In the wake of the Republicans’ catastrophic inability to repeal Obamacare, many people have begun to accept that the Patient Protection and Affordable Care Act is the new basis on which the US health system will be built. This means that for the foreseeable future, assuming the Republicans are not able to suddenly develop a competent and coherent health financing agenda, progress towards universal health coverage (UHC) in the USA will depend upon improvements of and reform to the free market system as it is regulated by Obamacare. Obamacare is unusual among developing nation health financing systems for its heavy reliance on private insurers as the fundamental providers of risk pooling, as opposed to most other health financing systems where some form of government insurer provides the overwhelming majority of national health financing. For a lot of critics of Obama and Clinton from the left this is seen as a failure, and a sign that they are neoliberal sellouts: under this view of health financing reform, no market-based system will work and Obama sold out his own supporters when he put forward a plan that did not include single payer or a public option. For conservative policy makers in non-crazy countries – for example the UK[1] or Canada – and also in developing countries moving towards UHC, this offers an opportunity to see whether a free market approach to health financing can deliver the key goals of universal coverage and financial risk protection. The problem for conservative thinkers on health care is that there seems to be very little evidence that free market systems work, and the problem for left wing critics of Obamacare is that there is no evidence single payer could have been delivered in the modern US political environment. So for both far left critics and moderate right wing admirers of Obamacare the obvious question is: can UHC be achieved without a single payer system?

This week’s issue of the Journal of the American Medical Association has published an opinion piece addressing this issue. Entitled Achieving universal health coverage without a single payer: Lessons from 3 countries, it gives a brief overview of how Singapore, Germany and Switzerland have achieved UHC with at least nominally non single-payer systems. It attempts to address some of the key differences between these systems and the USA, and some ways in which the health market in those countries is different. Since JAMA is behind a pay wall, I thought I would give a brief summary of a few of these points.

First the article opens with a clanger, asserting that “Universal coverage is a top priority not only for Democrats but also for President Trump,” which does lead one to wonder how critical the authors are. It then goes on to dismiss summarily one of the key ideas raised by Republicans for making private health coverage more affordable in the US: high risk pools. The intention of a high risk pool is that patients with high cost or pre-existing conditions be offered insurance from a special fund financed by the government, thus removing them from the main private insurance risk pool and enabling insurance companies to reduce the cost of mainstream health insurance products. The problem with this model is that it is enormously expensive and there is no evidence that it works. The article points out that no US government will be able to justify the amount of money required to properly finance high risk pools, and that it probably costs upwards of 8 billion US$ a year to do this. It also notes that – contra Paul Ryan’s assertion that pre-ACA high risk pools worked great – most of the state-based high risk pools in the pre-ACA era were hideously expensive and did not work. The article also points out that a preferred strategy of some left-wing critics of Obamacare – shifting high risk patients onto Medicare – may also not work, since Medicare is already a high risk pool and expanding it by dumping in the highest cost patients will be impossible without increased funding (the article uses the language of sustainability, about which I’m suspicious because of its origins, but it cites well-respected sources on the challenges of continuing to finance Medicare if it is treated as a high risk pool).

So given this, the only way that a private system will be able to achieve universal coverage is if everyone is enrolled in insurance, and insurance is properly financed. The article describes the systems in Singapore, Germany and Switzerland, and how each of them force all their citizens into insurance coverage. For example, about Singapore it says:

Singapore institutes compulsory contributions from employers on behalf of their employees to create medical savings accounts. Employees maintain these accounts for health care expenses such as health and disability insurance premiums, hospitalization, surgery, rehabilitation, end-of-life care, and outpatient services. Those failing to pay their premiums are subject to garnished wages and other legal actions that can force payment of back premiums, penalties, and interest. Unemployed or low-income individuals are eligible for government subsidies that enable them to pay for the premiums.

and it points out that Germans are enrolled automatically in “private” funds that take a guaranteed 7.3% of their income. It’s hard to imagine any such plan being popular in the modern US, where the individual mandate has been subjected to years of withering don’t-tread-on-me type criticism and the idea of paying an income-based premium is terrifying to the GOP’s donors. In Switzerland and Singapore, where the systems do not use tax-based payments, they have government subsidies for (according to the article) up to a quarter of their population. So these systems – which by all accounts are functioning, affordable and tolerated by their citizens – share Obamacare’s key tactics of means-tested subsidies and individual mandates.

The article also makes the point that these systems have a very healthy free market structure, with much more vibrant private markets than the USA:

Germany in 2015, for example, had 124 sickness funds and 42 private health insurance companies, and the average resident of Switzerland in 2011 could choose from 59 health insurers offering coverage, with the 5 largest insurers covering 43% of the population. By comparison, in California, a state with approximately half Germany’s population, only 7 firms covered more than 95% of privately insured individuals in 2011, with the 3 largest firms covering 75%. In Massachusetts, with a population slightly smaller than Switzerland’s, 3 insurance companies enrolled 79% of individuals with private insurance.

I think this might be pushing the comparison a little bit, because many of the “sickness funds” in Germany are likely union-run or industry-based mutual associations with very strict management criteria, non-profit structures and guaranteed membership, and they may be regionally based so not actually directly competing with each other[2]. Also, I’m very confident that all three countries studied have rigorous price regulation and strict government oversight of providers (hospitals and clinics), so that they cannot for example price gouge the insurance provider for an infamous $500 band aid as they can in the USA. It’s much easier for private insurers to compete with each other for market share when they know what the cost of the insurance payout is likely to be, and can be confident that the provider won’t charge them arbitrary amounts, and I suspect that this certainty also removes a whole layer of administrative staff at both provider and insurer, for which the US system is infamous.

