacare regulatory structure intact, while somewhat cutting the subsidies for buying insurance, and entirely eliminating the mandate. If you think that the subsidies are doing most of the work in keeping people insured, with the mandates playing a minor role, then you’d expect that this bill would reduce the number of people obtaining private insurance … somewhat. But if you think that the mandate is the important thing, and the subsidies merely a little sweetener to make the mandates go down easily, then you will predict massive coverage losses, almost equal to the coverage gains under Obamacare.
Since my money’s on the subsidies, I think the coverage losses are likely to be more modest than the CBO projects, making the cries of roaming senatorial death panels seem slightly overblown. No, make that really overblown, because, as I’ve written before, the evidence that increasing health insurance coverage saves lots of lives is surprisingly mixed. Given how messy the data is, I think that the effect is small enough to be easily swamped by statistical noise. When you combine smaller coverage declines with small coverage benefits, the result looks like something considerably less than the bloodbath I’ve seen promised on social media.
And yet even if I’m right, that’s not going to do Republicans much good when they’re trying to sell this bill. The appetite for relatively abstract technical arguments about mortality estimates and demand response to tax penalties is … well, if you have made it this far into this article, let's just say your interest in these details is not representative of the general population’s. Congratulations: you’re a member of a small and outlandishly wonky tribe. (Most people barely finish listicles of cat gifs.) What most people are going to see about this bill, if they see anything at all, is the headline numbers about coverage losses.
That said, I’m not going to predict that Republicans won’t pass this bill, or something very like it. In 2010, I believed that it would be political suicide for Democrats to pass Obamacare, and therefore they would very sensibly decline to do so. I was right that it was political suicide for the following midterm election, but wildly wrong about modern partisan propensities for lemming rushes.
It’s possible that this was an aberration, after an unlikely series of catastrophes had given Democrats the quite false notion that they had the reincarnation of Franklin Delano Roosevelt sitting in the White House. Or it’s possible that this marked a more enduring change in political incentives. With Congress switching party control so often, modern parties may be less focused on building enduring electoral and legislative coalitions, and more focused on getting whatever they can while the getting is good. Republicans really want to do tax cuts, and they really want to move control of Medicaid toward the states while capping its costs, and this bill gets them closer to both of those goals. So despite the ugly optics, they may well pass this thing, knowing that they’re likely to lose control of Congress relatively soon no matter what they do.
The upshot? Regardless of whether Republicans want to kill you, what the Senate is proposing here is far more likely to kill some Republican political careers. The cause of death ought to be listed as “suicide.”
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.”
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