What the Obamacare Replacement Act Is All About

Senator Rand Paul revealed his Obamacare Replacement Act (S. 222) last month, and a synopsis of the changes can be found here.

Will it work? Having made a list of the major things wrong with our current system, which led to a list of the major ways to fix the system, I can now compare the lists to Senator Paul’s proposed changes.

Repealing Obamacare

Goodbye, Obamacare! Well, not entirely. The mandates are gone, as are the community rating restrictions and the essential health requirements. The medical loss ratio is also gone. However, the non-mandate taxes are still in place and so are the exchange subsidies and Medicaid expansion for the able-bodied poor. Some of this may end up moot: if an exchange doesn’t have any insurers in it, the subsidies are irrelevant to people in that exchange. If someone on Medicaid cannot find any providers willing to take Medicaid, it’s irrelevant to that person. That’s the major difference between guaranteed insurance and guaranteed access, and it was just about to bite us in the assets. A large number of counties have only one insurer choice for 2017, and Pima County in Arizona almost had no insurers at all until Blue Cross Blue Shield AZ agreed to stay. Even then, they’re only offering catastrophic plans if I’m reading the website right. I had to dig for this information, and I know of no media outlet covering what is an extremely important story of failure on the part of an exchange. Effectively, it failed without being labeled a failure.

This is big. But it’s not what I’m talking about here, so I’ll keep going.

I vacillate between wanting to keep the exchanges and wanting them gone, not because I like the exchanges but because I want people to see at least one exchange fail completely and unambiguously due to lack of insurers. Without one or more exchanges obviously failing, many people will still believe that the exchanges would have succeeded. However, with the new administration, people who might be convinced of the ACA’s failure may very well assume it’s the fault of the changes and not inherent within the ACA itself. Given that and since failing exchanges will hurt people, I choose getting rid of the exchanges.

Conclusion: Senator Paul’s changes get rid of the mandate but not the exchanges. This means that the individual health insurance market will continue its death spiral.

Protecting individuals with pre-existing conditions

It’s a symptom. Having a limited (two-year) open enrollment period won’t greatly add to the individual insurance market’s death spiral. Neither will it help. Ditto the HIPAA pre-existing conditions protections. But they will help in the war of public opinion.

Equalize the tax treatment of health insurance

Yay, it’s on my list!  It’s not one of my three biggies, but it’s on the list. It levels the playing field between the individual and employer markets, and it begins to detach health insurance from employment so that’s great.

Some people will think it doesn’t go far enough because the deduction is non-refundable. I’m not a fan of using refundable tax credits to redistribute wealth, so I’m good with the deduction. All I want is to level the playing field.

Expansion of HSAs

This isn’t on my list, though I’ve considered it. It mitigates the impact of rising healthcare prices by making healthcare costs paid through the HSA essentially tax free, but it doesn’t fix any of the underlying problems. The $5000 tax credit is a subsidy, and subsidies generally cause some of the cost increase they’re designed to mitigate. The no-limit contribution is great for the wealthy and for people already spending a lot of money on health care. I’m good with allowing HSAs for non-catastrophic plans, though it may be better to use HSAs to incentivize catastrophic plans. Bankruptcy protection will make it more likely that people will shelter their money in an HSA, while also giving opportunity for abuse.

Love, love, love the capitated primary care payments, especially at this stage of reform. Just about anything that aids the cash-payment alternative system is a plus in my book. Not sure how this will be impacted by H.R.365, introduced in the House in January, which “amends the Internal Revenue Code to: (1) permit an individual to pay primary care service arrangement costs from a health savings account; and (2) allow an eligible taxpayer enrolled in a high-deductible health plan to take a tax deduction for cash paid into a health savings account, even if the taxpayer is simultaneously enrolled in a primary care service arrangement.” They may be complementary, and they definitely overlap.

The rest, well, the rest allows the government to continue micromanaging. The government gets to decide what is and is not “medical” or “health care,” which means everyone and their therapist will be lobbying the government to declare their cool thing to be “health care.” Wouldn’t it be better to target the real underlying problems to make healthcare costs reasonable so that we don’t have to give preferential treatment to one industry over others? That’s just going to end in tears at bedtime.

Charity care and bad debt deductions for physicians

Initial thought: positive. Physicians need to be at last minimally reimbursed for the charity care they offer. At the very least, they need to be not discouraged from it. This fits with one problem I identified as an underlying issue: removing impediments that keep doctors from being able to volunteer their services.

Pool reform for the individual market

Yes, yes, and yes! This directly targets one of my solutions. In fact, it goes farther; not only does it repeal or modify existing rules that make pooling more difficult, it deliberately makes it easier to pool. Nothing jumps out at me that might allow the pools to play loosey-goosey with people’s money and have a higher than expected failure rate.

Interstate market for health insurance

Yes! It appears to give a wide latitude for selling insurance across state lines while trying to prevent certain abuses that may be obvious to those in the industry. I want to research the details more to find out what each bullet point is meant to prevent.

Association Health Plans

Yes, yes, and yes! More risk pooling to give themselves more clout with insurers. Repeals or amends regulations that make it harder for small businesses to pool together. Again, nothing jumps out at me.

Anti-trust reform for healthcare

Good exemption and clarification, though this is not an area I focus on. That it doesn’t apply to Medicare/Medicaid/etc. contracts means it’s limited, but it allows healthcare professionals more leverage against insurers if I’m reading it right.

Increasing state flexibility to conduct Medicaid waivers

It’s a start, but it only deals with a symptom. Very little in this proposed bill would target the huge problems Medicaid makes for the healthcare industry as a whole.

Self-insurance protections

I didn’t know about this issue, but on its face, good. One less thing for the federal government to micromanage.

 

Overall, Senator Paul’s proposed bill makes some positive steps forward, but it doesn’t focus on—or even acknowledge—the two most damaging problems in health care: the Medicare pricing structure as de facto price control and our chronic shortage of doctors. It also doesn’t separate pre-paid medical services from real insurance, but it does increase our chances of building a successful parallel cash-only system.

 

Health status insurance and other policies made illegal under Obamacare

Have you ever heard of health status insurance? I hadn’t. It allowed people to insure against developing a condition that would make them uninsurable. What a great idea! That would alleviate many peoples’ biggest fear about health insurance.

As to why I hadn’t heard of it, well, it’s because Obamacare made it and other innovative policies illegal. Read all about it here.

Yet another good reason to repeal Obamacare.