Having given an overview of these systems the article draws a simple conclusion and gives a firm recommendation: Obamacare needs tougher enforcement of a more punishing individual mandate. I think this conclusion is only partially correct, missing the role of price regulation and cross-subsidization from general taxation that protects these private markets.  So I think that the article is a little strong in concluding that the USA can definitely achieve universal health coverage without at least, for example, introducing a public option to every market place (or at least the rural areas). But it does make the point that a better regulated insurance market with better subsidies and a much tougher mandate would likely encourage competition, and achieve universal health coverage (or close to it) without driving up costs. It certainly seems that the architects of Obamacare knew this and had a long term plan for its expansion and improvement, and assuming the world survives Kim Jong Il’s birthday this weekend, hopefully the Democrats will be back in power in the USA soon enough to begin taking the next steps along that road. I’m not convinced yet, but it is still possible that Obamacare could show the way to a genuinely private, free market alternative to achieving UHC without single payer. In my view, however, if Obamacare (and human civilization!) does survive the Trump presidency, it is likely to become an increasingly state-regulated and state run system, rather than a robust private market place, because introducing a public option, slowly squeezing out private provides, and then making health insurance premiums fully means-tested and tax-based, is a much more reliable way to make everyone happy.

Still, for genuinely interested conservative policy-makers outside of America (whose “conservatives” have no interest in anything resembling policy), the next few years of Obamacare offers an exciting opportunity to develop new pathways to UHC. Given the complexity of movement towards UHC in some low income countries, and the very limited government finances in many of them, it would be interesting to see whether Obamacare’s roll out, expansion and improvement offers a new and more viable pathway to UHC than those currently on offer. I’m not holding my breath, but it will be interesting to see what lessons we can learn from this new and quite unique approach to one of America’s (and the developing world’s) big remaining problems.

First we have to survive the Trump presidency, though.


fn1: Caveats on the use of “non-crazy” should be inserted here, especially after Brexit

fn2: Interestingly, these sickness funds sound a lot like the non-profit mutuals that Obamacare was supposed to encourage, and which US “conservative” critics of Obamacare constantly sneer at and declare completely unviable.

By now everyone has learned the news that after 17 days of massive effort to try and force it through the legislature in the dead of night the Republicans have given up on their godawful attempt to repeal and replace Obamacare, and have accepted that Obamacare is now the “law of the land.” Having made no effort at all to reach out to Democrats, and after trying to push it through the Senate using a reconciliation process that was explicitly designed (and admitted) to negate Democrat votes, Trump’s first act of contrition for his and Paul Ryan’s failure was to blame the Democrats for not working with him. He went on to repeat the lie that Obamacare is “exploding” (it’s probably not) and openly admitted that he is going to try and hasten its collapse through executive action, following the logic that a program initiated by Democrats that is screwed into the ground by a Republican government will somehow be seen to be the Democrats’ fault.

Trump initiated this process of screwing Obamacare on his first day in office, when he passed a notoriously vague executive order that instructed all responsible departments to not comply with the details of the law to the extent they could legally get away with. A lot of people were duly concerned about this, because there are a lot of aspects of Obamacare that rely on administrative guidance that can be modified by the government in power. So this week’s New England Journal of Medicine has a short editorial by Jost and Lazarus about whether Trump can actually successfully undermine the workings of the act through administrative action alone. The two authors appear to be lawyers, one with a connection to the Constitutional Accountability Center, which supports the cause of “progressive constitutionalism” (which appears to be the idea that the Constitution is a living document whose interpretation can change over time), so presumably their understanding of constitutional law is fairly good.

The authors point out that reaction to Trump’s executive order ranged from fear to snorts of derision, and proceed to show at least one way in which it has failed bigly. One of the big fears expressed in initial response to the order was that the Inland Revenue Service (IRS) would stop collecting taxes it is required to under the “mandate”, the unpopular part of the law which punishes through the tax system anyone who does not purchase insurance. This was probably Trump’s intention in passing the executive order, but it turns out the IRS ignored him: it admitted on February 15th (a month after the order was signed) that it was still collecting mandate taxes, and that it’s sole response to the order has been to shelve a planned crackdown on tax evasion related to the mandate.

The authors point out why this should be unsurprising: government agencies are required to enforce the laws of the land, and there is a long-standing history of jurisprudence forcing them to. They point out that in fact

it is one thing to delay temporarily a legal requirement or to phase in a new law to facilitate adjustments by affected people or entities; it is quite another to refuse outright to enforce a law already in force, with the aim and effect of undermining that law. The Supreme Court has said that courts may step in to correct any such “abdication” of the executive branch’s duty to faithfully execute the law.

Apparently the highest court in the land has built up a body of precedent which requires government agencies to enforce government law, and the authors seem quite confident that if agencies don’t do this, court action would likely force them to. They go further than this, though, considering the hypothetical case in which the IRS bends the definition of “financial hardship” sufficiently to enable anyone affected by the mandate to be exempted from it on the basis of “financial hardship” (apparently some devious Republicans had considered this oily move). They write:

In a critical 2015 Supreme Court case upholding nationwide availability of ACA “premium assistance” tax credits for eligible low-income insurance purchasers, Chief Justice John Roberts held that courts and agencies must interpret and apply individual provisions of a law — indeed, of the ACA in particular — so as to further its overall “legislative plan.” Roberts concluded: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. . . . [W]e must interpret the Act in a way that is consistent with the former, and avoids the latter.”

This might seem quite reasonable to outsiders, but apparently in America the idea that government agencies must act according to the legislative intention of the law of the land is novel and requires clarification from the Supreme Court.

(Also note that this statement was made by justice John Roberts, a conservative judge appointment by Bush Senior, not one of those quisling liberals who think all toilets should be unisex because they’re radical feminists!)

