In January of this year, as congressional Republicans were ramping up legislation to repeal, or at least rewrite, Obamacare, Mitch McConnell, the top Republican in the Senate, went on Face the Nation to make his case against the current health care law.
“What you need to understand is that there are 25 million Americans who aren’t covered now,” he said. “If the idea behind Obamacare was to get everyone covered, that’s one of the many failures. In addition to premiums going up, copayments going up, deductibles going up. And many Americans who actually did get insurance when they did not have it before have really bad insurance that they have to pay for, and the deductibles are so high that it’s really not worth much to them. So it is chaotic. The status quo is simply unacceptable.”
McConnell’s case against Obamacare, highlighted at the time by Vox’s Ezra Klein, was that it didn’t cover enough people, that premiums were too expensive, that out of pocket payments and deductibles were too large, and that the system as a whole, with its unstable health exchanges, was too chaotic. Something would have to change.
McConnell’s argument had the virtue of being essentially true. Health insurers have exited the exchanges. Deductibles in Obamacare plans run high. Premiums for typical plans under the law went up 22 percent last year. The current system has increased coverage, but it has not covered everyone, and those who do have coverage have reported frustrations with the expense and limitations of their plans.
At the time, Republicans had not released their own health care legislation, or shared the framework for their plan. But now they have, and it is hard to square McConnell’s criticisms of Obamacare with the legislation his office helped produce. According to a Congressional Budget Office (CBO) estimate released this afternoon, the Senate health care bill, the Better Care Reconciliation Act (BCRA), would make every single one of the issues that McConnell mentioned worse.
Essentially, the CBO’s report concludes that the Senate GOP’s health care bill would not solve any of the problems that Mitch McConnell said he wanted to solve. Like the Senate health care bill itself, it highlights the cynicism and emptiness of Republican thinking on health care policy.
Let’s start with coverage. McConnell complained that “one of the many failures” of Obamacare was that it left 25 million uncovered. According to CBO, however, under the Senate health care plan 15 million fewer people would have coverage next year than under current law. By 2026, the CBO estimates that the figure would rise to 22 million. McConnell couched this criticism in a caveat—”if the idea behind Obamacare was to get everyone covered”—which perhaps suggests that this is only a failure if the idea is to cover everyone. But Republicans did not and do not have another idea. Indeed, around the same time, President Trump promised that the Republican plan would provide insurance for everyone.
McConnell also hit Obamacare for rising premiums. But the Senate health plan would not halt those increases either. CBO estimates that if the plan were to become law, premiums would be about 20 percent higher next year than under Obamacare. To be clear, that’s a 20 percent increase above and beyond what is already projected. In 2019, premiums would be 10 percent higher than under current law. Starting in the next decade, CBO estimates that premiums would be lower than under current law by about 30 percent. But that’s after several years of significant hikes.
Which brings us to one of McConnell’s other criticisms, that the insurance provided under Obamacare isn’t very valuable. According to CBO, the biggest reason why premiums would be lower, relatively speaking, in the next decade is because, on average, health plans would cover significantly less than they do now.
The Senate bill pegs its subsidies to health plans with lower actuarial values than Obamacare does; these plans are known as benchmark plans. The actuarial value is the percentage of expected health costs that a plan must pay. What this means is that the Senate legislation is built around standard plans that offer less generous coverage than under Obamacare. At the same time, it leaves many of Obamacare’s insurance regulations in place. So in order for health insurers to offer standard plans that also comply with Obamacare’s regulations, they end up having to include high deductibles. Under Obamacare, plans that resemble the Senate bill’s standard plans typically have deductibles of about $6,000, meaning that beneficiaries have to pay that amount before using their coverage.
In some cases, the deductibles would be high enough that they would limit the value of plans, according to the CBO, especially to low-income individuals. “As a result,” the report states, “despite being eligible for premium tax credits, few low-income people would purchase any plan.”
You might summarize this by saying, for example, that the Senate bill might result in people having “really bad insurance that they have to pay for, and the deductibles are so high that it’s really not worth much to them.”
Do they have to pay for it? The Senate health care bill does eliminate Obamacare’s individual mandate. But it includes a workaround, intended to synthesize the mandate’s effects, by penalizing people who go without coverage for 63 days in a different way—prohibiting them from obtaining insurance coverage for six month.
And what about insurance markets? Today’s CBO report expects that under the Senate plan, individual insurance markets would continue to be stable in “most parts of the country”—emphasis on the “most.” This is another way of saying that the Senate bill would not significantly improve on the conditions we are seeing under Obamacare. The CBO also notes, with some uncertainty, that some of the provisions in the Senate bill could cause insurers to exit the market, or refuse to enter. So it would not be less chaotic. It might be more so.
Are the CBO’s estimates perfectly accurate? Almost certainly not. As point estimates, they are quite likely to be wrong. And the CBO’s models sometimes miss complex economic feedback effects.
But the single point estimates are less important than the broader shifts the agency foresees. CBO’s projections are likely to be directionally accurate: higher premiums and deductibles, fewer people with coverage and lingering questions about market stability. CBO’s report is a picture of an insurance market that has all of the flaws that Mitch McConnell diagnosed in Obamacare, but worse.
As with the structure of the Senate health care bill—a dysfunctional rewrite masquerading as repeal—what CBO’s report exposes is the GOP’s unwillingness to think beyond the parameters of Obamacare.
Republicans did not respond to the failures of Obamacare with a different vision of how the health care system should be organized. They did not build a case for policies with different goals about the health care system. Instead, they criticized Obamacare for not living up to its own goals, for failing on its own terms. Even in their criticisms, they bought into to its premises. They had no policy goals of their own to promote.
So it is hardly surprising that when it came time to repeal and replace Obamacare, they instead produced legislation that simply rewrote it, offering the same thing, but less of it. And it is even less surprising that the legislation they have released undercuts the criticisms that McConnell and others have made of Obamacare, because their plan has the same problems—but even more acute.