An overhaul of GovCare begins

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The first step has been taken to repeal and replace provisions of the Affordable Care Act (ACA), which was enacted in 2010 and has since been fleshed out by a host of administrative interpretations and regulations. Republicans have been promising such action for years, and having won the White House as well as both houses of Congress they will now have the leverage to get it done – so long as they stick together and can avoid a filibuster in the Senate by packaging the remedial legislation as a budget bill.

Hopefully everything will go smoothly, but the budget reconciliation process is tricky and there isn’t much room for error. We’re reminded of a maxim of Coach Darrell Royal of the University of Texas that “three things can happen when you pass the football, and two of them are bad.”

Here’s our assessment of where things stand and an idea for improving the likelihood of a favorable outcome.

A. Repeal and replace – There has been some debate as to whether the GOP should aim to (1) simply repeal GovCare, or (2) also replace it with a plan that accomplishes many of the same results in a more efficient and less costly manner.

The case for the first approach goes as follows: GovCare was a deeply flawed plan, which should never have been enacted. Instead of attempting to provide healthcare insurance (HCI) for the minority (about 15%) of Americans who didn’t have HCI, no matter what the consequences for everyone else, Congress should have focused on reining in the soaring costs of healthcare. Well, better late than never. The proper course now is outright repeal, after which legislation to make healthcare more affordable could be considered as it should have been in the first place. In contrast, a repeal and replace approach would likely yield a GovCare Lite plan that wasn’t much better than what’s on the books now. The false narrative of “repeal and replace” is preserving Obamacare, Daniel Horowitz,,

The entire mantra of “repeal and replace” was flawed from day one because it accepted the Democrat premise that Obamacare actually served a semi-useful function, albeit with some glaring flaws, and therefore, must be replaced with something similar. It presupposes a solution without understanding the problem. It’s like the mindless calls for “immigration reform” and “criminal justice reform” without specifying what is wrong to begin with and which problem is being solved with the “reform.”

Proponents of repeal and replace argue, however, that the enactment and implementation of GovCare has created expectations for HCI availability and subsidies that cannot be ignored. Outright repeal would fuel a political firestorm and doom GOP hopes for remaining in power long enough to get the country moving in a different direction. Republicans plot how to avoid their own midterm meltdown, David Drucker, Washington Examiner,

Despite widespread dissatisfaction with GovCare, polling indicates that most Americans don’t favor outright repeal. What they want – whether it’s deliverable or not - is a new plan that would deliver the perceived benefits of GovCare with fewer problems. Poll: most people don’t support Obamacare repeal and delay, Robert King, Washington Examiner,

A poll from Morning Consult and Politico found that 61 percent don't want Obamacare to be repealed without a clear alternative announced. About 28 percent wanted it repealed immediately even if there is no plan in place, and 11 percent had no opinion.

In our view, political reality dictates a repeal and replace approach – so long as (1) the replacement plan represents a clear improvement over the status quo, and (2) there is a reasonable assurance of the votes to enact it. GovCare won’t really be repealed, and that’s fine,

B. Budget reconciliation – Last week both the Senate (51-48) and the House (227-98) passed a budget resolution calling for legislative proposals to reduce projected deficits (recited as totaling about $8 trillion over the next 10 years). “S.Con.Res.3 - A concurrent resolution setting forth the congressional budget for the United States Government for fiscal year 2017 and setting forth the appropriate budgetary levels for fiscal years 2018 through 2026.” (Note: Congress hasn’t adopted a budget for FY 2017 - which ends on 9/30/17 - and the government is currently operating on a continuing resolution that will expire on 4/28/17.)

The commonly understood purpose of
S.Con.Res.3 is not to create a responsible budget baseline for FY 2017 et seq., it’s basically too late for that, but simply to set the stage for repealing designated provisions of the ACA under the budget reconciliation process. The text is lengthy and loaded with jargon intelligible only to the initiated, but here’s an excerpt from which the intent can be inferred.

