Rand Paul’s ‘Obamacare Replacement Act’ Deserves Trump’s Attention
Consumer Power Report #531
President-elect Donald Trump and Congress should seriously consider adopting the “Obamacare Replacement Act,” the latest and possibly best Republican proposal aimed at repealing and replacing the Affordable Care Act (ACA). The plan would lower the cost of insurance by eliminating various mandates and increasing patients’ health care buying power by expanding the use of health savings accounts (HSAs).
Senator Rand Paul (R-KY) tweeted a photograph of the first page of the draft bill on Saturday, January 14, with the caption, “Coming this week: THE Obamacare replacement bill. Done drafting the bill & will be discussing on @CNN Sunday AM and all week next week.”
Although Paul has yet to introduce his plan as legislation in the new Congress, he revealed its central components this week on various television networks, reiterating guideposts he sketched in an op-ed for the news and commentary site Rare on January 2. Paul wrote:
“What should we replace Obamacare with? Perhaps we should try freedom:
1. The freedom to choose inexpensive insurance free of government dictates.
2. The freedom to save unlimited amounts in a health savings account.
3. The freedom to buy insurance across state lines.
4. The freedom for all individuals to join together in voluntary associations to gain the leverage of being part of a large insurance pool.”
These points boil down to putting patients, instead of government and industry cronies, at the center of our health care system. Paul’s freedom strategy would increase the influence consumers have over the products insurers price and sell. It would open up insurance-buying opportunities for consumers other than the binary “employer-sponsored” and “individual” markets. And it would make consumers instead of their employers the target audience of insurance products, and help people pay for their health care and insurance, too.
The key to insuring a greater number of people than are insured under ACA is “to legalize the sale of inexpensive insurance,"which means “getting rid of Obamacare mandates on what you can buy,” Paul told Jake Tapper on State of the Union on January 15. As a rule, ACA fines people who have not purchased an insurance plan compliant with the law’s 10 mandates for minimum essential coverage.
Each ACA-compliant plan must cover outpatient care, emergency room services, hospitalization, pregnancy and newborn care, mental health and substance abuse treatment, prescription drugs, post-injury rehab, labs, preventive care, and pediatric care (including oral and vision care for children), according to Healthcare.gov.
Moreover, the law’s “guaranteed issue” and “community rating” mandates require insurers to sell insurance to johnny-come-latelies who wait to buy it until they are very sick, at the same price insurers sold it to other customers.
These mandates raise the cost of insurance for people who don’t want coverage for services they may never, and in some cases can never, use. Eliminating those mandates would lead to an influx of plans offering so-called catastrophic coverage with high deductibles for lower premiums than the least expensive Bronze plan offered on the Obamacare exchanges.
Expanding HSAs alongside eliminating these insurance mandates will not only give many (if not all) people tax breaks for dollars they spend on health care. It will reinforce the salubrious effects of making patients aware of the costs of their health care.
For example, a natural byproduct of allowing insurers to offer, and patients to buy without penalty, only catastrophic coverage would be people’s tendency to use insurance less frequently to pay for health care needs. This would make not only insurance, but health care itself, cheaper, for three reasons.
First, people with catastrophic-level deductibles would not try to max out their deductibles each year, which many people now try to do under the illusion they will get free (to them) health care the rest of the year. Instead of chasing their maximum deductible, people would be more likely to pay providers directly for any services they can afford. This would raise price awareness as people calculate whether they should pay providers directly or use insurance instead.
Second, price awareness creates demand for price transparency. Most customers, including and especially responsible low-income people on tight budgets, want to know prices before they buy. To please these patients and earn their business, providers would increasingly post their prices up front, just as the Surgery Center of Oklahoma and Oregon Coast Dermatology do.
Third, an increasingly price-conscious customer base would give providers a greater incentive to compete on price and quality than the current system gives them, in which patients try to pay as much as possible to make their insurance plan worth the premium. Instead, people would be more inclined to shop around for the best value and even negotiate with providers, who can afford to charge cash patients less when not funneling money through middle-man insurers, and providers would be more responsive to patient negotiations.
