Monday, May 29, 2017

Why the New Republican Healthcare Plan Might Be More Popular Than the Old One

When Republicans set out to repeal and replace Obamacare, they should keep political rules in mind. First, every major policy change has both losers and winners.  Second you hear a lot more from the losers than the winners.  That is why changing policy is so hard.

The first proposed Republican plan was an exception in producing no winners at all.  Or rather, no winners in the field of healthcare.  The relatively small number of people whose taxes fund Obamacare would be winners in seeing their taxes fall.  But no one would see lower premiums or more coverage.  Either there would be no change, or subsidies would be reduced and (often) premiums increased.

Anyone wanting to lock in a policy has to create winners as well as losers, because in winners one creates a constituency for the new policy who will resist changes to it.  By ingeniously creating a policy with no winners (at least in terms of healthcare), Republicans assured that there would be no resistance to going back to something more like Obamacare.  The House Freedom Caucus saw this as a problem and insisted on a new version.

The new version allows states to opt out of Obamacare's regulations requiring them to provide certain essential services, and forbidding them from charging more for pre-existing conditions.  This was a very important matter to the Freedom Caucus, which opposes all economic regulations on general principle.  The reason they gave for wanting this change was to lower premiums and, indeed, removing the regulations will lower premiums for young, healthy, male customers.

There is no doubt that healthy young men have been losers under Obamacare and have seen their premiums go up to subsidize women and older and sicker customers. For some time Republicans have been denouncing Obamacare for raising premiums for healthy young men.  I was never quite sure whether these criticisms were sincere or opportunistic.  On the one hand, it might just be like their claim to be upset about the high deductibles even as all Republicans plans proposed even higher. On the other hand, before the Obamacare regulations, individual insurance policies were largely unregulated and really did offer much lower rates to healthy young men.  And, after all, basic Republican/libertarian dogma is that whatever outcome results from the unregulated workings of the free market is, by definition, optimal.  And, indeed, the Freedom Caucus does appear to think that keeping down rates for healthy young men is the absolutely most important policy goal in replacing Obamacare.

So, the new policy, unlike the former one, will at least create winners and a constituency.  Healthy young men will pay less.  Granted, they will also have higher deductibles, but I am guessing that that will not create all that much opposition.  Already under Obamacare the deductible is more than most healthy people pay in one year anyhow.  That it goes from being not that much more to being a lot more will not be noticed by most people who don't spend all that much on health care anyhow.

But it will also create losers.  Older people will pay higher rates.  Because the subsidy does not change in proportion to the premium, people in rural areas will pay more, and people in Alaska will pay a lot more.  In other words, a lot of Trump supporters will be losers.  But not just Trump supporters.  People with pre-existing conditions will find rates spiking, as will women who consider having a baby.  In short, Trumpcare will make insurance a lot more affordable for people who don't actually need it, and less affordable for people who do.

And make no mistake, we will be hearing a lot more from the losers than from the winners.

*Actually, there is one benefit.  Providers charge much less to insurers than to individual consumers, so even if the insurance company does not pay for anything at all, the out-of-pocket expense for any care is less for an insured person and an uninsured person.

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