Protesters block a street in Salt Lake City during a demonstration Tuesday against the Republican health-care proposal. (Rick Bowmer/AP)
Sen. Ben Sasse (R-Neb.) used the most direct means possible of making his pitch for repealing Obamacare directly to the president: He appeared Friday morning on “Fox and Friends.”
Within 20 minutes of Sasse’s appearance, President Trump had tweeted his support of the idea of passing a bill to repeal the Affordable Care Act (that is, Obamacare) over the short term, setting a strict timeline for Congress to figure out a replacement. Sure, Trump had earlier in the week insisted that negotiations were going well and that a big surprise was looming from the Senate negotiations, but Sasse’s plan (and Sen. Rand Paul’s (R-Ky.) before him) captured Trump’s attention.
An expert we spoke with by phone Friday, the Brookings Institution’s Matthew Fiedler, made clear that this would not simply set a timer on replacing the existing system. While that clock ticked down, he suggested, the system would already be falling apart.
A lot depends on the wording of the repeal, of course, but Fiedler made some basic assumptions. First, that the ACA would be repealed as of Jan. 1, 2019. Second, that the individual mandate — the law that forces people to either have insurance or pay a tax penalty — would be revoked immediately. And, third, that the bill would either immediately or quickly wind down Medicaid coverage for those who gained it under the ACA’s expansion to cover those in lower-income ranges.
1. Premiums would spike
Since we’re assuming that the individual mandate would be dropped immediately (which has been part of past repeal proposals), we can also assume that those who only signed up for coverage to avoid the penalty would not renew their coverage. The point of the mandate, of course, was to bring more people into the pool to help offset the cost of sicker, more expensive patients that insurers would have to cover.
The people who only signed up for coverage because of the mandate are people who didn’t see the need for insurance before — which is to say, they’re healthier than those who had an urgent need for coverage. Since they’re healthier, they cost the insurer less in coverage. If those people walk away from coverage, the remaining pool of people would be sicker, on average, and insurers would have less money flowing in to pay for them. So premiums would increase.
“The estimate of the Senate bill would be 20 percent increase in premiums in 2018 because of that mandate repeal,” Fiedler said, referring to the recent nonpartisan analysis of the overhaul bill introduced in the Senate. That’s a significant increase right out of the gates — that would probably drive more people away from coverage.
2. Insurers would bail
What’s more, with a looming deadline next year, an enormous amount of uncertainty would be introduced for insurers that are participating in the Obamacare marketplace.
Fiedler put himself in the shoes of an insurer: “2018’s going to be a risky and unstable year because there’s just been this major policy change. I have no idea what’s going on afterward. Is it really worth staying in this market for the time being, or should I just get out until this is all resolved?” His guess? A number of insurers would figure that remaining in the market for the final 12 months would be more trouble than it was worth.
What’s more, the Senate (and House) wouldn’t really have until Dec. 31, 2018, to come up with a replacement. Insurers would want to prepare for 2019 early in 2018 — meaning that the uncertainty could extend into the next year as well if Congress doesn’t move quickly to establish what the ACA replacement would look like.
“If you wanted to have any chance to put Humpty Dumpty back together again for 2019,” he said, “you’d have to move pretty quickly.”
3. States would drop Medicaid coverage
The expansion of Medicaid under the ACA meant that lower-income Americans could receive coverage under the federal program. While the federal government usually reimburses states about 50 to 75 percent of the costs of that coverage, Obamacare meant that all of the cost of expansion was covered at first, dropping slightly in later years. (It’s a 95 percent reimbursement at the moment.)
If the bill mandates that federal reimbursements immediately drop to 50 to 75 percent once Obamacare is repealed, states would probably start moving people off Medicaid before 2019 to assure a smooth transition.
If, however, the repeal bill undoes the expansion to cover lower-income Americans — which some of the repeal bills that were introduced previously did — states would have to choose whether to fully fund those people by themselves or to drop all of them from coverage. “I can’t imagine there’s any state in the country that’s in a position to do that,” Fiedler said.
His assumption was that every state that had expanded Medicaid coverage under Obamacare would drop it if the law were repealed.
4. There’s no guarantee a replacement would be developed
Fiedler raised another key point: It’s not a safe bet that Congress would actually pass a bill to replace Obamacare after they light the fuse with a repeal bill.
For one thing, we’ve already seen how difficult it has been for the party to negotiate the competing interests of its moderate and conservative factions, both in the House and the Senate. For another, Fiedler pointed out that there were “members of the Republicans caucus that are fairly happy with the health-care system that results from a full repeal.” It’s much easier to force inaction on Congress than action.
Congress tends to like to bump up against the hard deadlines it sets for itself, and there’s no reason to think that this time would be any different. In this case, though, much of the damage would probably already be done by the time the clock ran out.