Blog Post - Views on the Economy and the World

Why Republicans Can't Reform Health Care

| July 26, 2017

Why do Republican politicians seem unable to come together on a bill to “repeal and replace” the 2010 Affordable Care Act, also known as Obamacare?  After all, they have spent 7 years with that as their single-minded goal, they campaigned on it in the 2016 presidential election, and they now control all branches of government.

It is tempting to blame lack of experience and competence on the part of the president.  But that doesn’t explain why the Republican congress can’t do it without him.  Some Republicans blame unwillingness of the Democrats to cooperate.  But given their majorities it should not be necessary for the other party to cooperate in dismantling its most important achievement of the last eight years, nor is it remotely reasonable to expect them to do so.

Don’t be misled by the reasonable-sounding formulation that, since everyone agrees that Obamacare has flaws, a bi-partisan replacement to improve it should be possible.  The most important of the existing flaws in Obamacare are there because Republicans insisted on putting them there, not because of unforeseen consequences of the original proposal.

It is a little closer to the truth to say that the Republicans negligently forgot to formulate an acceptable replacement in all their years of voting to repeal Obamacare.  But that makes it sound like they could come up with an acceptable replacement if they tried hard enough.  They cannot.

The relevant division among Republicans

Republicans in Congress are divided.  Whatever version of the bill they try out, they cannot seem to put together the necessary majority.  But the familiar distinction between “hard-core conservatives” and supposed “moderates” is not the most useful way of looking at the split.  They are divided, rather, between those who acknowledge the laws of arithmetic and those who do not.

By the way, it is the same division that has plagued the Republicans over tax policy for almost 40 years: they all want massive tax cuts but some also proclaim their commitments to pay down the national debt while preserving military spending, social security and Medicare, while others recognize that this combination is arithmetically impossible.

When Republicans say they want to repeal and replace Obamacare they mean not just a change in name, but a general reduction in the role of government in the health care system and, in particular, an end to the individual mandate that requires all Americans to have insurance.  They are divided between those who recognize that the result of the various repeal and replace proposals would be a loss of insurance by many and are willing to accept this reality, on the one hand, and those who do not recognize it, on the other hand.   The decline in the number of citizens who have coverage would exceed 20 million, according to estimates of the Congressional Budget Office (which, contrary to some desperate claims, have a very good track record).

An example of the first category is Rand Paul of Kentucky, one of the few more-or-less-consistent libertarians who deserve acknowledgment for intellectual honesty.  But if his policies prevailed, the losses inflicted on lower- and middle-income workers would be so severe that the Republicans would probably be voted out of office for a generation.   That logic assumes that there exists a limit to the scope for large numbers of Americans to vote against their self-interest.  (Indeed, Republican proposals to take away benefits are now very unpopular.)

The second category of Republicans finds the loss of health insurance by 20 million citizens unacceptable.  This group still doesn’t know what it wants, even after all this time.  Some of them may take refuge in a solution where millions end up on skeletal health care plans that don’t offer true protection against the cost of serious health problems, so-called junk insurance.  But this solution is no more attractive than the loss of coverage altogether.

Logically there should be a third group that acknowledges the arithmetic, finds the loss of 20 million uninsured unacceptable, and then chooses to face reality by working for a version of Obamacare or some other plan that can continue to expand the numbers of Americans who have health insurance.  This third group would properly be labeled the moderate Republicans.  Unfortunately there is nobody left in this group (except perhaps Susan Collins of Maine).

Options with an expanded government role

Consider a birds-eye perspective on alternative health care systems.  At one polar extreme is socialized medicine: the government directly provides health care to all.  The British are attached to their National Health Insurance.  But different nationalities have different preferences.   Nobody in US politics is arguing for a government takeover of the health care system, even though some opponents of Obamacare have falsely described it in this way.

Who supplies health care is a different question than who pays for it.  A substantial fraction of Americans would support a single-payer system.  It can be described as “Medicare for everyone.”  Other countries like Canada make it work, delivering high-quality health outcomes at a fraction of the cost of the US system.  Advocates point to cost savings from paperwork reduction, for example.  Still, it would be unrealistic to think that US government health insurance for all would be anything other than a very expensive new mandate – at a time when voters are unwilling to pay the taxes that would be necessary to finance the level of mandates that we already have.  Certainly it will continue to be opposed by three influential groups: the insurance industry, those consumers who are happy with their current employer-paid plans, and Republicans in general.

Is there a free-market option?

What would the oppose polar extreme look like, a system where the ethic of “personal responsibility” insists that nobody gets health care unless they or their employers pay for it?  It is hard to imagine such a system.  It is not what we had before Obamacare; that system was not a model of personal responsibility. The uninsured imposed costs not just on themselves but on the rest of us as well, in ways that go well beyond expensive medical attention in the emergency room.  Those who don’t see a doctor regularly are more likely to fall victim to alcoholism, obesity, smoking, and addiction to opioids or methamphetamine.  Even leaving aside the emergency room, many of the uninsured end up receiving some longer-term care for which hospitals are not reimbursed so that they must spread the cost to the rest of us.

If the objective were to stamp out such nefarious practices it would require an active reversal of government policy, to stop the medical profession from providing care that it feels ethically committed to provide.  Taking government policy out of health care would include depriving non-profit hospitals of their tax-exempt status, for example.  Perhaps there could be a new federal law requiring ambulances to leave accident victims by the side of the road unless they can show proof of health insurance.  I have yet to meet a free-market conservative so extreme as to favor such a system, when pushed.

No free lunch

So, as often, the right answer must lie somewhere between the polar extremes (socialized medicine at one end and a pursuit of pure laissez-faire at the other).  It must have something like the key features of Obamacare.  The famous three legs of the stool are:  the individual mandate, no discrimination against pre-existing conditions, and a means to pay for it.

The individual mandate is a key component that makes Obama’s Affordable Care Act work.  Many forget that it was originally an idea that conservative think tanks developed in order to devise a workable system of national health insurance with the minimum possible role for the government and a maximum possible role for the market.  It played the key role in the Massachusetts health care reform signed by Mitt Romney when he was Governor in 2006. (Analogously, two other ideas originally designed by conservatives to achieve agreed goals in a market-based manner were  the negative income tax and cap-and-trade environmental regulation.)

A heavy majority of Americans — including those who thought they hated Obamacare, at least until recently — want to retain the provision that insurance companies can’t discriminate against those with pre-existing conditions.  [They also tend to favor the provision that parents’ policies must cover children up to age 26.]  But they can’t have these popular benefits without also accepting the unpopular individual mandate.  It is simply not financially feasible for private insurance companies to insure people who are already sick or at high-risk, if the still-healthy can opt out of the pool.  The fundamental source of market failure is known to theorists as adverse selection.  This is the origin of the famous “death spiral” that dooms plans lacking the mandate or something like it.  The “no discrimination” leg won’t hold up the health care stool, if the individual mandate leg is removed.

So it doesn’t matter how many permutations of the legislation to replace Obamacare the Senate leadership tries.  They won‘t come up with something that decreases the role of government without increasing the ranks of the uninsured.

For more information on this publication: Please contact the Belfer Communications Office
For Academic Citation: Frankel, Jeffrey.Why Republicans Can't Reform Health Care.” Views on the Economy and the World, July 26, 2017, http://www.belfercenter.org/publication/why-republicans-cant-reform-health-care.