The current broken system’s overreliance on insurance for routine services prompts many to conclude, erroneously, that health care markets do not function as other markets do. The opposite is true. The health care market doesn’t look like other markets because regulations have distorted it. We are witnessing the result of policies distancing consumers from knowledge of prices. Our national leaders for at least the past eight years (but actually the past 74 years) have accomplished this using labyrinthine laws implemented by unaccountable bureaucracies.
Paul’s proposal contains important clues for escaping the Obamacare labyrinth. Trump and Congress should grab hold of it, lest we remain stuck here long after President Barack Obama has escaped.
-- Michael T. Hamilton (email@example.com), @MikeFreeMarket) is a Heartland Institute research fellow and managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.
IN THIS ISSUE:
New Hampshire Republican Gov. Chris Sununu is asking Congress to give states as much flexibility as possible to design their own health care systems as part of the federal effort to repeal and replace the Affordable Care Act.
Sununu is offering his thoughts in a letter to U.S. Senate Majority Leader Mitch McConnell sent Wednesday. The U.S. Senate is soliciting governors’ feedback on changes to health care. Sununu says a new system should avoid “onerous regulations” on states.
Unlike some other GOP governors, Sununu does not mention or comment on the future of Medicaid Expansion in his letter. … New Hampshire accepted federal dollars under the health law to put roughly 50,000 new people on Medicaid. Govs. Rick Snyder of Michigan and John Kasich of Ohio are urging Congress to keep Medicaid expansion.
SOURCE: Kathleen Ronayne, Associated Press
States that fought and shunned the Affordable Care Act’s Medicaid expansion, hoping to avoid the cost of covering millions of working-poor families, will be left with substantial growth in the program even after the Republican-led Congress unwinds the law.
From Florida and Texas to Georgia and North Carolina, enrollment in Medicaid and the Children’s Health Insurance Program has soared since the passage of the health care law, as the poor and uninsured have come out of the woodwork to apply for coverage. And those new enrollees -- 2.4 million people across 19 states that decided not to expand Medicaid -- aren’t going anywhere immediately after the incoming Donald Trump administration signs repeal legislation into law.
It’s an ironic and unintended parting gift from President Barack Obama, whose namesake health care package triggered a rush to Medicaid that will leave some of the most conservative states in America spending more than expected to insure the poor after he leaves office than they did before he entered. …
Experts call the growth in Medicaid enrollment in states that did not expand “the woodwork effect.” It refers to people eligible for Medicaid before the Affordable Care Act -- but not enrolled -- who joined amid public awareness campaigns for HealthCare.gov and the Medicaid expansion.
Those campaigns specifically targeted non-expansion states such as Florida, Texas, North Carolina and Georgia.
And it’s precisely those states that are now grappling with bulging Medicaid rolls: Florida led the way with nearly 540,000 new Medicaid enrollees, a 17.4 percent increase; North Carolina added 408,000, up nearly 26 percent.
Texas and Georgia added roughly 290,000 and 214,000, respectively. Georgia’s 14 percent enrollment growth more than doubled Texas’ 6.5 percent increase.
Even when the Affordable Care Act is repealed, woodwork-effect enrollees in states that did not expand Medicaid are unlikely to lose their coverage.
That’s because newly eligible Medicaid enrollees in expansion states can earn up to 138 percent of the federal poverty level, because of the health care law’s relaxed income eligibility requirements. But woodwork enrollees in non-expansion states had to meet Medicaid’s traditional state-income guidelines reserving coverage for very low-income applicants. Those earning thresholds are set by states and unlikely to change under any federal repeal legislation.
“The woodwork effect was definitely more significant than we initially expected in Medicaid,” said Caroline Pearson, senior vice president at Avalere, a Washington health consulting business. “We really think it was largely (insurance marketplace) awareness that drove the increase in Medicaid enrollment, particularly in non-expansion states.”