(a) Committee On Finance.—The Committee on Finance of the Senate shall report changes in laws within its jurisdiction to reduce the deficit by not less than $1,000,000,000 for the period of fiscal years 2017 through 2026.
(b) Committee On Health, Education, Labor, And Pensions.—The Committee on Health, Education, Labor, and Pensions of the Senate shall report changes in laws within its jurisdiction to reduce the deficit by not less than $1,000,000,000 for the period of fiscal years 2017 through 2026.
(c) Submissions.—In the Senate, not later than January 27, 2017, the Committees named in subsections (a) and (b) shall submit their recommendations to the Committee on the Budget of the Senate. Upon receiving all such recommendations, the Committee on the Budget of the Senate shall report to the Senate a reconciliation bill carrying out all such recommendations without any substantive revision.

Hmm, sounds like the identified committees of the Senate are expected to recommend a total of $2 trillion in deficit reductions over the next decade by January 27. But would said reductions be achieved by cutting spending or raising taxes, would the adjustments necessarily have anything to do with GovCare, and would all the reductions be in the out years? Also, would even a reduced level of $6 trillion in deficits over the next 10 years be fiscally responsible?

Similar action would be authorized in the House under Section 2002. Then legislation to “reconcile” the House and Senate budgets would be in order, which could be adopted by a simple majority vote, and proposed changes to the Affordable Care Act would presumably be included in the mix.

This exercise to evade the Senate’s filibuster rule seems somewhat ridiculous on its face. However, the reconciliation process has been used for various purposes since the underlying legislation was enacted in 1974 – from reducing budget deficits to cutting taxes and creating programs that increase spending – so its use in this instance would not be particularly novel. The parliamentary tactic that could obliterate Obamacare, Robert Pear, New York Times,

Also, if anything didn’t get taken care of on the first go round, it might be possible to resort to reconciliation again in conjunction with the budget process for fiscal year 2018.

Bear in mind that the reconciliation process is only deemed applicable to legislation with a clear connection to the budget. Accordingly, it might not be possible to package many desired changes to GovCare in a budget resolution versus dealing with them in separate legislation that could be filibustered absent 60% support (including some Democratic votes) in the Senate. The GOP’s winding path to Obamacare repeal, Susan Ferrechio, Washington Examiner, 1/13/17.

Lawmakers hope to include as many replacement provisions as possible within the repeal measure because it will be considered under budgetary rules that will prevent a Democratic filibuster. But it's not clear how much replacement legislation can be included in the repeal measure due to strict guidelines governing the use of the budgetary tool, known as reconciliation. The rule prohibits language and provisions that do not directly relate to the budget.

C. Timing – Perhaps the biggest problem in attempting to repeal and replace GovCare is that Republicans have yet to reach a consensus as to what the replacement plan would look like – or when it would go into effect.

Initially, the GOP leadership in Congress seemed to envision the repeal provisions being enacted quickly (say in February) – but with a long transition period (up to two years or more) during which the replacement provisions could be crafted, debated and enacted.

Critics warned, however, that repeal of GovCare without concurrent establishment of a replacement plan might hasten the collapse of a system that is already imploding. Also, this approach might boomerang if moderate Republicans backed away from supporting a meaningful change in healthcare policy down the road. GovCare won’t really be repealed, and that’s fine,

If the Republicans repeal GovCare and then start working on replacement provisions, which would be subject to filibuster and therefore require 60 votes in the Senate, the eventual replacement provisions aren’t likely to be materially better than current law. It’s not smart to begin business negotiations by surrendering whatever leverage one has, and it’s unclear why a different conclusion should apply in the political realm. 

At this point, the advocates for an expedited repeal and replace approach seem to be winning. Notice how this issue was addressed at the president-elect’s press conference last week. Transcript,

Q. Can you be specific on what guidance you’re giving congressional Republicans on the timeline for repeal and replace, whether it needs to be simultaneous *** [whether] you have outlined a plan for what you want the replace package to look like, would it guarantee coverage for those who have gotten health[care] insurance through the current Obamacare law?

A. *** We’re going to be submitting, as soon as our secretary’s [HHS Secretary designate Tom Price] approved, almost simultaneously, shortly thereafter, a plan. It’ll be repeal and replace. It will be essentially, simultaneously. It will be various segments, you understand, but will most likely be on the same day or the same week, but probably, the same day, could be the same hour.

