Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

Trump's Latest Healthcare Proposal Is Arguably the Most Dangerous Yet

In the words of President Trump, "Nobody knew that healthcare could be so complicated."

Following his victory in November, and with Republicans retaining control of both houses of Congress, it was widely expected that the Affordable Care Act (ACA), best known as Obamacare, would be shown the door rather quickly into Trump's presidency. But that hasn't been the case. We've instead been through not one, two, or three...but four iterations of a Republican healthcare repeal-and-replace effort -- all of which have come up short.

Image source: Getty Images.

Republicans are now zero for four in their repeal-and-replace efforts

In March, the House introduced the American Health Care Act (AHCA) to lukewarm support among the GOP -- and general vitriol among the public. The initial version of the AHCA never even made it to vote. A second version of the bill, which included two amendments -- an essential benefits waiver for states, and additional funding for high-risk and low-income patients -- passed by the narrowest of margins in early May, sending the bill to the Senate for debate.

However, GOP senators didn't care much for the AHCA. They wound up keeping a few core components of the law and rebranding it as the Better Care Reconciliation Act (BCRA). Introduced last month, the BCRA, like the initial version of the AHCA, failed to even go to vote because of lukewarm support from within the GOP. A second version of the bill was trumpeted last week with a number of changes designed to win over both conservative and moderate Republican holdouts. But once again, this fourth attempt at repealing and replacing Obamacare came up short, with at least four GOP senators stating they would not vote in favor of the BCRA. Republicans can afford to lose no more than two members of their own party if they have any shot of passing legislation through the Senate under reconciliation.

So here we are again at a stalemate. President Trump had vowed during his campaign to repeal and replace Obamacare, and both the GOP House and Senate have struggled to do so. Perhaps the greatest irony here is that the previous Congress under former President Obama did pass an ACA repeal bill, which Obama vetoed. Now that the GOP has a clear path to do so, little to no progress is being made.

Image source: U.S. Department of Homeland Security via Flickr.

"Let Obamacare fail"

So what's the next step for Republicans? According to Donald Trump in an interview with the press this past Tuesday, it's to purposefully let Obamacare fail. 

Let Obamacare fail; it'll be a lot easier. And I think we're probably in that position where we'll just let Obamacare fail.

We're not going to own it. I'm not going to own it. I can tell you the Republicans are not going to own it. We'll let Obamacare fail, and then the Democrats are going to come to us and they're going to say, "How do we fix it? How do we fix it?" Or, "How do we come up with a new plan?"

The idea of letting Obamacare face-plant is nothing new. In fact, all President Trump would have to do is withhold cost-sharing reduction (CSR) funding, and the ACA could potentially collapse on itself. Cost-sharing reductions are the subsidies given to those earning between 100% and 250% of the federal poverty level that lower the cost of copays, coinsurance, and deductibles associated with a visit to the doctor. A 2016 court ruling in favor of Republicans found that CSRs were being disbursed without Congressional authority, meaning all Trump would have to do is drop the appeal of the federal court's decision put in place during the Obama presidency, and CSR funding would cease. The adverse impact on low-income individuals and families would be immediate.

Image source: Getty Images.

Donald Trump just suggested the most dangerous strategy yet

But it's not the "let Obamacare fail" ethos that's truly terrifying. It's what Trump has proposed his Republican colleagues do instead: repeal Obamacare without a replacement bill in place. A repeal-only effort would give Obamacare a roughly two-year lifeline to be wound down and would purportedly give Republican lawmakers two years to come up with a replacement plan that everyone can agree on.

Unfortunately, there are numerous issues with this logic. For one, there are no guarantees that the GOP will come up with a workable plan in two years' time. The party has seemingly had eight months since the November elections to concoct a plan, which through four iterations has gone nowhere. Placing a time limit on crafting a bill has never worked particularly well in Congress, with lawmakers often waiting till the last hour to get things done. It also ignores the possibility that the GOP could lose its majority in the House or Senate between now and 2019, which could cause a stalemate in passing a new plan.

Second, it would create absolute turmoil in the health insurance marketplace. Even with the expectation of government-sponsored payments continuing for another two years, insurers would likely pull out of the ACA exchanges in increasing numbers, and this lack of competition would send premium prices through the roof. Not to mention that Trump's executive order easing the burdens of Obamacare, signed his first day in office, makes it virtually impossible for the Internal Revenue Service to collect the penalty associated with not purchasing health insurance. This would likely mean fewer younger adults enrolled over the next two years, and thus even higher premiums needed to cover sicker patients.

Finally, the numbers behind a repeal-only bill are truly terrifying. An analysis from the Congressional Budget Office (CBO) found that a repeal-without-replacement bill would lead to 32 million Americans' losing their coverage by 2026, including 19 million who'd lose their Medicaid coverage. Furthermore, insurance premiums would be expected to rise by about 50% in the year immediately following a repeal and would be almost double what they are now a decade later.

Image source: Getty Images.

Obamacare has issues, but they aren't insurmountable

There's no denying that Obamacare has issues. As we recently examined, some of these include a lack of healthy adult enrollment, the inability of each state's Office of the Insurance Commissioner to guide insurer premium pricing, and the failure of the risk corridor. However, these issues are fixable if Congress can find a way to work as a two-party team.

The real issue seems to be what'll happen with Medicaid. Republicans need cuts to Medicaid in order to reduce the federal deficit over the next 10 years and pass corporate and individual tax reforms. However, Democrats and some moderate Republicans may not go along with this plan, which puts tax reform up in the air, too.

What's next is really anyone's guess, but based on the CBO's analysis, repeal without replacement looks to be the most dangerous GOP strategy to date.

10 stocks we like better than Wal-Mart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017
The author(s) may have a position in any stocks mentioned.

 

The Motley Fool has a disclosure policy.