Commentary: The Partisan Battle over ObamaCare (August, 2017)

by John McClaughryJohn McClaughry

Democrats and Republicans in Congress are in full combat over the future of ObamaCare. Three of the key issues they’re debating are Medicaid expansion, the individual mandate, and the Cost Sharing Reduction.

Medicaid is a joint Federal-state program to provide essentially free health care to the poor. The Feds cover from 50 to 74% of the overall costs, the various States 26 to 50%. The ObamaCare Act forced all states to set increased income levels for Medicaid eligibility, at the pain of losing all Federal Medicaid funds. The Supreme Court held 7-2 that it was unconstitutional for the Federal government to force states to pay for their share of the increased Medicaid population by discontinuing all Federal support.

Ultimately 31 states agreed to expand Medicaid eligibility, in return for Federal payments of 100%, and then 90% after 2020, of the costs for the expanded population. Nineteen states rejected the offer. Republicans want to end the deal, which would leave the 31 states with millions of near-poor people no longer eligible for Medicaid.

Democrats won’t accept rolling back the Medicaid expansion. Republicans propose to help the affected population with expanded tax credits to purchase private insurance. The advantage of private insurance is that medical providers are increasingly unwilling to accept far below cost Medicaid-level payments for their services, leaving Medicaid patients with reduced access, fewer services, and longer waiting times.

The Medicaid part of the battle thus comes down to a hassle over the Federal subsidy, either to States for more Medicaid, or to patients through more tax credits. The other major part of the battle is more complex.

The second issue is ObamaCare’s provision to force healthy but often financially strapped younger people into insurance pools, where their premiums would be inflated to cover the much larger health care costs of their older, sicker parents and (under 65) grandparents.

This is the individual mandate, and an associated employer mandate to provide insurance for employees. In a nutshell, ObamaCare requires you to obtain government-specified health insurance, or pay a fine or a tax for the privilege of not buying it.

When House Democrats passed their ObamaCare bill in 2009 – without a single Republican vote – they based the mandate provisions on Congress’s power to levy taxes. The Democratic Senators, however, ran away from enforcing the mandate by a new tax on not having insurance. In its place, they crafted an individual mandate bill founded on Congress’s power to regulate interstate commerce, stretching that power to unheard of reach. The House was forced to accept the Senate version. Republicans rightly saw this mandate as a constitutional outrage.

So did four members of the Supreme Court. But Chief Justice Roberts took it upon himself to convert the commerce power mandate back into the House’s tax penalty that the Senate – and Obama himself – had explicitly rejected. It was upheld 5-4.

Republicans are united in their determination to extinguish the individual mandate. What happens if they do? According to the Congressional Budget Office, freed from the ObamaCare mandate/tax, fifteen million people would instantly stop buying health insurance. The Democrats describe this highly debatable outcome as being ‘kicked off’ your insurance. But as health expert Avik Roy has noted, “by definition, you haven’t been ‘kicked off’ your insurance if the reason you’re no longer buying it is that the government has stopped fining you.”

The third major issue in play is the “cost sharing reduction” (CSR). The ObamaCare law provided for Federal payments to health insurance companies to enable them to reduce the premiums on ObamaCare’s overpriced policies for lower income purchasers. But unlike the ObamaCare tax credits, which are in the tax law, CSR funds must be appropriated by Congress. The Republican Congress won’t do it, and Obama was driven to making the payments ($7 billion a year) out of funds appropriated for other purposes.

The House sued Obama for misappropriating the funds, and won in Federal District Court (the case is on appeal). Trump has continued making monthly CSR payments illegally, but threatens to stop. If the CSR payments disappear, the insurance companies will have to jack up premiums, which will drive lower income buyers out of the market, and the insurers with them.

It has long seemed pretty clear that without at least a massive overhaul, ObamaCare will collapse, slowly or rapidly. The obsessive question in Washington is, who can be made to take the blame for it: the Democrats who enacted this failing monstrosity, or the Republicans whose refusal to pour in more billions to prop it up, and whose inability to enact their preferred alternative due to united Democratic opposition, could be charged with consigning millions of Americans to no affordable health insurance?

One interesting test might be a short bill to strike a Medicaid expansion compromise, repeal the individual and employer mandates, and appropriate (and legalize) the CSR payments for two more years. I leave it to political junkies to play out the politics of such a proposal.

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

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