In conclusion the authors are unconvinced that Obamacare can be undone by administrative action alone, though they concede it could become less generous and function less smoothly as a result of meddling. But the Republicans need to be careful here, since administrative overreach in this regard is likely to be punished by the courts, stacking further humiliations on Trump’s already woeful record of mistakes and inactions. Worse still, there is a big and growing split in the Republican movement over Obamacare, and signs that some of the 19 states that resisted the Medicaid expansion are going to cave, further entrenching Obamacare’s role. In particular Kansas, whose economy has been completely wrecked by Republican Crazy Caucus economic ideals, is desperate for money and is very close to taking the Medicaid expansion because balancing the budget will require the extra money. Virginia’s governor is also trying to get that state covered, and activists are using failure to take the expansion and its associated funds as a stick to beat Republicans locally. With Trump’s popularity nosediving, the collapse of the American Health Care Act showing the impossibility of reform through Congress, and many of the areas that voted for Trump most vulnerable to executive action, it is unlikely that vulnerable Republicans are going to want to push this issue at a local level. So the conclusion of this opinion piece in the NEJM is that while Obamacare won’t work as well under Trump, it is unlikely to be seriously damaged. And the longer it continues to function, the harder it will be for Republicans to repeal it or to continue to even talk about it. My guess is that over the next two years – and especially as the mid-term elections approach and it begins to look like a wave election is going to swamp a lot of Republican congress people – we will see more states take the Medicaid expansion, and moderate Republicans begin to talk strong talk about repairing the existing law rather than destroying it. Whether any of them survive the mid-terms will be another question entirely – but if they don’t, they will be replaced by angry Democrats, raising the possibility that after a wave election in 2019 the Dems might be able to force a veto-proof bill across Trump’s desk, requiring him to sign a public option into law.

Regardless of what happens at the next election, though, it appears that there is no easy way for the Republicans to undermine Obamacare enough to destroy it, and it would be increasingly reckless of them to try. Obama’s legacy looks to on increasingly solid ground, and I think it’s now safe to say that he was one of the greatest of the modern presidents. Who would have thought a Kenyan Muslim could go so far!?

The New England Journal of Medicine appears to have plunged deep into the debate on health insurance reform since Trump was elected, and in its 9th March issue has a series of articles and opinion pieces on Obamacare’s effects. This includes a piece pointing out that Obamacare expanded access to treatment for substance addiction, including opioid addiction (a big and growing problem in the US at the moment) and also a research article examining the impact of the medicaid expansion on specific health and health financing outcomes (the findings: it was broadly very positive). It also has a short research article examining the claim that the individual insurance markets have been thrown into a death spiral by the poor design of the law.

This claim has been going around for about a year now, and is generally based around the fact that some insurers have left some markets, and in some cases blamed Obamacare for their decision. For example, Zero Hedge made this claim in 2015, and the National Review took it up in July 2016. Articles discussing the alleged failings of the exchanges typically point to the withdrawal of big companies such as Aetna from some exchanges, suggesting that these companies are withdrawing because the fundamental dynamic of the exchanges prevents them from making a profit. This is important in the US context because for people earning above 138% of the federal poverty line who do not have employer-based insurance, the best and most efficient way for them to get insurance coverage is through a marketplace called an exchange, which is a special clearinghouse for selecting Obamacare-compliant insurance plans that is set up either by your state or by the federal government if your state refused to cooperate with the law. (An example of a generally well-liked exchange in a Republican-run state is Kentucky’s Kynect exchange). Obamacare’s defenders have pointed out that some consolidation is natural in markets when they change, and that new entrants or changing business practices will naturally force some businesses to fail or leave – that’s capitalism! Under this defense, the exchanges are working as intended and there’s nothing to worry about, except that in some smaller states this process may lead to a collapse of competition as only one or two insurers remain – a problem Clinton intended to fix by introducing a public provider in all markets if she won the presidential election.

The new article in the NEJM explores this issue in detail, by collecting data on all the plans that operated in exchanges from 2016 – 2017 and comparing those that left with those that remained. The authors make the particular point that once the exchanges opened the marketplace itself changed, and this had implications for insurers. They say:

In particular, the ACA’s insurance-market reforms required firms to develop and market new products that were attractive to low-income Americans who faced few access and pricing restrictions based on their underlying health status.

This means that organizations that are unfamiliar with these market conditions might struggle. They explain this as follows:

Anecdotal evidence supports the argument that the skills of particular insurers may not have been well suited to these marketplaces. Many of the exiting firms, such as UnitedHealth, have primarily covered enrollees in the self-insured–employer market, in which insurers provide administrative services and are not primarily responsible for bearing actuarial risk or for developing products targeting low-income consumers. In addition, many of the assets that have proven quite valuable in the self-insured market — such as a large national footprint that is attractive to multistate employers — may not be particularly useful in state-based individual insurance marketplaces.

They then present the results of their detailed assessment of the properties of those businesses that entered or left the market place, which they summarize in a table, reproduced as Table 1 below.

Table 1: The characteristics of leavers

This table makes clear that the insurers who left the marketplace in 2016 were offering more expensive plans with narrower networks and lower levels of behavioral health coverage; they were also much more likely to be bigger actors in the market for fully-insured people and much less likely to have experience in Medicaid markets. Overall this suggests that these companies left the exchanges not because the exchanges were flawed, but because these companies were not experienced in targeting low-income Americans who make up a large share of the individual insurance market, and having made a play at the individual market decided to get out when they were out-competed by organizations with more experience in the marketplace. The authors further note that actually a lot of the insurers active in the exchange markets are making a profit and are aggressively targeting new marketplaces – but these insurers tend to be smaller organizations with experience in Medicaid services, and don’t attract the same attention as the big employer-market insurers who failed.

This study isn’t definitive and has some limitations – for example it did not compare leavers in 2016 with historical leavers before Obamacare was implemented, and it only compared silver plans (which are the most popular but not necessarily the most profitable, I guess). Nonetheless, it gives the lie to the claim that Obamacare’s exchanges are not working, or at least suggests that they are working well enough to warrant tweaks and improvements rather than complete abolition. Once again the NEJM has shown that Obamacare’s opponents are long on rhetoric and short on facts, and that although this health care law is not perfect, it is doing okay and is certainly a significant improvement on the status quo. Let’s hope that whatever reforms proceed over the next two years will lead to improvements in the areas that are not working, and not wholesale destruction of America’s best chance at universal health coverage in half a century.

