The Republican Health Care Plan Is a Nightmare for the Old and Nearly Poor
There are lots of losers under the Republican plan to replace Obamacare, but perhaps nobody would suffer as badly as older Americans who live just above or around the poverty line. According to the new estimates from the Congressional Budget Office, that group could see its insurance premiums rise by 750 percent within a decade under the House GOP's American Health Care Act, compared with what they'd pay under current law for more comprehensive coverage.
Yes, 750 percent. That's not a typo. That devastating increase is spelled out in the table below, in which the CBO models how premiums might change for Americans of different ages and incomes under the legislation Republicans have proposed. With Obamacare, a 64-year-old earning $26,500 per year in 2026—175 percent of the poverty line—would have to pay $1,700 for insurance, after tax credits. That plan would cover 87 percent of their medical costs, on average. Under the AHCA, or Trumpcare, that same person would owe a full $14,600 after tax credits for a plan that only covers 65 percent of their medical costs.
Suffice to say, an almost-senior citizen cannot afford to pay 55 percent of their income for health insurance.
Why the drastic increase? There are two main reasons: Under Trumpcare, insurers would be allowed to charge older Americans more, while the government would give lower-income Americans smaller subsidies to pay for coverage. Currently, insurers are only allowed to charge older customers three times what they charge younger individuals. The Republican plan would allow them to charge five times as much. Meanwhile, under the Affordable Care Act, the federal government gives people tax credits based on their income and the cost of insurance, which cap premiums as a percentage of their earnings. Trumpcare's premiums are only based on age—they don't take income or cost coverage into account—so poorer households tend to lose out. They're also set to grow more slowly, which doesn't help matters.
There are some winners in this bargain. Obamacare doesn't offer premiums subsidies for households that earn more than 400 percent of the poverty line. So some middle- and upper-middle-income Americans may come out ahead. A 40-year-old making $68,200 in 2026 would pay $6,500 under Obamacare; with Trumpcare's tax credit, he'd pay just $2,400 for an insurance plan that was only slightly less comprehensive. A 21-year-old with the same salary would benefit similarly, while a 64-year-old would pay slightly less than under Obamacare.
The CBO has often been criticized—perhaps unfairly—for its estimates about Obamacare's coverage effects. But its budgeteers were largely on target regarding the Affordable Care Act's effects on premiums. Republicans are already objecting that the office's estimate did not account for the way deregulation through the executive branch will bring down costs, by allowing insurers to sell less expansive policies. But that doesn't help older Americans with significant medical costs much. And as I mentioned before, these premium comparisons assume customers will buy far less comprehensive coverage. There's every reason to believe the projections on this table are at least directionally correct about what the effects of Trumpcare would be.
So you could call it a trade-off. Younger, higher-income Americans pay less, while older, poorer Americans—many of whom are likely Trump supporters—pay far, far more for less useful insurance. This is part of a bill, mind you, that would force many of these lower-income households into the individual market by cutting hundreds of billions from Medicaid. These trade-offs might be less severe if Republicans weren't determined to turn their legislation bill into a vehicle for massive, regressive tax cuts. But hey, everybody has their priorities.
Silicon Valley Is Having a Meltdown Because It Can’t Use Uber and Lyft at SXSW
Last May, voters in Austin, Texas, backed their city government’s hard line on background checks for Uber and Lyft drivers. Both companies exited the city immediately, putting regular users of the ride-hailing services in a fix—and leaving more than 10,000 drivers high and dry.
What has happened since has been considered a free-market success story, as the absence of the Silicon Valley duopoly made room for a handful of newer alternatives—by August, 10 licensed ride-hailing services had registered drivers with the city. "Austin is showing the world that yes, there is life after Uber,” CNN Money trumpeted on March 8. "And it's pretty good."
And then came South by Southwest, which brings about 70,000 people to downtown Austin each March. On Saturday evening, outages hit the new taxi startups, and overwhelming demand cascaded from one broken app to the next, leading to a ride-hail breakdown and conferencewide freakout.
And lo, the elites called out in one voice, and what they said was: Where the hell is my Uber?
“Austin is broken without Uber or Lyft,” tweeted Ryan Hoover, the founder of ProductHunt.