So we’re gonna do repeal and replace, very complicated stuff. And we’re gonna get a health[care] bill passed, we’re gonna get healthcare taken care of in this country. You have deductibles that are so high, that after people go broke paying their premiums which are going through the roof, the healthcare can’t even be used by them because their deductibles bills are so high. *** We’re going to have a healthcare [plan] that is far less expensive and far better.

If it’s feasible for the repeal and replace plans to be “essentially simultaneous,” great. Some observers insist this can’t be done, however, because months would be required to develop and agree on details of the replacement plan.

Yes, Secretary-designate Tom Price has a plan in mind, but so do several other GOP stalwarts. Discussion will be required to decide on the best plan or combination of plans.

And unless the replacement plan can be approved via the reconciliation process, which is deemed unlikely, it can’t pass without the support of about eight Democratic senators. There is no assurance that such support could be arranged on reasonable terms. Congressional Republicans poised to blow it on Obamacare, Kelly Riddell, Washington Times,

My worry is by April 28 (or sooner), congressional Republicans are just going to kick the can down the road, because a replacement bill, and the votes to pass it, still won’t be in order. They’ll do this by repealing the law in the reconciliation process, but not really. They’ll claim they’ll “repeal” Obamacare, but that repeal won’t actually go into effect until a two or three years’ time — enough so they can figure out a replacement. The devastating aspect of this is the entitlement will become that more entrenched in our society, and that much harder to replace.

This assumes Democrats and Republicans won't work out a mutually agreeable overhaul of GovCare. And from all indications, noncooperation is probably a fair assumption.

So far, the party that passed the ACA without a single Republican vote has declined to acknowledge the serious problems (soaring premiums and deductibles, shrinking healthcare provider networks) with GovCare. Consider the president’s upbeat comments on this subject in his farewell address on
1/10/17, and don’t hold your breath for his public support of alternative plans.

•If I had told you that we would *** secure the right to health[care] insurance for another 20 million of our fellow citizens – you might have said our sights were set a little too high. But that's what we did. 

•Healthcare costs are rising at the slowest rate in fifty years. And if anyone can put together a plan that is demonstrably better than the improvements we've made to our healthcare system – that covers as many people at less cost – I will publicly support it.

Not a single Democratic member of Congress voted for S.Con.Res.3, and there were some blunt comments about GOP zeal for repealing GovCare, including Senate Minority Leader Chuck Schumer’s gibe that this was a plan “to make America sick again.”

In the wake of the passage of this resolution, more than 40 rallies are being planned around the country to protest the intended repeal of GovCare and/or advocate even more extensive programs such as a “single payer” healthcare system. Sens. Bernie Sanders, Chuck Schumer, et al. in Warren Michigan, House Minority Leader Nancy Pelosi in San Francisco, etc. Dems aim to energize support to save Obamacare, Robert King, Washington Examiner,

Other Democrats have accused Republicans of proposing to terminate GovCare without a replacement plan despite repeated assurances that this will not be allowed to happen. Senator Tom Carper, dear friends letter, 1/13/17.


We cannot afford a reckless path that leaves millions of Americans in the lurch and doctors, hospitals, health centers, insurers and states with no recourse. I stand ready and willing to consider changes to our healthcare system that build on the progress made under the ACA and provide more comprehensive, affordable, high-quality healthcare coverage to more Americans and their families. And I remain committed to standing up and fighting for the people and families who are concerned about the future of their healthcare today.

By the way, the estimate that 20 million people have gained HCI as a result of GovCare is somewhat exaggerated. Why Obamacare’s “20 million” number is fake, Genevieve Wood,,

The Obama administration claims 20 million more Americans today have health care due to Obamacare. The reality is that when you look at the actual net gains over the past two years since the program was fully implemented, the number is 14 million, and of that, 11.8 million (84 percent) were people given the “gift” of Medicaid. [Furthermore], it’s estimated that anywhere from 2 to 7 million people now on Medicaid would have qualified for the program even without Obamacare.

In sum, Democrats will place the onus for a GovCare overhaul on Republicans, never mind who passed the ACA in the first place, and blame the GOP for any problems with the revised program. Kelly Riddell, op. cit.,

Politically speaking, Senate Democrats also don’t have any incentive to work with the GOP. Once Republicans move to repeal, they own Obamacare, its failure and all the political fallouts for not having an alternative.