It’s unlikely that this blog has any readers, and if it does it is unlikely that any of them are dyed-in-the-wool US Republicans, but just in case there are any out there, I would like to ask you a question. Can you articulate the objectives of a Republican healthcare policy? Can you describe what principles would underlie such a policy, and what methods would be used to achieve it? The new republican “alternative” to Obamacare has been released and it has attracted a lot of attacks from the right as well as the left, with many Republicans decrying it as “Obamacare lite” and complaining that it retains many of the key features of Obamacare: the mandate (now disguised as a fine), subsidies, and regulation. Some of the people attacking it (e.g. Erick Erickson at the Resurgent) seem to believe that repealing Obamacare now and working for a full replacement over the next year would be a good idea, which suggests that chaos in insurance markets is considered a small price to pay to achieve Republican objectives in healthcare policy. But what are they? A recent Vox article on the new plan suggests that it has mistaken the slogan (“repeal and replace Obamacare”) for the actual policy goal, because while the proposed plan would appear to meet the goals of the slogan it doesn’t actually offer any improvements on the actual plan. Many right-wing critics of the plan seem to agree. But none of them seem to be able to articulate what the objectives, principles and methods of a Republican healthcare policy would be. So what are they?

By way of comparison, most of the rest of the developed world and an increasing number of developing countries have achieved universal health coverage (UHC), and it is easy to identify the objectives, principles and methods of this movement. UHC has a specific objective, defined by the WHO as

ensuring that all people have access to needed promotive, preventive, curative and rehabilitative health services, of sufficient quality to be effective, while also ensuring that people do not suffer financial hardship when paying for these services

This is a clear objective – you may not agree with it but you can’t fault that it is clear and definitive. If any quibbling is going to go on here (and it does) it will be over the definition of “financial hardship,” which varies from place to place and time to time, but is at least a thing that can be defined. What is the Republican equivalent of that definition? Where is the Republican equivalent of that webpage?

The movement to UHC has also defined specific principles of health coverage. There is a famous diagram that defines a nation’s health services in terms of the proportion of the country covered, the range of services covered, and the magnitude of financial coverage offered, summarized in the cube shown below.

These are the principles under which UHC is defined and changes in UHC are assessed. Typically as countries move towards UHC they will make sacrifices on one or more dimensions of this cube, but in principle they will be trying to expand the fiscal space to incorporate all of them. For example, the UK National Health Service covers all the cost of medical care and covers all the population, but doesn’t cover all services (e.g dentistry), while the Japanese system includes some co-payments (so doesn’t cover 100% of the fees), but includes dentistry in its services covered. In my opinion this cube needs a fourth dimension, timeliness, but at its basic level this cube describes the goals of the system. In addition UHC as defined by the WHO attempts to achieve equity, although that could be wrapped up in the dimensions of population covered and cost-sharing. In any case, every UHC program can be assessed in terms of how well it achieves the goals defined by the cube, and these constitute the principles of health coverage. This isn’t a perfect model (it excludes quality and timeliness, for example) but it’s a set of principles we can work with.

What is the Republican approach to defining a successful health policy, and how do you aim to assess progress towards your objectives?

Finally, UHC as it is supported by the WHO is supported by a variety of different payment and delivery mechanisms, which are well understood and frequently studied. The people working in this field understand that the goals of the UHC program can be achieved through a variety of methods, which will vary depending on the political, cultural and economic climate in which UHC is enacted. Generally we will see a mixture of general revenue, government-run services, social insurance mechanisms, private insurance mechanisms, out-of-pocket payments, and (in developing countries) NGO funding. The exact mix varies and the drawbacks of the different methods are understood. Within this framework there is a general agreement on the need for regulation and the dimensions we regulate (credentials of health care workers, financial robustness of providers, assessment of drugs and devices) and often the government intervenes to ensure that everything runs smoothly (often through price negotiations, workforce planning, and targets and rules for specific sectors or agencies). Countries select from a wide array of possible regulatory and financing frameworks but all these frameworks are understood and well studied, and as middle income nations move towards UHC they typically select a set of methods from amongst this suite of tools that they think will work best in their setting. Given that Republicans rule out some basic mechanisms – general taxation revenue, government run services, social insurance mechanisms – and a wide array of regulatory structures, what methods do Republicans propose as alternatives?

Looking at how the Republican response to Obamacare has panned out over the past six years, and reviewing the new proposed plan, it seems to me that Republicans have rejected almost all the principles and methods of UHC. They appear to have done so on the grounds of “freedom”, but have never defined what a “free” health system would be. They also haven’t defined the objectives of their healthcare policy at any stage in the debate. Given this inchoate approach to a complex and important policy issue, it’s difficult to understand why they opposed Obamacare – with no objective or principles, how can they argue for or against any policy? I know it’s a fruitless task to expect Republicans to respond to any issue seriously when all they really are is a pack of grifters and con artists, but while those epithets almost certainly are true of the party I do think a lot of its voters are serious about their beliefs. So I want to ask you – what are your objectives, principles and methods? What does a Republican healthcare plan look like and what will it ultimately achieve?

I think the Republican leadership haven’t put even a moment’s thought into these questions, and I don’t get the feeling their “intellectual” wing in the bought-and-paid-for think tanks has either. But maybe there are ordinary Republicans who can answer my questions? If so, have at it! I’ll take a lack of comments as proof you don’t have a clue, rather than evidence that this blog has no readers. So let me know! What do you want, and how are you going to get there?

