Commentary: ObamaCare’s Year of Reckoning (November, 2016)

John McClaughryby John McClaughry 

It now seems increasingly likely that most of President Obama’s signature achievement, ObamaCare, will end up on the scrap heap by the end of 2017, if not sooner.

Obama and his Democratic Congress rammed the Affordable Care Act through in 2010, without recognizing the likely consequences. In the ensuing five years, Obama has made numerous unilateral changes to the act to keep it from falling apart. Now President Trump can insist that the act be implemented exactly as written by the Democratic Congress and signed with great fanfare by Obama. That will be a death sentence.

In 2010 the for-profit health insurance industry agreed to support ObamaCare if Obama would abandon the progressive component, a government-owned “public option” company that would be able to undercut the premium rates of its (Federally regulated) competitors.

In addition, Obama also gave the industry a provision called “cost sharing reduction”. This was a Federal government promise to inject billions of dollars to reduce the cost of “Silver” benefit plans for lower-income Exchange purchasers.

But Congress didn’t appropriate any money for this purpose. So Obama snatched billions of dollars out of the tax credit refund program to make the payments. But that’s illegal, as a Federal District Court has already ruled (it’s on appeal).

If it’s illegal, the Trump administration can simply stop paying. Then at least some  insurance companies, facing an exodus of Exchange customers who can no longer afford Silver plans, will take advantage of another provision of the law to exit the program altogether.

And there’s more. The ObamaCare “risk corridor” program assessed most insurance companies to create a fund to bail out the ones that lost money by low-balling their premiums for unfamiliar customers under the new ObamaCare rules. The law requires that the first $5 billion of these assessments must be paid over to the Treasury.

Obama plans to divert the statutory $5 billion Treasury payment into more bailout dollars for the companies. The Government Accountability Office declared that that diversion is illegal.

Alternatively, Obama is now planning to take the needed money out of the Judgment Fund. This is a long-standing Treasury fund available to settle monetary judgments against the government. Obama’s intention is to settle the claims of the insurance companies that have sued, and presumably the others as well, and submit the settlement to court approval. This would avoid an unfavorable court ruling. It would also be another covert multibillion-dollar bailout to keep the insurance companies from jumping ship.

Trump doesn’t have to defy the Obama’s Affordable Care Act, or have Congress repeal it, to close out Obamacare and its recurring insurance industry bailouts. All he has to do is carry out the law as Obama and the Democratic Congress actually enacted it, and ObamaCare will then collapse. That would be a calamity for millions of Americans who could find themselves without health insurance.

The Republican Congress has vowed to prevent that calamity by passing a “smooth transition” act to put a new health care program in place. Trump has already said that “repeal” won’t end ObamaCare-mandated family coverage for children up to age 26, or the mandate that pre-existing conditions be covered at no extra charge.

Beyond that, Congress is likely to convert the Exchange premium tax credits to individual tax credits, repeal the tax penalty on those who fail to buy government-specified coverage (now $695 per adult), repeal the employer mandate, repeal the guaranteed issue and community rating mandates, liberalize access to Health Savings Accounts, and partially fund state high-risk pools to cover the uninsurable.

That’s not a complete program, of course, and there are problems with keeping the pre-existing condition provision that will require a creative solution.

What will this mean for Vermont? It’s too soon to say, since it depends on what replacement plan Congress and the President put into place. BlueCross/Blue Shield of Vermont, which insures over 90% of the individual and small group customers on Vermont Health Connect, has nowhere to go, and has become a “too big to fail” ward of the state. Medicaid, now covering over 184,000 Vermonters, will budget-wise remain “the monster that ate State Street”.

The future of Gov. Shumlin’s “All Payer” agreement with the Obama administration now depends on Gov. Phil Scott’s views on whether patient care and affordability will be improved by turning almost all health care in Vermont over to a statewide managed care monopoly called OneCare Vermont, whose care decisions will be controlled by a state-dictated global budget.

Vermont legislators, despite the chronic yearning of many for a single payer plan, should begin now to devise a new consumer-directed health care policy, built upon patient choice, price and outcome transparency, more legal protections for providers, and personal responsibility – instead of more government mandates, a medical provider monopoly, and ever-accumulating bureaucratic control.

- John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org)  

 

{ 1 comment… read it below or add one }

Richmond December 1, 2016 at 5:45 pm

I continue to think that Obama and Prof? $$Grubber knew for sure the scheme would flounder and cost too much, leading the public to demand of the next Dem. Gov’t that Gov’t just take over all medical care, and control costs by starving the providers – just as Medicare and Medicaid currently do. And Dr Dynasaur in Vt.

Then the providers would be demanding that they too become gov’t employees with good salaries and benefits.

Rationing health care services. Pay providers per capita, rather than paying them to cure disease of heal wounds.

Reply

Leave a Comment

Previous post:

Next post:

About Us

The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
Read more...

Latest News

“We are the regulators!”

by Rob Roper Kevin Mullen, chairman of the Green Mountain Care Board, appeared on the WDEV radio program Open Mike (10/11/17) to discuss Certificate of Need laws in...

Certificate-of-Need Is Obsolete

by Frank Mazur There is a push for consumerism to address our high health care costs.  Given the freedom to choose health options consumers will be more cost...

Study: School Choice Increases College Success for Low Income Students

By Rob Roper A recent examination of the Florida Tax Credit Scholarship program by Dr. Matt Chingos of the Urban Institute concluded that giving low income students access to...

Climate Lawsuit Extortion

by John McClaughry Do you think climate change is just a harmless obsession among certain weird people? Well, read this from True North reports’ Michael Bastasch. “The U.N....

Commentary: The next solar bailout

by John McClaughry “Free electricity from the sun” has been a dream for decades. Although solar photovoltaic cells have been used for 40 years in spacecraft, the growth...

Video