D. A modest suggestion – It’s possible that the campaign to repeal and replace GovCare will have constructive results, but for the reasons discussed this seems far from certain. We think the prospects for a favorable outcome could be improved by repealing the filibuster rule in the Senate, which has resulted in a de facto 60% supermajority requirement for much of that body’s business.

While the reconciliation process offers relief from the filibuster rule in some cases, it is a complicated procedure that the American public doesn’t really understand. If you doubt this, try reading
S.Con.Res.3 to see if you can follow it.

Furthermore, the reconciliation process is only considered applicable to budget-related provisions. This could lead to pointless debates about which parts of a GovCare overhaul could be accomplished via reconciliation and which would require ordinary legislation and therefore be subject to a higher voting requirement.

It could be argued that better legislation will result from bipartisan deliberation, which is facilitated by the filibuster rule. Lessons from Obama’s failure; Republicans must sell their replacement to Obamacare—the way the president didn’t, Kim Strassel, Wall Street Journal,

Republicans have plenty of opportunities to deploy carrots and sticks on red-state Democrats who are up for re-election in 2018. A GOP sales campaign can help make those moderates more comfortable joining up and more fearful of voter backlash if they obstruct free-market reforms. But a bipartisan coalition will require some honest give. If Republicans take the Democrats’ approach—if they are too pure to negotiate—they will fail.

In this case (and perhaps others), however, bipartisanship seems more likely to prove counterproductive. As Republicans are going to own whatever results are achieved, they should have the power - after a reasonable opportunity for debate and the offering of amendments – to decide what will be done.

Note that the filibuster rule is not required by the Constitution, which only specifies supermajority voting requirements in Congress for a few things, e.g., approval of proposed constitutional amendments. And having already been partially abolished, this tradition should no longer be considered sacrosanct. Senate Democrats execute “nuclear option,”

A recent column argued that Republicans should prefer use of the reconciliation process to abolishing the filibuster. Preserve the filibuster – then overcome it, Phil Gramm & Michael Solon, Wall Street Journal,

If Republicans now follow the Democrats’ lead in overriding historical constraints like the filibuster rule on legislation, the damage to the system might never be repaired. *** Fortunately there is another way to reverse President Obama’s transformation of America. Using the power of the purse, as our Founding Fathers intended, Congress can defund almost any government action with a simple majority in both houses and the president’s consent. Mandatory spending, which Congress cannot reach with the appropriations process, can be altered through a budgetary process known as reconciliation, which allows the Senate to act with 51 votes to achieve savings mandated in the budget.

However, the ensuing letters to the editor seem more persuasive – especially one from Lou Stahl of Phoenix Arizona,

Voters will not accept any more Republican excuses for failure. For the last eight years, the excuse was that President Obama would veto any legislation that sought to accomplish Republican objectives. With President Obama gone and Republicans in control of both houses of Congress, voters will not accept the filibuster rule as an excuse for Republicans’ inability to enact their agenda, especially when what remains of that rule can be changed by the GOP, and probably will be changed by Democrats when they next get the opportunity. If Republicans cannot now do what they have repeatedly promised, they probably never will, and they will deserve their reputation as generally ineffective.


# The Dems are demoralized and will not cooperate. – SAFE director

# I wish Trump was a better leader and said the right things in order to rally the people together for change. On GovCare, for example, why not say something's time to give Obama lots of credit for what he did.  We now need to take some new steps to make it even better.   Why does he have to be so divisive? – Retired financial manager  

SAFE wrote to the members of Congress from Delaware on 1/16/17, urging their support for the type of changes in GovCare that we believe are needed. Based on past experience, the letter probably won’t be taken seriously. Accordingly, we don’t see a solution short of abolishing the filibuster so the majority can govern.

#Here’s what the new healthcare system will look like:  HSA accounts for all, individually purchased policies across state lines, assigned risk pools with state/ federal subsidies based on income, with a mandatory tax of about 2% on all premium collected by private insurers paid into the pool.  Cost shifting for sure, but at least there will be an element of competition.  Big pharma will drop prices or face re-importation of drugs from Canada. I can also see a hike in premiums for those who don't sign up, much like Medicare plan D. – Retired financial planner   

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