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After six weeks of waiting and watching the Republicans flail about trying to figure out a way to deliver on their campaign promise to “repeal and replace” Obamacare we have a policy! The Republicans have delivered on their promise to “simultaneously” repeal the law and replace it with something better, wisely choosing not to go down the repeal-now replace-later path that would have made them responsible for two years of madness. Instead they have decided to use the budget reconciliation process to revise the law, pushing their amendments straight into committees without giving anyone a proper chance to assess the law – including the Congressional Budget Office, whose decision on the law is essential in order for it to actually reach the committee stage. Apparently it’s a shocking piece of political cynicism when Democrats push a law through congress before anyone has a chance to read it, even after they spent months hashing out the content in public, but it’s okay for Republicans to push the law straight to the committee stage without any debate or public discussion at all …

Putting aside the dirty politics of the law, the law itself seems to be pretty dirty. Vox has an explainer, but in essence the basic details are:

  1. It repeals the mandate, a tax penalty on people who do not take out insurance, and replaces it with a fine applied to the cost of subsequent health insurance. This means that if you drop your plan and don’t take up another one within 63 days you suffer a 30% increase in the cost of your next insurance plan.
  2. It replaces Obamacare’s income-based subsidies with age-based subsidies, that are means-tested to disappear above a certain income. These credits are smaller than Obamacare’s and obviously intended to favour the wealthy and Republican voters (younger people are poorer than older people). In combination with the changes to the mandate, these subsidies will push insurance markets into a death spiral (see below) and are vastly more regressive than the Obamacare system (which was far from perfect).
  3. It doesn’t undo the Obamacare bans on discrimination against people with pre-existing conditions, but it does relax the rules on higher charges for the elderly, so that insurers can charge the elderly up to 5 times as much as the young
  4. It removes regulations on the products insurers can sell, enabling them to again offer insurance which offers no protection against financial catastrophe
  5. It retains the Medicaid expansion until 2020, after which it will stop new admissions to medicaid under the expansion rules, basically enabling the Republicans to repeal the Medicaid expansion by stealth and to put off the electoral consequences of the repeal by making sure it doesn’t affect those currently receiving medicaid. The Medicaid expansion probably increased the number of people insured by 10-20 million – this will be reversed slowly over the next 10 years
  6. It changes Medicaid funding to block grants for the states, which will mean that states give less funding to Medicaid, further restricting its effectiveness and/or driving more people off Medicaid. It also hands out money to Republican states that did not take the Medicaid expansion, to ensure they are not disadvantaged by their decision not to take the expansion over the past 6 years. Given that this decision was a political decision taken in collaboration with the federal Republican party, and that this decision directly disadvantaged state budgets, the decision to reward these states for their intransigence is breathtakingly cynical
  7. It abolishes a range of Obamacare taxes that were crucial to funding Obamacare
  8. It delays the so-called “Cadillac tax” (which all health economists agree is a really good policy) until 2025, effectively ensuring that this excellent piece of pro-equity, cost-containing legislation never happens

Aside from the decision to allow young people to stay on their parents’ insurance until the age of 26, there is essentially nothing about this health financing policy that is good. In particular, decisions 1 and 2 are very stupid decisions that will hasten the descent of insurance markets into death spirals. Consider the example of a 26 year old healthy man with no pre-existing conditions who is leaving his parents’ insurance, and is on 150% of the poverty line. This young fellow is not eligible for Medicaid (which is restricted to people earning less than 138% of the federal poverty line) but will get a $2000 subsidy under the new plan. If he does not find himself a plan within 63 days he will be charged 30% extra on the plan he chooses. The internet tells me 150% of the federal poverty line is about $18,000. The average cost of a silver plan for this man would be about $350[1]. Under Obamacare, if this chap didn’t take up insurance he would be faced with a tax penalty every month of his life for the rest of his life until he chose to purchase a plan; but his plan would be subsidized so that he would not be paying much for it, so the difference between the tax penalty and his plan cost would likely be minimal – his decision about whether to take a plan would largely come down to his personal health seeking behavior[2]. In the case of a 26 year old man we can be fairly confident he would choose not to take a plan, but that’s a story for another day. Under the Republican plan, this young man would suffer a 30% penalty on his next plan, for one year. Using Obamacare coverage costs as a guide, he would face a $110 a month penalty for one year, or $1320. Given that this man is healthy with no pre-existing conditions, and can assume that any significant health issues he faces in the next five years will be emergency issues (i.e. being shot) and best handled by free emergency care, he has no special reason to get health coverage. So from his perspective waiting four months with no coverage is no big threat to his health, and saves him more than the fine – and the longer he waits, the more he benefits. The Republican plan actively encourages young, healthy people to avoid taking insurance for as long as possible, because there is a cap on their liabilities that is determined by the price of the insurance they ultimately take. Given that no one in their 20s needs high cost coverage and salaries rise as you get older, a 30% fine is no inducement to take coverage – and the higher this fine gets, the stronger the inducement to delay purchasing coverage. This fine will encourage young people to avoid markets, except for a small group of people who hate taking risks, who will likely already be sick or at risk of getting sick. The healthy will stay away until they are old enough to need coverage – especially if the new deregulation of products enables insurers to remove maternity care from coverage, since maternity care would encourage 30-something women to take insurance.

Furthermore, while the Obamacare mandate returns the penalty for not taking insurance to the tax payer, the Republican plan returns it to the insurer – to use on covering their losses as the death spiral begins. It’s a disaster for insurers and it shows the fundamental silliness of trying to manage a universal health coverage (UHC) system through a classical private market place governed by Republican ideology – these market places rely on a large pool of low risk individuals, but Republican ideology opposes forcing anyone to spend their money in any specified way. So on the one hand you have a classical market demanding a certain pattern of expenditure that can only be guaranteed through government coercion, and a ruling party that fundamentally opposes that coercion, on both moral and practical grounds.

Madness.