The woodwork effect was certainly intentional on the part of the Obama administration. …
SOURCE: Tony Pugh, McClatchy Washington Bureau
Is the party promising access to insurance for everybody, as congressional Republicans have long pledged, or are they promising insurance for everybody, as Trump told WaPo last weekend? The latter implies making universal coverage a top priority in whatever comes next, the former doesn’t. Inquiring minds want to know, and by “inquiring minds” I mean the people on Capitol Hill who are right now trying to come up with a new system of health insurance for the United States.
“I think that syncs up with what our members have been saying, that we think everybody ought to have access to affordable health care insurance. I assume that’s what he means by that statement and that’s how we’re proceeding,” said Sen. John Thune, the third-ranking Senate Republican.
“Pressed on the difference between health care for everyone and access to health care for everyone, Thune said reporters would have to ask Trump what he meant. He said he didn’t know if Trump’s transition team had explained the statement to Congressional Republicans.”
Mike Pence told CNN that he took Trump’s comments to mean making insurance affordable for everybody, but he seems not entirely sure either.
Follow-up question: Is Trump planning to introduce his own replacement plan or is he leaving it to Ryan and McConnell to come up with a new system, with input from the White House? The WaPo story made it sound like he has his own plan in the works (“It’s very much formulated down to the final strokes”) but that was news to John Cornyn when he was asked about it yesterday while Rep. Chris Collins said, “It’s the first I’ve heard about it.” Cornyn and Collins aren’t random nobodies: Cornyn is number two in the Senate GOP caucus and Collins is the Trump transition team’s designated liaison to Congress. If anyone would have had an inkling that a Trump health-care plan was being prepared by the White House, they would have. Instead they were both blindsided.
Yuval Levin’s sources on the Hill say that they’re not only not sure if Trump is preparing his own plan or not, they’re not sure what sort of timeline he’s willing to accept for replacing ObamaCare:
“After Rand Paul announced he had spoken with Trump, who agreed with him about making repeal and replace simultaneous, one congressional staffer suggested at a Capitol Hill meeting on health care that his boss could call Trump and get him to say the opposite. After Trump’s news conference last week, several members and staffers suggested (independently) that Trump must mean that repeal and replace should take effect simultaneously, rather than that they should be enacted simultaneously, in which case congressional Republicans were already on the same page as Trump. (And of course, that could very well be what Trump meant.) After Trump’s Washington Post interview this past Sunday, the conservative health-care universe, including some people on Trump’s own team, quickly concluded that the separate administration plan he described was entirely a figment of Trump’s imagination …
“Beyond this adjustment in response to Trump’s remarks, congressional Republicans are still unsure how to work with the incoming administration. Trump’s style, some uncertainty about who is in charge on his staff, and a touch of resentment at his vague public criticism of their strategy has left many uneasy about committing to any path. They fear getting far down the road toward legislation only to have Trump hear it criticized on Morning Joe and then declare on Twitter that he’ll veto it.”
If his own team hasn’t heard about the White House health-care plan that’s allegedly in the works, it means either (a) it doesn’t exist or (b) Jared Kushner’s been typing something up on his computer at odd hours that Trump’s going to end up handing to Paul Ryan with an instruction to “make it happen.” …
SOURCE: Allahpundit, Hot Air
California officials on Wednesday withdrew their request to sell unsubsidized insurance policies to people who can’t prove they’re legally in the United States after learning the decision would fall to President-elect Donald Trump’s administration.
Calling the decision “the first California casualty of the Trump presidency,” Sen. Ricardo Lara said he doesn’t trust the incoming administration to protect people’s privacy and health. The Democrat from Bell Gardens wrote legislation seeking to waive a federal requirement that the Covered California insurance exchange only do business with citizens and legal U.S. residents. …
SOURCE: Jonathan J. Cooper, Associated Press