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OpEdNews Op Eds    H2'ed 4/18/17

The ACA Lives: fix it not kill it

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The Affordable Care Act (alias Obamacare) lives to fight another day despite (or maybe in spite of) Speaker Paul Ryan's dogged efforts (over 60 HR votes to repeal over eight years). The most recent reiteration of the effort to kill the ACA and replace it with something dubbed Trumpcare had the support of the White House. The effort failed to come to the floor for a vote on March 24, 2017, because Rep. Ryan and the President realized there weren't the votes in the House for it to pass. Ironically, the President Trump threw up his hands in frustration.

Who would have anticipated this outcome considering that the Republicans control the Congress of the United States (both the House and Senate)? Since the President is a Republican, the demise of the ACA was arguably a sure thing. We remember Mr. Truman repeatedly saying throughout the presidential campaign that on the first day as president, he would ask Congress to send him a bill to "immediately repeal and replace Obamacare." Surely, he would have signed the bill. And the stars were aligned to make that happen given the makeup of the government. If it weren't for disparate Republican factions (particularly the Freedom caucus) with varying philosophies on how the government should function, repeal of the ACA would have been a done deal.

The Congressional Budget Office (CBO) said that Trumpcare would cut the federal budget by $300 billion in ten years, but 24 million Americans wouldn't have health insurance. (See Business Insider ) This will come from the elimination of the penalty on taxpayers without insurance, tax credits that are not as generous as current subsidies, and cutbacks of Medicaid expansion. Does this mean repealing the ACA would reduce federal budget deficit to $143 billion in 2027 from the current estimate of $443 billion? Any concerns for the 24 million or more without health insurance?

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Trumpcare would not have been an improvement over the ACA since it did not address directly some of the issues associated with the ACA in a positive way. It would not allow children to stay on their parents' insurance plan to age 26, it would eliminate the individual mandate, which would be an incentive for the young to not get insurance, and it would allow insurance providers to revert to denying insurance to the pool of the most vulnerable such as people with a preexisting condition. The actuarially likely to fall ill will get insurance, so insurance companies will logically raise premiums. Repealing the ACA would release $1 trillion dollars that would wind up largely in the pockets of the rich. Trumpcare would take subsidies away and perhaps give block grants to the states to distribute as they see fit for health insurance. What is better going through the state or directly to people?

A view in economics holds that it is better--more cost effective--indeed more efficient to target a tax (or subsidy) directly at the problem you aim to solve. For instance, to reduce pollution the government could tax the price of steel, which would cause the price to rise and sales (and production) of steel to fall, which in turn would reduce emission of effluence from smokestacks. However, suppose you tax effluence (pollution) from the smokestacks directly, the steelmakers would have an incentive to reduce the contamination coming out of their smokestacks without reducing the production of steel. Similarly, if the goals is to have more health insurance, mandating it will be more effective than giving the cash to buy it, which would lead to adverse selection, as the sick will buy insurance and the young and the healthy will not. Put lightly differently, a mandate is superior to a subsidy (negative tax) for insurance coverage as does the ACA as it incentives people to obtain health insurance and decreases premiums up front. Again, giving more money to states is the equivalent of approaching the insurance problem indirectly.

The ACA is not about to implode (explode) according to as the Congressional Budget Office found that the exchanges are not in a death spiral. Furthermore, "If Republicans had not launched a legal battle to allow states to deny Medicaid coverage to their citizens, and then cruelly taken up the opportunity to do so; sabotaged small but crucial risk-corridor payments to encourage insurer participation; and denied funds for outreach to exchange customers, it would be functioning better than it is. Still, it is functioning.

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As the Congressional Budget Office found last week, the exchanges are not in a death spiral. Insurers have found a stable price point." (See nymag.com) If sixty votes in the House to repeal Obamacare means anything, it means a commitment to put a stake in its heart. Speaker Ryan's aversion to what the ACA stands for implies that he will not entertain any measures to fix it even if obvious fixes would make it work better for the American people. It is difficult, though, to see what a new healthcare plan looks like without the individual mandate that people like and keeping children on their parents' healthcare plan. And A campaign rhetorical promise (apparently scrapped) to insure everyone would be nigh impossible to pull off in a government controlled by Republicans.

The economic costs of denying millions of Americans insurance are great because uncovered people with catastrophic illnesses could lose everything they own, including their savings and their homes because of extreme medical costs. People without insurance might also put off seeing a doctor until it is too late to help them. I don't agree did Dick Cheney that deficits don't matter. Mr. Trump also hinted at this noting that we could borrow and turn around and repay at a discount. (See the New Republic)

The interconnections between deficits and economic performance are layered with complexities. With that caveat, deficits do matter inasmuch as they add to the national debt and perhaps inform our social and economic choices for public goods and services such as expenditures on the military versus healthcare. Deficits can also lead to perverse behavior as when in order to cut taxes on the rich, the government attempts to find the money by gutting the ACA.

 

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Seymour Patterson received a Ph.D. in economics from the University of Oklahoma in 1980. He has taught courses and done research in international economics and economic development. He has been the recipient of two Fulbright awards--the first in (more...)
 
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