It’s worth noting that a lot of right-wing commentators are angry at this new plan, calling it Obamacare lite and objecting to the subsidies and the mandate. Eric Erickson at The Resurgent opposes the mandate and sees the Republican plan as no different, giving a clear example of the fundamental conflict between modern Republicanism and basic health care policy. You can’t have a functioning health insurance system if healthy low-risk people don’t opt in, but they will never have an incentive to opt in if they aren’t forced to. Sensible systems (i.e. all the rest of the developed world) force people to opt in through the tax system, using government coercion to ensure the risk pool works; if you don’t do this you get a shrinking risk pool and sick people preferentially buying in, leading to escalating costs and a death spiral. That Republicans don’t understand this fundamental aspect of health policy makes them as stupid as their orange shitgibbon president, who just noticed that health policy is “unbelievably complicated.” They’ve had 6 years to figure this out, and they still don’t understand a single thing about one of the most crucial aspects of modern policy.

Fortunately, this bill won’t pass – the Freedom Caucus will sink it from the right, and the Medicaid expansion states from the left. The Republicans have had 6 years to sort this shit out, and they have failed in every way. Truly, Americans are uniquely poorly served by their elected representatives!


fn1: My god American health stuff is so complex. In every other developed country you just pay a certain predetermined proportion of your income as part of your tax and get coverage. How in any way is this market-based stuff better?!

fn2: Because under Obamacare costs and subsidies depend on age, sex and location (to the nearest zip code) it’s impossible to give precise numbers to any of these issues. Suffice it to say that in Japan or Australia no one earning $18,000 would have to pay anything resembling $350 for their insurance (or even $35, I suspect). But we don’t even have free access to guns, so don’t listen to us about healthcare policy!

An old Jedi mind trick

An old Jedi mind trick

Our guardians in the press are up in arms and all a-fluster in shock that Trump’s advisor Kellyanne Conway has decided to start referring to blatant lies as “alternative facts.” She was defending the Comical Ali press conference by Trump’s spokesperson, Spicer, which apparently lit up Twitter because of its obvious stupidity, and his blatant yelling attempts to pretend that the Trump inauguration had a greater audience than the 2009 Obama inauguration was presented as “alternative facts” rather than bald-faced bullshit. Spicer even claimed that Trump’s inauguration had the most people ever or something; and this after Trump apparently attempted to get a military parade organized, with tanks and missiles. He also apparently pressured the head of the National Parks Service to find flattering photos that would confirm what he and his crew already knew to be “fact” – that he had a bigger audience than the Kenyan Socialist, even though he obviously, clearly didn’t. It’s telling that having gone looking for evidence to support their view, and having found none, instead of making excuses they simply decided to front up and lie.

The media are shocked and pearl-clutching about how blatantly Trump is rejecting reality. I’m not sure why they’re surprised. The only surprising thing about the whole sordid affair is that Conway was smart enough to come up with a new term for what the Republican party has been doing for years – making up its own facts and expecting the media to swallow them whole, or at least take them seriously. The most obvious example of this is their ongoing project of blatant climate denialism, which the media have abetted for years by allowing the liars, con-artists, grifters and spooks of the GOP denialist wing and all its “think tanks” to come on to shows discussing science and present their bullshit denialism as “balance.” Since the GOP have been coddled for years into believing that complete lies need to be given airtime for reasons of “balance,” why would they not expect the media to give Trump’s view of the inauguration just as much weight as the photographic evidence? The GOP have been denying the temperature curve for years, and sure some of them have gone for a more sophisticated “humans aren’t causing it” line but a large part of the denialism has focused around denying that temperature exists, denying that the curve is rising, slicing the curve up into small parts and claiming cooling, using a different curve (see e.g. Breitbart with its recent attempt to claim the globe is cooling), using a curve that doesn’t measure the earth’s surface, or claiming that the data is all fraudulent. These are surely just as much “alternative facts” as disputing exactly how many people are in two separate photographs of the national mall.

If the media blessed the last 15 years of abject denialist bullshit with the halo of truthiness, why would they expect the GOP to stop there? And it’s not just on matters of policy that they know the GOP lies: Paul Ryan – who the media insist on pretending is a serious policy thinker – has been caught out lying flagrantly about his own marathon times, no doubt in order to burnish his manly credentials for his far right base and to keep the media hanging onto his strange, blank-eyed granny-starving charm so they can keep pretending he’s not just another shallow tax fetishist. The GOP were also pretty good at pretending that the national debt Clinton inherited was not Bush’s fault, and that the national debt Obama inherited was not Bush’s fault – and the media pretty much let them have that as well. Which has also enabled the GOP to keep up their image as the party of serious deficit reduction and concern about “inter-generational equity” when in fact they are the biggest culprits for the ballooning federal debt, and only ever take deficits seriously when a Democrat is in charge. And wasn’t it the PNAC that said that the only limits to American power were their imagination, just before they fucked up and invaded Iraq?

The GOP and the rarified “thinkers” in “think” tanks like the Heritage foundation associated with this clan of grifters have pushed a whole bunch of other lies and deceptions over the years that are easily just as blatant as Spicer’s recent “alternative facts”: more guns means less crime, the Clean Air Act didn’t work, Barack Obama was born in Kenya, the Laffer curve, abstinence only sex education works, the Empire were the good guys (seriously there is a dude at National Review who runs with this particular shtick). They also peddle in a sideline of hypocrisy that would get a Democrat sunk in a moment – most obviously the wide array of “family values” candidates like Gingrich and Trump who’re onto their third marriage, and the rogue’s gallery of anti-gay lawmakers who have been caught adopting a “wide stance” in public toilets. They’ve been able to get away with this mixture of blatant denialism, straight-up lies, prevarications and half truths, and rank hypocrisy for the past 30 years because the media have been noticable lax about confronting them on the obvious con they’re running. Now the media have a president who really genuinely hates them and they’re suddenly starting to notice that taking facts seriously matters. But they’ve done the GOP’s work for them, allowing every single important issue of the past 30 years to be turned into a matter of opinion and “balance”, making every single basic fact underlying public policy into a debatable issue, and now Trump and his team of rich ingrates have decided they don’t need to pay lip service to the truth anymore. Having shown themselves to be willing enablers of GOP lies for 30 years, it’s going to be a little difficult for the media to back away and start pretending that facts matter.

