Replacing Obamacare

The repeal of Obamacare by the Republicans is easy. They have done it repeatedly for over 40 times in the House during Obama’s presidency but could not overcome his veto power. Now that they have Trump as President and a majority in the Senate, the repealing will certainly be completed very shortly. The next step is to replace it, which will be difficult and carry a lot of risks. The other problem is that they do not seem to have a plan.

Obamacare was passed in 2010 thanks to a short-lived Democratic majority in both the House and the Senate. It had zero Republican support. After implementation in 2014, Obamacare has now covered over 20 million citizens in two years out of a total of about 55 million without health insurance. Despite all its imperfections, its repeal means the Republicans will wind up back in square one owning all the problems of the American health care system characterized by high prices, limited access, a huge number of uninsured and a shrinking market consisting of more older and sicker people. I wonder why any political party wants to own such a can of worms.

There exists a big political risk that is so obvious. After repeal, more than 20 million Americans will lose their Obamacare coverage overnight. These angry people will come out to vote in the next election cycle, that is, in 2018 for Congress and 2020 for President. Can the Republicans afford losing 20 million votes next time? Their margins of winning in key swing states are usually small. In 2016 where three states determined the outcome of the presidential election (Pennsylvania, Wisconsin and Michigan), the Republicans’ combined margin of victory was only about 100,000 votes.

The difficulty for replacing Obamacare is of course money. In essence, Obamacare subsidizes low-income people to enable them to buy health insurance. The amount of subsidy per person averages about $300 per month. With 20 million now covered, the total federal subsidy amounts to $6,000 million per month! This will unnerve the insurance companies because without the Obamacare subsidy, the health insurance market will shrink by this much. Everybody knows that the bigger the market, the better for the insurers because their risks are reduced.

How can you replace Obamacare with a better alternative? It can happen in a very complicated way, but the 20 million people must wait for a long time if they lose Obamacare immediately after the repeal. There is no way for the Republicans to quickly deliver a better alternative except to grant a subsidy equal or bigger. As you are aware, big federal subsidy is a “no no” for the Republicans. Their trick is to cut taxes and make it sound like a subsidy beneficial to the people. However, those 20 million covered by Obamacare belong to the low-income group. How much tax benefits can they receive? It will certainly be much smaller than the average $300 federal subsidy per month per person. In addition, a tax cut does not mean that they will use the money to buy health insurance. So the number of uninsured will certainly rise. This will make a less stable society full of sick people. Also, the insurance market will shrink, causing the insurers to raise rates again and again to compensate for increasing risks.

The American health care system is a vicious circle of price inflation since the early 1990’s. Even a government subsidy like Obamacare cannot keep prices down as it is supposed to do. The Republicans always give the public the illusion that a free market will help. Don’t we have a free market in America all along? The markets for food, housing, autos and other consumer goods are subject to competitive market forces. However, health care is not because it is a necessary package of products and services where everyone should have some reasonable access.

I think the health care problems in America is a result of corruption. Look at the tremendous profits piled up by the drug companies, the insurers, the hospitals, and the top health care professionals. On the other hand, look at the sufferings of the middle class as they are being squeezed. The government does not want to do anything about it. Why? Because the laws made it legal for the health care industry to continually raise prices while bribing legislators and top government officials to subdue their conscience and remain silent. At this point, little can be done to reign in health care costs except to let them rise to a level so unbearable that the people will rise up and revolt. Before it reaches that point, the government can do something drastic like imposing price controls. Somebody will cry out loud that it would be like communism. Well, in 1971 when the US was ripped by high inflation, Richard Nixon, a Republican President, imposed price and wage controls to stabilize the economy. Nixon was no communist but that was the past. Does any politician at present have the guts to do it?

This entry was posted in 21st Century, Economics/Politics, Health Care. Bookmark the permalink.

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