No purer example of the hedonic treadmill than watching rich dudes freak out about having to navigate a major American city without Uber. pic.twitter.com/4CwqjTTV09— Kevin Roose (@kevinroose) March 12, 2017
TechCrunch summed up the view from Silicon Valley. "Austin definitely missed its chance to prove that cities are ready to fully-function without Uber or Lyft,” a reporter wrote.
It was a convincing demonstration of how thoroughly Uber and Lyft have pervaded the habits of high-level American executives. According to Certify, a company that analyzes business expenses, business travelers in the fourth quarter of 2016 spent more than half of all ground transportation expenses, including rental cars, on Uber alone. It has been only six years since Uber launched in San Francisco, and already, its absence is like a phantom limb making founders writhe in frustration. In this wholesale class allegiance to a single transportation company, however, these people are outliers. Only 15 percent of Americans had ever used a ride-hailing service as of last year, according to Pew.
The outrage is dumb: Cities don’t function so differently now, by any metric, than they did before the ride-hailing apps debuted five years ago.
But it's also pernicious. It also illustrates how a happy reliance on Uber has blinded a whole group of influential Americans to a real mobility crisis in the U.S. that is getting worse, not better. For people without a car, the American city hasn’t been fully functioning for more than 50 years. Recent downtown improvements like streetcars and bike shares do little to address the transportation challenge of job sprawl. Bus ridership is plummeting nationwide; ridership on the nation’s second-busiest heavy rail system has fallen by 14 percent. For people who don’t drive, transportation networks are not getting them where they need to go. And no, ride-hailing services, no matter how much they subsidize fares, can’t fill that gap.
Planners like to debate the extent to which the rise of ride-hail and the decline of transit are related. I tend to think transit’s wounds are mostly self-inflicted. But ride-hail takes advantage of those shortcomings, pitching itself to regulators, investors, and consumers as a necessary patch for ailing transportation networks.
And the outburst from SXSW reminds me that so many loud voices don’t just not participate in that conversation about general mobility improvements in cities, they’re not even conscious of its existence. They think a city like Austin could reach "full function" with a handful of multinational taxi companies. They didn’t even think to complain about how Austin’s transit system has cut service in recent years, and ridership has fallen along with it—down an astounding 12 percent in 2016. Looking for a bus isn’t an instinct they have anymore.
It may be naïve, but I’d like to think that the culture of armchair transit experts agitating for better service has some incremental political effect in New York, creating a grassroots knowledge that filters up and out through reporters and political staffers.
I doubt the panelists of South by Southwest would ever have been lining up for Cap Metro bus service, even if the alternative was to call a taxi service. But would it kill them to complain about it? Among large U.S. cities, only San Juan lost more transit riders than Austin last year. That's a problem that the problem-solvers at SXSW could turn their attention to.
Trumpcare Would Leave 24 Million Without Insurance by 2026, Says Congressional Budget Office
The House Republican plan to replace Obamacare would leave 24 million additional Americans without health insurance by 2026 and cut $880 billion from Medicaid over a decade, according to a new, widely anticipated estimate from the nonpartisan Congressional Budget Office.
As a point of comparison, the Affordable Care Act extended insurance to an estimated 20 million Americans.
The Republican health care plan would cut spending on subsidies to help Americans purchase health insurance while rolling back the ACA's Medicaid expansion and capping per-person spending on the program, which insures lower-income Americans, going forward. It would also eliminate the requirement that Americans buy insurance or pay a tax penalty, as well as rules requiring employers to offer insurance to their workers.
The CBO expects that the law's combined effects would cause millions to lose coverage immediately, with losses growing over time. By 2018, 14 million fewer Americans would have health insurance—about 6 million fewer would purchase insurance on the individual market, while 5 million fewer would benefit from Medicaid. By 2026, Medicaid's projected enrollment would be 14 million lower than under current law.
The longer-term effects on the individual market are slightly more complicated. By 2020, 9 million fewer people would buy insurance on their own, compared with under Obamacare. By 2026, the losses would be down to 2 million, as “people would gain experience with the new structure of the tax credits and some employers would respond to those tax credits by declining to offer insurance to their employees.”
That's what passes for good news on the coverage front.
The CBO is slightly more sanguine about the legislation's effects on the federal budget. It would still shrink the 10-year deficit by $337 billion.* That's largely because it slashes that $880 billion from Medicaid, while shrinking spending on insurance subsidies by around $300 billion. That makes it possible for Republicans to pack in more than $590 billion in tax cuts, largely directed at the wealthy and health insurers, without swelling the national debt. So, you know, Trumpcare's got that going for it.