I’ve been saying for a long time now that the GOP cannot behave like a serious political party while it denies global warming, and that the effort required to deny global warming has corrupted the entire intellectual structure of American conservatism. This is why now the GOP has become the home of vaccine denialism, with Trump considering appointing an open denialist to the vaccine safety committee, and why the GOP cannot come up with a health care policy or a strategy to contain gun violence: The effort of denying the facts of global warming has required such a complete and overwhelming rejection of the basic tenets of modern intellectual activity that they have had to walk away from reality to manage it. Just as the torturer in 1984 forced Winston to lie about the most basic things in order to rebuild his ideology, so the GOP have developed in themselves the ability to lie to themselves about anything, no matter how obvious and simple, and now it’s easy for them to believe anything they want to believe. To convince a Republican of the wrongness of vaccination policy or the fact that homeopathy can cure AIDS you don’t need to sell them on pseudo-scientific waffle – you just need to show them how it matches their ideology, and they’ll automatically believe the rest. This is what happened with anti-vaccination ideology, and it happens by default with any environmental issue. In time it will happen with everything else, because the GOP is intellectually rudderless, has built an entire intellectual structure on no foundations.

Over the term of this presidency that means that the president, all his sycophants, and most of the GOP congress are going to present us a range of ridiculous ideas that are clearly wrong, and yet believe them wholeheartedly: Trump will be “ever more popular” even as his popularity plummets; their Obamacare replacement will be enormously successful even though it is a dismal failure; crime will plummet even if it goes up; the economy will be going great even as inflation and unemployment rise. They have finally and completely severed themselves from reality and even though the rest of us have seen this coming for 30 years, their compliant operatives in the media have just noticed just how far gone the whole screaming mad mob are. But by the time they try to start dealing with it, Trump will have cut them off completely and withdrawn into his Fox news bubble. After all, once you completely reject all facts, you don’t need the media to report anything, do you? You can just make proclamations of the truth, and the more pesky fact-checkers you cut out of the process the easier it is to promulgate the truth.

This day has been coming for 30 years, and we scientists have been warning of it for a long time. I fear it is going to be a long time before America can drag itself back from this state, and that it will do a lot of damage to itself and the rest of the world before it finally recovers. Let’s hope the damage isn’t fatal …

What the American people have to look forward to

What the American people have to look forward to

We’re a week away from the inauguration of the 45th President, but the Senate and House seats have changed so that the Republicans now control both houses of Congress, and one of their first actions has been to begin repealing Obamacare. They’ve been salivating over this prospect for six years and making a big fuss about it, as have all their adjutants in think tanks and conservative media, so you would think they would be ready to roll with a coherent plan. Unfortunately it appears that they don’t, and the first week of their attempts to begin the process have been rather shambolic. Since they don’t control 60 Senate votes they are trying to enact the repeal through some arcane process called reconciliation, but that is just the start of the rolling drama that is coming; Vox has an explainer about the whole process, and is running a fairly good series of articles watching as the Republicans attempt to wreck Obama’s signature achievement.

The Republicans’ first plan seemed to be “repeal and replace”, in which they would unravel all the key parts of Obamacare now but put some kind of deadline on when they would take effect, then begin working on a replacement plan in the meantime. Unfortunately this was patent madness, that they were warned about for months, which would tip many insurance markets into a death spiral and create chaos for both insurance companies and millions of insurance holders. Trump stepped on this with the announcement that repeal and replacement would happen simultaneously and soon, which is something of a problem for the Republicans since they don’t have a plan and working one up in a couple of weeks is going to be kind of challenging (Obamacare took about 15 months to happen, I think). Even more challenging for the Republicans is their lack of a filibuster-proof majority in the Senate – they can repeal the law’s components with 51 votes, but they can only put in place a replacement with 60 votes. If the Democrats decide to act in exactly the same way that the Republicans have for the past 6 years, they will prevent any replacement plan for the next two years, and unless the Republicans can hold them responsible in the mid-terms, potentially kill any future replacement. This would be a disaster for the Republicans, since they would create an insurance death-spiral with no ability to legislate a repair, and go to the mid-terms with several million people suddenly losing their insurance. Given this their choices all seem very unpleasant.

This is incredibly irresponsible politics. Health care reform has been a Democratic party priority – and part of national debate – since the 1990s, and Obamacare was passed in 2010. The Republicans have had 25 years to think about this stuff, and have tried more than 50 times to repeal Obamacare while they were in opposition, yet over that whole time they haven’t come up with a single plan that will do anything to improve health insurance coverage. One Republican even admitted that the plans they have tried to pass during Obama’s administration were only pushed because they knew they wouldn’t get passed – they aren’t serious plans. Paul Ryan has been saying the Republicans will release a plan “soon” for years, and although there are a couple of different ideas floating around out there none of them is near the level of a properly designed plan – and none were pushed during the election. The Heritage Foundation was able to scour the whole country looking for complainants in a Supreme Court case – and fight that case – to gut one part of Obamacare, but didn’t appear to have time to come up with an alternative plan that was worth putting to Congress. The Republicans have known this day is coming for at least six years and they have nothing coherent to offer the American people. We all know the reason for this, of course – Republican political ideology simply cannot produce a reform of the American healthcare system that will give more people affordable coverage, because the Republicans’ fundamental position is that government should not be interfering in healthcare markets, and it is impossible to make healthcare affordable and accessible without extensive government interference in markets.

As if that were not bad enough, their president-elect campaigned on a promise not to cut medicare or medicaid, and recently his spokesperson said that no one would lose their existing plan (a promise that has been held against Obama by Republicans for six years!) Trump has also said he likes Obamacare’s provisions on pre-existing conditions. So now the Republicans have to come up with a free market plan that somehow keeps Medicaid in place, doesn’t take away anyone’s insurance, and forces insurance companies to cover pre-existing conditions, while bringing prices down and giving individuals greater choice (the latter two points being raised by Paul Ryan recently as part of what he described as a “rescue mission” to make health care more affordable than it is under Obamacare). And if they follow Trump’s timeline they have to do it in a few weeks or months.

