The American Healthcare Act (AHCA) (aka “Trumpcare”) is doomed. It was from the beginning, but the CBO Report issued today is the final spike through the head of a bill that was already a Walking Dead style animated corpse. That report found the current bill would add 24 million uninsured within ten years. Most of that would occur quickly, with 21 million of those additional uninsured happening in just three years, by 2020.
The President is clueless. In a rare moment of both humility and candor he admitted as much, declaring “nobody knew that health care could be so complicated.” For the record, he’s wrong. I knew it. If he’d called me I’d have told him. I never got the call. Senate Republicans are zombie shuffling away from bill with Senator Roy Blunt of Missouri bluntly stating “the bill’s likely to change in the House and again in the Senate.”
The CBO Report is damning in its conclusion that Trumpcare will roughly double the number of uninsured in the country. This conclusion condemns the viability of the AHCA as currently written. It all has to do with that “healthcare is complicated” thing that is only now dawning on our President.
This complexity should not surprise anyone. Americans spend well over $3 trillion a year on healthcare, roughly 18% of our GDP. This means nearly one in five dollars spent on anything in this country is spent on healthcare. The United States spends $10,000 per person per year on healthcare. Thus, the average annual healthcare bill for a family of four is $40,000. Staggering figures, and someone must pay for it. For every person (children and babies included) paying less than their $10,000 somebody else has to pay more. This is math; numbers must balance.
America is unique in this regard. No other nation spends close to this, not even other advanced nations. America’s share of GDP and per person spending on healthcare is roughly double similar numbers for the industrialized nations of Western Europe and Canada. Yet that additional spending does not buy us longer life expectancy, or lower infant mortality, or much else in the way of outcomes to justify any claim to having the best healthcare system in the world. But I digress, back to Trumpcare, Obamacare and the fundamental dilemma of healthcare insurance.
One of the most popular aspects of Obamacare was its rule that insurers could not deny coverage to people with preexisting conditions. Prior to Obamacare, many people with chronic illnesses, or even at high risk for them, simply could not get health insurance. So Obamacare required that insurers cover them like anyone else. This aspect of Obamacare is so popular that neither Trump, nor Republicans in general, want to abandon it. In fact, an incredible 92% of Americans support the Obamacare requirement that insurers must cover those with preexisting conditions. This may be a “divided nation” on many things, but not on that. Changing that aspect of Obamacare would be political suicide.
This leads to the most unpopular part of Obamacare, the part Republicans sued against, campaigned against, and swept the 2016 elections with. That part is the “individual mandate” requiring that everyone purchase health insurance or pay a tax penalty. Why did Obama and Democrats insist on having this unpopular provision that generated so much backlash? It’s simple. Without the individual mandate, it was not possible to require that insurers cover preexisting conditions.
Health insurance companies, like any other business, have to make money. If they don’t they will go out of business and provide no health insurance to anyone. People with preexisting conditions are often incredibly expensive to cover (often by many multiples above that $10,000 per person average). That is why so many were not covered before Obamacare. If you require by law that insurers cover them, there are two ways to pay for this:
- Allow insurance companies to increase premiums on those paying for health insurance, or
- Increase the number of people who are paying for health insurance to increase the base of those insured and spread the additional costs to a higher number of insured people.
The problem with Option 1 is that it creates an insurance death spiral. As premiums increase, people quit insurance creating higher premiums for those remaining, prompting more to quit insurance . . . and so on. Further, the incentive is to not buy insurance until one is already sick. Imagine if you were permitted to wait to purchase fire insurance until your home is on fire. I think you could see how such a system could not work.
So Obamacare chose Option 2 and increased the base by mandating that people purchase insurance or pay a tax penalty. The individual mandate was not because Obama is a freedom-hating socialist, bent on destroying individual liberty in America, but because that was the only way to make the system work, in particular a system requiring that insurers cover preexisting conditions. At one point, the late 1980s, this idea of an individual mandate enforced by a tax penalty was a conservative idea. The conservative Heritage Foundation strongly supported the concept (see page 51 here). Not a word of its supposed unconstitutionality was to be heard.
So with 24 million less insured people, how will Trump address the dilemma of paying for coverage of preexisting conditions? Quite simply, he does not. Because it is too popular to repeal, Trumpcare keeps the Obamacare requirement that insurers cover preexisting conditions, but it eliminates the individual mandate that served as its financial foundation. With 24 million fewer Americans insured, the costs of insuring those with preexisting conditions will fall on a much smaller base of insured people, dramatically raising their premiums. With premiums escalating, fewer people will purchase insurance . . . and so on. The death spiral referred to above is on.
As for those 24 million without insurance, will they not get healthcare? Of course they will, we won’t just let them die. They will flock to already overcrowded emergency rooms to receive primary care in the most expensive manner possible. These are expenses they will not bear, lacking financial resources to do so, shifting more costs to the ever draining pool of insured people. In essence, the people who are insured under Obamacare now, and paying at least a part of their costs for healthcare, will become uninsured and pay none.
This is a small piece of the complex interrelationships of our massive (one-fifth of the economy) healthcare industry. You can’t pull out just one thread of that tapestry without risking unraveling the whole picture. Trumpcare is a massive legislative dodging of one of the most perplexing dilemmas in healthcare financing. However, its consequences cannot be dodged.
Thus, Trumpcare as written is doomed. Any substitute must address this dilemma, one way or another.