*Correction, March 13, 2017, at 5:30 p.m.: This post originally misstated that the CBO believes the Republican health care plan would shrink the 10-year deficit by $337. The estimate is $337 billion.
The White House Is Still Lying About the Obama Economy, and Journalists Are Letting Them Get Away With It
During the 2016 campaign, Donald Trump's go-to tactic for attacking President Obama's economic record was to simply assert that the numbers were all fake. The unemployment rate? It was “phony,” a “fiction,” “one of the biggest hoaxes in modern politics,” Trump suggested. In reality, he told voters, the job market was a disaster.
On Friday, the Bureau of Labor Statistics released the first jobs report covering President Trump's time in office. It was solid—U.S. businesses added 235,000 workers to their payrolls. So, naturally, a reporter decided to ask press secretary Sean Spicer during his afternoon briefing that day whether, given his past statements, Trump thought this jobs report was “accurate and a fair way to measure the economy”—you know, whether it was still a sham.
Spicer was ready. “I talked to the president prior to this, and he said to quote him very clearly,” the press secretary said, grinning like a 12-year-old about to win a spelling bee. “They may have been phony in the past, but it’s very real now.”
The whole room laughed. Loudly. Then the press conference moved on. It was almost a tender moment. Except the entire White House press corps was chuckling at the president's habit of spreading conspiracy theories about his political opponents—sometimes it’s wiretapping, more often it’s about unfriendly numbers—and then reversing himself once convenient. Apparently, pathological dishonesty is now a winking joke. That's our Trump!
The gag took another soul-crushing turn on Sunday, when White House Office of Management and Budget Director Mick Mulvaney sat down for an interview with CNN's Jake Tapper. Since the White House was now trumpeting the formerly phony jobs report, Tapper asked whether the Bureau of Labor Statistics had changed its methodology. What followed was an awkward, factually inaccurate attempt at evasion, in which Mulvaney insisted that, while he didn't want to bore the viewers with specifics, the Obama administration was definitely up to something fishy and the Trump administration was most definitely not.
“We’ve thought for a long time—I did—that the Obama administration was manipulating the numbers in terms of the number of people in the work force to make the unemployment rate, that percentage rate, look smaller than it actually was,” Mulvaney said. “And we used to tell people back home, the only thing you should really look at, number of jobs created. And as long as that number is above $250,000 [Note: He seems to have meant above 250,000 jobs], then the economy is doing extraordinarily well. And that was the number we hit last week.”
Nothing in this garble was true, except perhaps for the fact that Mulvaney might believe his own nonsense. The economy did not add 250,000 jobs in February. More importantly, the Obama administration did not manipulate any percentages—there are different ways to calculate unemployment and underemployment, some of which are broader than others. The Obama administration reported the same ones as past presidents. The Trump administration is reporting the same exact numbers as Obama, tallied in the same way. The figures haven't even changed much since Trump took office—the official unemployment rate is still 4.7 percent, like it was in December.
In his follow-up question, Tapper almost got Mulvaney to admit so much, before dropping the subject, seemingly out of exhaustion.
Tapper: But just to—I don’t want to spend the whole interview talking about this.
Tapper: But just a point on it—you’re not the one that was attacking the numbers as phony. There’s nothing that changed that made them real today?
Mulvaney: Right. The BLS did not change the way they count. I don’t think. But you could have a long conversation, when you have got a numerator and a denominator, how to arrive at a percentage. But again, I don’t want to bore people.
Tapper: This isn't a claim that you made, so I'm not going to spend too much time on it.
And that was it. Lame as his bit about the complexities of long division may have been, Mulvaney was allowed to end on the utterly baseless note that, somehow, the Trump administration was doing something differently, the specifics of which were just too dull for a television audience. And Tapper, typically one of the most aggressive interrogators on television, was content to leave it there as if this is, somehow, a B-level story.
It's not. The idea that Obama was lying about the state of the economy is a keystone in Trump's claim that he is actually making the job market great again. It's a core part of the the administration's narrative. And yet, even good reporters like Tapper barely seem to have the heart to press them on it. The rest have just decided to laugh it off.
Update, March 13, 3:50 p.m.