It’s not clear what colour everyone’s unicorn will be, but we know it will be a free market unicorn.

So what can we expect this plan to contain? It’s not clear, because there have been multiple Republican “plans” or “policies” in the past couple of years, but based on the major ones that have floated around and some of the major policy discussions we have seen, the plan will likely include some or all of the following.

  • Abolishing the mandate: The mandate is the Obamcare rule that hits people with a tax penalty if they do not take out health insurance, in an attempt to force young and healthy people to take up insurance. This mandate is key to Obamacare, since forcing young and healthy people to take up insurance will ensure that the insurance risk pools are large enough to keep costs down and keep insurance companies viable. The mandate hasn’t been as successful as its planners envisaged, probably because the plans young people are likely to choose to take up are “Bronze” plans with very poor benefits, and many young people probably don’t think they’re worth the effort of filling in forms, given the size of the tax penalty. Republicans hate the mandate and want to get rid of it but of course don’t have an alternative method for forcing people to take up health care. If you abolish the mandate but force insurance companies to cover people with pre-existing conditions then they have to raise prices for everyone else – which means the care won’t be affordable, a key goal of Ryan’s “rescue mission.”
  • Deregulating insurance markets: Trump was big on allowing insurers to operate across state lines, and most Republican plans want to see some kind of reduction of conditions on insurers. In the repeal of Obamacare this will likely involve removing the restrictions placed on plans that can be marketed on exchanges – when Obamacare was introduced, a set of minimum standards was established for insurance plans which guaranteed people buying them would get a certain minimum level of benefits, and enabled people to choose between plans that were rated as either Bronze, Silver, Gold or Platinum. By deregulating markets and the rules on how insurers market their plans, the insurance companies will be able to return to the pre-Obamacare era of selling absolutely shonky packages at a low price – which, if they’re required to offer coverage to people with pre-existing plans, is the only way they’ll cover their costs. Many Republicans also think insurance companies should be able to compete across state lines, ostensibly because this will increase competition in smaller states and rural areas where currently only one insurer operates, and also to allow more mergers. This is unlikely to encourage competition in the long-term, but will lead to large insurers merging and creating multi-state monopolies – monopoly pricing being another way to cover costs. There is no universal health coverage system in the world which operates successfully with a deregulated private market, and it’s not going to magically happen in the USA.
  • Reforming subsidies: Another aspect of some Republican plans has been to change subsidies so that they are not income-based. Currently under Obamacare anyone with income below a certain level receives a subsidy towards the cost of their health insurance, with the subsidy growing as income decreases, to ensure the plan remains affordable. This is the natural compensation for the mandate, and is one of the pillars of Obamacare. Republicans like Tom Price have proposed replacing these income-based subsidies with age-based subsidies, which means Bill Gates gets the same subsidy as a minimum-wage 61 year old labourer in Louisiana. This policy is part of a new rhetoric the Republicans are developing based on “equality of access” rather than equality of coverage. The natural consequence of this will be that poor people will decline to take up insurance, since the subsidy won’t be enough for them – especially in a deregulated market with no mandates.
  • Block-granting medicaid: As part of Obamacare the Medicaid program was expanded, with states being offered financial support to extend Medicaid to a larger pool of people (Medicaid is the USA’s free health coverage for very poor people). Republicans hate this because it’s straight-up welfarism, and the Heritage Foundation ran a successful challenge in the Supreme Court that enabled states to refuse the expansion. Unfortunately for the Republicans a lot of states – including some Republican-ruled swing states – took the expansion, and about 5-12 million people gained health coverage through it (estimates vary). If the Republicans take away this expansion they will piss off a lot of people, including people in Republican swing states that could damage them in future elections, so they need to find a way to take away the Medicaid expansion from safe Democrat and safe Republican states, and enable swing Republican states to keep it. Their answer is block-grants, in which the money for Medicaid is granted to the states but not earmarked for Medicaid only. Since some deep Republican states like Kansas and Louisiana are in big financial trouble, they can then use the Medicaid money to bail out their failing state finances, and pare back Medicaid in their states; while swing states can keep using the money for Medicaid and avoid creating a large pool of angry voters. Even then it is likely that the block grants will be smaller than the funds currently available so all states will have to cut Medicaid coverage or reduce the quality of care offered – but the Republicans don’t care because Medicaid is for poor people, so just need to make sure they don’t cut it away from so many people that it swings an election.

Any single one of these reforms in isolation would probably be enough to radically roll back recent gains in insurance coverage in the USA, but it’s likely that whatever misbegotten, evil plan the Republicans come up will have all of these reforms to some extent. This is why Republicans have started talking about equality of access rather than coverage, because if everyone theoretically has a subsidy and the right to purchase healthcare, then you can blame them if they decide they can’t afford it. In this rhetorical model they will force insurers to cover people with pre-existing conditions, abolish the mandate, deregulate the market in such a way that insurance companies can offer absolutely shonky products at inflated prices, cut subsidies so that no one takes them, and then blame poor people for “choosing” not to take up the healthcare they had “equal access” to.

It remains to be seen whether the Republicans will be able to get away with this – either because Trump takes a personal interest in a reform that actually works, and vetoes anything they offer, or because the Democrats drag out the replacement strategy until they can again win control of Congress. In any case it’s going to be fascinating to watch the Republicans try to behave like responsible adults now that they have the levers of power, even though for the past six years they have shown themselves pathologically incapable of dealing with the contradictions and challenges their ideology has thrown up.

Of course, what’s “fascinating” to those of us who live in countries with sane governments and universal health coverage, is going to be very terrifying to a very large number of poor and chronically ill people in America. Good luck to all of you!