Why the GOP’s Obamacare Replacement Is Infuriating Just About Everyone

Mar 07, 2017

It took President Barack Obama more than a year from his inauguration to get the Affordable Care Act passed by the skin of its teeth -- despite enjoying massive Congressional majorities. And now, after early reactions to the GOP's replacement plan, his successor and the Republican-controlled Congress are learning why reforming the U.S. health system is such a Sisyphean endeavor.

After months (well, technically, closer to a decade) of wait for an official Republican plan to replace Obamacare, the House Energy and Commerce and Ways and Means committees unleashed legislation dubbed the American Health Care Act (AHCA) late Monday that would nix the existing health law's unpopular mandate to buy insurance and pare back its far more popular expansion of Medicaid for the working poor, among other provisions.

But major policy shifts are all about tradeoffs. And in an attempt to simultaneously preserve some Obamacare-era protections for the 20 million-plus Americans covered under the law, while scrapping other provisions despised by a conservative Republican base, the House leadership appears to have galvanized just about everyone other than the White House against the plan.

Liberals hate it (duh)

Unsurprisingly, Democrats aren't particularly excited at the prospect of undoing major tenets of Obama's signature domestic legislation.

"This will make millions of people — it's a question of 10, 15, 20 million people — off of having health insurance," said House Minority Leader Nancy Pelosi during an interview on CBS's This Morning on Tuesday. "It will be the biggest transfer of wealth from low- and middle-income people to wealthy people in our country. Show us the numbers as to how many people will be thrown off. It couldn't be worse."

Liberal groups such as MoveOn and patient advocates like Families USA also slammed the plan. "People with serious chronic illnesses will be hurt the most, left only with bare-bone coverage that comes with drastically higher deductibles. These individuals will once again be forced to go without lifesaving treatment or go into debt to get the care they need," wrote the latter group in a statement.

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These critics are referring to the fact that AHCA would include massive tax cuts for the wealthy while significantly scaling back or freezing government assistance for the poorest. For instance, Obamacare's use of federal subsidies to pay for mandated coverage would be replaced with a tax credit system meant to encourage people to voluntarily buy insurance. But the GOP plan would be far less generous in many regions because it's a flat credit based on a person's age.

Under the plan, people younger than 30 would get a $2,000 annual credit to buy insurance, and people older than 60 would receive just $4,000 per year. (Individuals who make more than $75,000 or couples who make more than $150,000 would be phased out of receiving the credits.) The independent nonprofit Kaiser Family Foundation (KFF) has a handy interactive map demonstrating how the GOP plan would essentially benefit the young and the rich at the expense of the old, poor, and sick.

The Medicaid program for the poor would also see massive changes. For instance, the federal government would stop providing federal funds to pay for people who newly qualify for coverage in the states that expanded Medicaid after 2020. And the entirety of the program would be converted into a "block grant" system which provides states with a fixed sum of money to pay for Medicaid enrollees. Critics say such a system would inevitably lead to deep Medicaid benefit cuts.

The bill also defunds Planned Parenthood, a provision that has already sparked intense pushback from women's groups.

Conservatives aren't fans, either

Republican factions were already splintering on rumored Obamacare replacement blueprints well before the AHCA's introduction. But the official bill debut led to a firestorm of criticism from lawmakers and political groups who think it doesn't go far enough to dismantle the health law.

Kentucky Republican Senator Rand Paul, a fierce Obamacare critic, took to Twitter and echoed those sentiments about the AHCA's flaws. For instance, the GOP proposal would attempt to punish people who don't maintain continuous health care coverage by slapping a one-year, 30% premium penalty on them when they try to reenter the market. This is, roughly, the AHCA's version of the tax penalty for not having health insurance — but instead of a tax penalty going to the government, it's a temporary cash influx for health insurers.

"It keeps individual mandate but makes you pay the insurance companies instead of the government," he wrote.

Prominent conservative health care thinkers like Avik Roy, who advised Mitt Romney's 2012 presidential campaign, also weren't particularly impressed with the legislation. Neither were important House GOP blocs like the Republican Study Committee, which called the plan "a Republican welfare entitlement" due to its tax credits.

And at least four Republican Senators — Rob Portman, Shelley Moore Capito , Cory Gardner, and Lisa Murkowski — said Monday they wouldn't vote for a bill which significantly undercuts Medicaid (a criteria that this draft legislation appears to fit). All four hail from states that expanded Medicaid and realized massive coverage gains.

Market havoc could hit the health industry

Then, of course, there's the medical industry itself. Most of the major trade associations, including doctor's group the American Medical Association (AMA), and America's Health Insurance Plans (AHIP) have stayed relatively coy on how they feel about the GOP proposal. AHIP told Fortune that it was still "reviewing the bill."

The American Hospital Association (AHA) released a statement Tuesday afternoon expressing concerns over what coverage losses could mean for hospitals and patients and concluding that the group "cannot support the American Health Care Act in its current form."

"[I]t appears that the effort to restructure the Medicaid program will have the effect of making significant reductions in a program that provides services to our most vulnerable populations, and already pays providers significantly less than the cost of providing care," wrote AHA president and CEO Richard Pollack. He went on to insist that Congress continue to prioritize coverage as the bill continues its legislative journey.

There's a chance that not everything about the AHCA will be unappealing to industry groups. It does preserve protections for Americans with preexisting medical conditions and allows children to stay on their parents' health plans until age 26, which is important to doctors and hospitals.

But the reality is that the plan, in its current form, will make it significantly harder for poorer people to afford insurance or out-of-pocket costs (the AHCA completely nixes Obamacare's other subsidies to help low-income Americans afford deductibles). And at the end of the day, its hodgepodge of proposals will wind up shrinking the individual marketplace, which is bad news for insurance firms, hospitals, and other parts of the medical sector.

"I think the big insurers were hoping that the market would be expanded under a replacement," Kaiser Family Foundation vice president Gary Claxton told Fortune in an interview. "Instead, it's going to get smaller."

That's because the AHCA actually maintains Obamacare's "essential health benefit" provisions requiring insurers to cover services such as maternity and mental health care, as well as a cap on how much consumers can be made to pay out of pocket in any given year. But by combining those standards, which drive up the price of insurance, with a reduction in financial assistance and mandates to carry coverage, it's hard to see how poor people who are more likely to lack insurance will be able to afford it anymore.

The House is expected to begin its markup of the Obamacare replacement plan this week.

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