During Monday's press briefing, a reporter asked Spicer to elaborate on Mulvaney's comments about the unemployment rate. As usual, Spicer's response consisted of barely comprehensible verbal gymnastics. Here they are in full:
Reporter: Director Mulvaney said yesterday that he felt the Obama administration had been manipulating the unemployment rate. I wonder if that’s a view that the president shares and what evidence is there of that.
Spicer: I think he was clearly referring to Obamacare. [Note: No, he wasn't] With the number of people, but I would refer you back to him and his comments with respect to how he characterized that. I think he can discuss the precise nature of what he meant on that.
Reporter: Does the president think that the Obama administration had been manipulating the unemployment rate.
Spicer: I think you know what the president’s view is. He’s made it very clear in the past what his comments were on how those numbers were, were articulated in the past. I think there’s a question between the total number of people that are employed. And the president’s comments in the past have reflected that his big concern was getting to the bottom of how many people are working in this country, and that the denominator, meaning that the percentage rate of the total number of people, is not the most accurate reflection of how many people are employed in this country. How many jobs we’re creating, how many people are getting back to work, how many companies are committing to hiring more people is a much more accurate assessment of where we’re heading as a country, where our employment is, where our economy is headed. But to look at a number and say we have 4.7 or 4.8 or 5.9 percent unemployment is not necessarily an accurate reflection of how many people are working, seeking work, or want to work, and if you know how they conduct those surveys, there’s a lot of time when a lot of people, whether they’re older or younger or because of how long they’ve been searching for work are not considered statistically viable anymore and they’re washed away. So I think how you look at the percentage of people working can sometimes be a manipulated number. The number of people that are added to the rolls every year, every month rather, is a much more accurate understanding of what’s happening in the economy.
This is obfuscatory nonsense. One can argue about whether the headline unemployment rate, which Trump has criticized, tells us anything useful about the health of the economy. For what it's worth, I think there are better, more informative stats out there. But the administration has not accused Obama of emphasizing the wrong number. It has accused him of manipulating the numbers, which is a lie. The facts here are simple: The Department of Labor is publishing the same exact statistics it reported under the last administration, tallied the exact same way. But Trump and his underlings refuse to admit that, because it would undercut their message about the economy.
Still, it's good to see that the White House press corps didn't let this issue drop today. Again, it isn't something that should be chuckled away.
Corporate Incentives Cost U.S. $45 Billion in 2015, Don’t Really Work
The corporate tax breaks you tend to hear about are the outliers: Tesla’s $1.3 billion from Nevada, Boeing’s $8.7 billion from Washington state, Mike Pence’s deal to keep some Carrier jobs in Indiana.
Less flashy but more important, a February report from the Upjohn Institute for Employment Research suggests, are the run-of-the-mill economic development incentives built into state law across the country and designed either to attract companies, to keep them in place, or to get them to add positions. In 2015, incentives for new or expanding export-based industries (i.e., manufacturing, tech, media, any company that sells its goods or services beyond the local economy) offset average state and local business taxes by 30 percent, costing the U.S. $45 billion.
The report, based on a database of 26 years of incentives in 33 states, affirms the consensus that these tax breaks—which have tripled since 1990, when the database begins keeping track—don’t do much to convince companies to move.
“There’s big disparity in incentives across even adjacent states,” explained Timothy Bartik, a senior economist at Upjohn and the author of the report. Incentives can vary by as much as 3 to 1 across state lines, and there’s little evidence they exert a strong effect on corporate geography, said Bartik, or respond to in-state economic trends. “The largest predictor of whether a state is offering a lot of incentive deals is whether they offered them the year before.” In other words: States don’t offer these deals to companies because they need to, but because it’s simply what they already do.
Trumpcare’s Only Fan Is a Massive Insurance Company That Really Needs a Favor Right Now
By gawd, there's finally someone out there who says they like Trumpcare—or parts of it anyway. Anthem, the nation's second largest health insurer, expressed its support for the Republicans' Obamacare replacement in a letter to the House Energy and Commerce and Ways and Means committees, as Morning Consult reports Friday. In the note, CEO Joseph Swedish says that without major changes to the Affordable Care Act, his company will begin to “surgically extract” itself from the individual insurance market in 2018, and that the “time to act is now.”
Anthem has previously said that it might bail on the Obamacare markets in 2018, so this letter doesn't come as a great shock. It's also worth noting, as Politico does, that Anthem has been trying to win approval from Washington to buy up its rival, Cigna—which suggests it has some incentive to play nice with the administration.
The question is whether Anthem really supports the whole Republican plan, or just really likes a few key parts. Swedish writes that, “The American Health Care Act addresses the challenges immediately facing the Individual market and will ensure more affordable health plan choices for consumers in the short term,” then name-checks a few “critically important” provisions. Namely:
- "Establishment of the Patient and State Stability Fund" (This would compensate insurers that lose a ton of money on sick patients.)
- "Repeal of the ACA’s health insurance tax" (Health insurers don't want to be taxed.)
- "Continuation of the Cost Sharing Reduction (CSR) subsidies" (This is complicated, but these federal payments to insurers are basically essential to making Obamacare work, and some have worried Trump would cut them off.)
- "Allowing the use of tax credits for ‘off exchange’ health plans.” (That would make it easier for insurers to sell whatever the heck they want.)
In short, health insurer Anthem is very much in favor of the provisions that would be obviously beneficial to the health insurance industry. “These provisions are essential and must be finalized quickly,” Swedish writes.
Does this mean Swedish backs everything in the bill? It's hard to tell. The letter never says anything clear-cut like: “We would like to see the current incarnation of this legislation pass.” And the CEO is silent on one aspect of the bill that's worried other insurers and the industry's major lobbying group—the elimination of Obamacare's requirement that Americans buy insurance or pay a tax penalty, which Republicans would replace with a much weaker provision. Swedish also says Anthem is still “thoroughly reviewing and evaluating the legislation further to better understand the changes to both the Individual market and the Medicaid program.” But in the meantime, the company apparently likes Trumpcare enough to write a mostly supportive letter, and maybe win itself a little goodwill and influence in the process. Someone had to cheer for this thing, eventually.
Trumpcare Might Break the Insurance Market
Republican leaders have claimed that their new health care legislation will finally stabilize America's wobbly insurance markets, which under Obamacare have failed to settle down in many states. Unfortunately, there are strong reasons to worry that their proposal would make the damage worse in some markets—and maybe collapse them entirely.
The reason why boils down to two words: adverse selection. That's the troublesome situation in which customers wait until they get sick to buy health coverage. When it occurs, carriers tend to lose money and pull out of the market; after all, nobody wants to run an insurance business enrolling nothing but congestive heart failure and cancer patients. This has been something of an issue under Obamacare, which banned companies from discriminating against patients with pre-existing conditions, but tried to keep the markets functioning Americans to buy insurance or pay a tax penalty under the individual mandate. Combined, the two rules were supposed to create a balanced risk pool of healthy and sick customers. But the mandate has been less effective than the law's architects hoped, and many insurers have ended up with an older, sicker customer base than they first anticipated. That's created problems like higher premiums, and left many counties with just a single insurer on the Affordable Care Act’s exchanges as companies have stopped selling plans.
As I wrote on Tuesday, Trumpcare, in theory, could make the adverse selection problem much worse. That's because it keeps Obamacare's pre-existing condition rules intact while nixing the individual mandate. In its place, the law would allow insurers to charge new customers 30 percent extra for a year if they'd previously gone 63 days uninsured. This rule is supposed to encourage people to stay covered, lest they pay a penalty. But in some ways, it creates the exact opposite incentive. Where the individual mandate bites people each year that they don't buy coverage, Trumpcare's penalty doesn't hit until someone buys coverage, and only then makes it more expensive. So once people go two months uninsured, it encourages them to delay buying coverage for as long as possible.
So the incentives are kind of perverse. But how strong are they? We can get a rough sense from the chart below, which was put together by Caroline Pearson, a senior vice president at the health care consulting firm Avalere. It compares how much a 27-year-old would pay for going uninsured under the individual mandate and how much he or she might pay under the Trumpcare penalty. The first striking thing, which Vox's German Lopez noted earlier this week, is that the Republican proposal hits lower-income Americans hard. Today, those earning less than 300 percent of the poverty line pay $695 under the mandate. Under Trumpcare, the equivalent of a bronze plan could cost them about $1,000 extra. Upper-income young people would end up paying less than today.
Morally, the fact that Trumpcare reserves special punishment for the young and relatively poor is pretty abhorrent. But it also has policy implications, because that's the demographic insurers desperately need to sign up for coverage. The Department of Health and Human Services has estimated almost 80 percent of the population that's eligible for an Obamacare plan but has remained uninsured earns less than 400 percent of the poverty line. Any reform meant to fix the individual market needs to get more of those young, lower-middle-class workers to buy insurance, at least if Republicans plan to keep protecting people with pre-existing conditions.
The Trumpcare penalty is really poorly designed to do that. Forcing the uninsured to pay an extra $1,000 for coverage is not going to make anybody more eager to buy insurance. It may discourage some young adults from becoming uninsured in the first place, but people often lose coverage for reasons they can't avoid, like sudden job loss. It doesn't help matters that Trumpcare would offer lower-income people less money to help them buy insurance than Obamacare. As conservative health wonk Avik Roy put it, the plan as a whole looks like a “a recipe for adverse-selection death spirals.”
To be fair, there are at least a few ways Trumpcare could overcome these issues. If deregulating the market allows insurers to offer coverage that costs less than the $2,000 tax credit young adults will receive, the penalty might be less of a problem, since young people will have very little reason to ever end up uninsured (of course, that's a big if). Second, while Trumpcare cuts health insurance subsidies for the poor, it extends them to higher earners—so you may see more young, uninsured middle-class Americans buy coverage, which would help the risk pool. Finally, the GOP plan would also create a large reinsurance fund to compensate insurers that lose money paying for especially sick customers (Obamacare had a temporary version that lasted through 2016). While that might not cure the fundamental problem of adverse selection, it'll mitigate its effects by reducing insurers' losses.
But none of that changes the fundamental flaw in the legislation. Republicans have built into the heart of their proposal a giant disincentive for the young and uninsured to buy coverage. They’re chasing away the very customers who are essential to making the market work. It's a blueprint for, you know, disaster.
Donald Trump Did Not Make the Jobs Report Great Again
U.S. companies added a solid 235,000 workers to their payrolls in February, the Department of Labor reported Friday morning, while the unemployment and labor force participation rates remained little changed. Because this was the first jobs report covering President Donald Trump's term in office, some conservatives apparently felt compelled to celebrate. Here, for instance, is the Drudge Report's hot take:
Ugh, no. Just no. This month's employment number was strong, yes, but also unexceptional. In January, the U.S. added 238,000 jobs; in September it tacked on 249,000. This time last year, we added 237,000. This month's result fell right within the range we've seen for the past several years. Trump's election might be making Wall Street investors and small businesses more optimistic or whatever, but there is no sign that has translated into jobs. Here's a chart of monthly jobs growth dating back to the Great Recession, for reference.
Donald Trump did not make the jobs report great again. He is still coasting on a solid economy left over from his predecessor's term in office. Frankly, Obama didn't do a great deal to influence the labor market after the first two years of his term, other than stand guard to veto the worst ideas of the GOP. Now, conservatives have a president who's ready to sign whatever legislation they manage to churn out of Congress. Let's see what happens when he starts scribbling his signature on bills.
A Vermont Mayor Wanted to Take in Refugees. He Lost His Job.
For the past year, the national drama over refugees has played out in miniature in the small city of Rutland, nestled in Vermont’s Green Mountains.
The fifth-term mayor, Christopher Louras, hatched a plan in 2015 for Rutland to settle 100 refugees from Syria and Iraq. The initiative was publicly announced last March, and in September, Rutland was granted State Department approval. It was the right thing to do, supporters said. But Louras, a five-term mayor who was first elected as a Republican but is now an independent, made an economic case for the program.
“The benefits, economically and culturally, that we will recognize is exactly what the community needs at this time,” he told the Boston Globe in May. “As much as I want to say it’s for compassionate reasons, I realize that there is not a vibrant, growing, successful community in the country right now that is not embracing new Americans.”
On Tuesday, the backlash swept Louras from office. His opponent, city Alderman David Allaire, strongly criticized the secrecy surrounding the town’s decision to accept refugees. Announcing his candidacy in December, Allaire stressed that he was not anti-refugee. “I’m sure if this had been handled differently, you would not see the divide you see in this community right now,” he said at the time. “We are a thoughtful, helpful community.”
Why Huge Chunks of the Health Care Industry Hate Ryancare
Business may like House Speaker Paul Ryan’s health care overhaul proposal—the Chamber of Commerce enthusiastically endorsed it after House Republicans unveiled it on Monday. But not the health care business. The American Hospital Association was first out of the gate to announce its opposition to the widely criticized plan, followed quickly by the main physicians trade group, the American Medical Association.
Businesses believe the plan could help relieve them of costs. Health care businesses, however, believe it will relieve them of customers, and therefore revenues. Which shows that Ryan, the earnest faux-wonk who claims to have a great understanding of the private sector, has very little clue about what has happened in the health care economy over the past several years.
Simply put, the U.S. economy is more leveraged to health care than it ever has been. Health care accounts for greater absolute and relative levels of economic activity. That’s in part because the baby boomers are getting older and because there’s inflation in health care. But it’s also because the Affordable Care Act vastly increased the number of people who have health insurance coverage, boosting the number of people accessing in-patient services, prescription drugs, and medical devices. In 2015, health care spending stood up at $3.2 trillion, up 5.8 percent from the year before, according to the Centers for Medicare and Medicaid Services. Health care spending accounted for 17.8 percent of the U.S. economy, up from 15.5 percent in 2005. In January, health care accounted for 15.6 million jobs, up from 13.6 million in January 2010. Health care employs more people than the manufacturing industry that the Trump administration hopes to revivify, and almost as many as retail trade. In Birmingham, Alabama, as is typical in many cities, 4 of the top 10 employers are health care operations.
And this larger health care industry is, in turn, highly leveraged to the Affordable Care Act. With its incentives, mandates, carrots, sticks, and investment, the ACA reshaped the health care industry, channeled money in certain directions and provided signals for the industry to invest where demand would rise. Everyone had to redo their financial models—for good or ill—based on the impacts. Hospitals could, for example, presume lower levels of charitable care that had to be written off. Venture capitalists plowed $400 million into Josh Kushner’s insurance startup Oscar, which sells policies on the ACA exchanges. MedStar Health, to cite one example, “poured millions into creating an extensive ambulatory care network across the region—most recently opening a major one-stop health shop in downtown D.C.” Hospitals have borrowed billions of dollars in bonds and constructed new facilities designed to capture ACA-related business. With Medicaid expanding significantly in Kentucky, clinics expanded their capacity to treat people suffering from substance abuse; the number of Bluegrass State Medicaid recipients seeking such services has risen 740 percent.
Sure, everyone in the health care value chain—insurers, doctors, device-makers—complains about regulation and reimbursements. That’s just how they roll. They still know that the repeal of the ACA would leave them high and dry. And they know that a huge amount of investment and debt now rests on the edifice they’ve built in the past seven years.
In drumming up support for the ACA, the Obama administration and congressional Democrats essentially bought off different sectors of the health care industry—or, if you prefer, engaged in interest-group politics. They convinced businesses to sign onto legislation by providing them with incentives and asking them to make some sacrifices. Insurers were promised more customers buying their products with subsidized funds; hospitals were promised cash to fund innovation and fewer patients showing up uninsured in emergency rooms; doctors were offered the prospect of more patients needing more treatment and procedures through the expansion of Medicaid.
As Paul Ryan and company put together their new plan, they offered sweeteners to one sector of the health care industry and told the rest of the value chain to stuff it. The plan contains plenty of sops for the insurance industry—people will be penalized for not buying plans, tax credits will subsidize the purchase of policies, and they’ll be able to charge more and be required to provide less. Which explains why insurers have been essentially mute about the proposal.
But for the other sectors of the business—doctors and hospitals, pharmaceuticals and medical technology companies—the plan effectively offers nothing. In fact, it offers less than nothing. Curtailing Medicaid and causing millions of people to lose or forgo insurance is a recipe for reducing consumption of health care services. Far from improving their margins, as the plan might do for insurance companies, it will make it harder to run many health care businesses. Imagine trying to pay off the bonds that supported construction of a new hospital if hundreds of thousands of people in your service area lose insurance. Imagine trying to pay the salary of a primary care physician in Kentucky if Medicaid is diminished.
Businesses, we are told, crave certainty. The intent of the GOP’s plan, as currently constructed, is to inject a huge amount of uncertainty into the industry. It’s not surprising key sectors of it are getting very, very cranky.