Monday, March 02, 2015

Well, Ezra Klein, Republicans may not have "plan" to save insurance markets after King. But they may deal

Republican Senators Orrin Hatch Lamar Alexander John Barrasso are out today with a lightly sketched "plan" to salvage premium subsidies credited through the ACA's federal exchange if the Supreme Court rules for the plaintiffs in King v. Burwell.  The proposal closely resembles the  possible post-King negotiation that former HHS Secretary Michael Leavitt outlined to me. Here's Hatch et al:
First and most important: We would provide financial assistance to help Americans keep the coverage they picked for a transitional period. It would be unfair to allow families to lose their coverage, particularly in the middle of the year....

Second, we will give states the freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices. Republicans understand that what works in Utah is different from what works in Tennessee or Wyoming. We want to give states the time and flexibility to design health-care systems that work for them, not for the bureaucrats in Washington.

People who live in states that have state exchanges will continue to be subject to Obamacare’s costly mandates and rules, along with the subsidies. But their states could also have the benefit of our solution. Every state would have the ability to create better markets suited to the needs of their citizens.
And here's Leavitt last week:
...take the current subsidy structure, but allow people who qualify for a subsidy to get it not just in a state exchange but in a private exchange that may be authorized by the state. Multiple private exchanges might begin to pop up. You’d end up with  a competitive marketplace with many more exchanges and lots more innovation.

That way, the Democrats get what they want in that they can continue to drive forward.  Republicans get what they want: a market-oriented system of distribution with substantially less federal interference. 
Ezra Klein today ridicules the Hatch-Alexander-Barrasso gambit, both for its sketchiness and on grounds that these would-be salvage artists won't be able to bring their Republican colleagues aboard:
But even if the op-ed included more details, the bigger problem is there is absolutely no way House Republicans will permit Senate Republicans to save Obamacare. House Republicans won't even let Senate Republicans fund the Department of Homeland Security. The Department of Homeland Security!

The idea that the Supreme Court will gut Obamacare and House Republicans will instantly vote to keep the subsidies flowing so long as states get a bit more flexibility to design their alternatives defies belief.
Klein is doubtless right that Republicans will not swiftly united behind a "plan" that offers to keep the subsidy flow going. But that's where Leavitt's scenario is instructive. He describes a negotiating process, not a "plan." He first of all acknowledges that it's uncertain whether Republicans can tame the camp that wants to kill the ACA dead at any price and do nothing to salvage insurance for the 7 million Americans who will lose their subsidies if the King plaintiffs prevail. But that very split between the would-be salvage crew and the dead-enders will put Republicans at a political advantage if it's not resolved:
Obviously, the administration is going to point to a simple legislative fix and say, you can save millions of people their health insurance by passing a piece of legislation. That’s a simple and direct argument. Right now the Republicans are still thinking through what their unified response might be – it hasn’t yet emerged. It will need to, because a divided message will fall victim to a single message.
Once the clock starts running on ACA plan holders' subsidies, both sides will come under intense political pressure. It's in those circumstances that Leavitt sees a deal taking shape -- Democrats get to salvage their extension of insurance via subsidized private plans, and Republicans get to deregulate state insurance markets. The key factor shaping the negotiations will be the rising political pressure, and which party it falls on more heavily:
Republicans have control of both houses of Congress; they can drive the legislative process. But they’ve got an administration that can veto it and so both sides have power – we have shared power playing off here. And you can count on both sides to push their power as far as they can, based on whatever political influence they have at the time. And we won’t know that until we see what the Court says, and what public opinion is.
Not only Klein but his Vox colleague Sarah Kliff, and several others, have held up the current GOP train wreck over funding the Department of Homeland Security to suggest that the GOP won't be able to unite to execute any form of constructive compromise with Democrats, least of all over something as emotionally charged as saving any aspect of the hated ACA. I feel the force of that argument.  But with millions faced with an abrupt loss of insurance, this negotiation may take on the Russian Roulette urgency of a debt ceiling showdown.  Under those circumstances, Republican demands can shrink rapidly. They may deal if they can claim to have mitigated demonized ACA features such as the mandatory Essential Health Benefits or even given states the option of finding a substitute for the individual mandate (an option which they theoretically already have, if they want to get creative with ACA Section 1332 innovation waivers).

Leavitt, out of office and in business as a healthcare consultant, is more moderate and pragmatic than currently serving GOP elected officials. His vision of a fairly rational negotiation may seem a relic of times past. But we have not had a debt ceiling default yet. And if the Supreme Court invalidates the subsidy flow under the law as currently written, the prospect of cutting off affordable insurance to seven million,  destroying the individual health insurance market and putting hospitals in crisis may be a cliff too steep even for this Congress.

Once again, the full Leavitt interview is here.

Update, 3/3: A Twitter exchange with political scientist Jonathan Bernstein raised one plausible post-King scenario: no conclusive deal implying Republican acceptance of the ACA, but a series of temporary patches extending the subsidies. One-year patches could become as routine as the yearly "doc fix" that adjusts Medicare's unsustainable Sustainable Growth Rate. Such patches to fund the subsidies would require yearly budget cuts elsewhere, as the Congressional Budget Office will score any restoration of invalidated tax credits as new spending.

Update 2 (or rather, afterthought), 3/3: A couple of nights ago I finished Remedy and Reaction, Paul Starr's history of the mutant and stunted drive for universal health insurance in the United States.  The revised edition, published in January 2013, encompasses the Supreme Court decision upholding the law's constitutionality as well as Obama's reelection. Nevertheless, the tone is anything but triumphant -- "Reaction" is so to speak the last word. This warning near the book's conclusion now sounds prophetic:
The Affordable Care Act already represented a significant scaling back of liberal ambitions from Senator Kennedy’s proposals in the 1970s or even what Clinton was calling for in the 1990s. In those debates, many Republicans had accepted the legitimacy of universal coverage as a national objective. That is no longer true; the earlier moral consensus has disappeared. The policies advocated by Republican leaders in Congress.  would raise the number of uninsured. Perhaps America will simply get used to the idea that although other countries can provide health care to all their people, the United States is too poor to afford it (p. 282).
Starr ascribes the persistence of reaction not to Republican ideology per se but to the vested interests created by our patchwork of government programs and tax subsidies:
The American struggle over health care has also been peculiar because of the unusual lines on which it has been fought. If the “special interests” were arrayed on one side and the suffering masses on the other, the conflict would fit easily into a familiar populist picture of the world. But though the health insurers , drug companies, and other interests profit from the health system, they are not alone responsible for maintaining it. The bias against change also comes from members of the protected public. No other major democracy created a financing system that provides the biggest tax breaks to the people with the best private insurance; no other major democracy established a separate program for the elderly. A variety of other programs protect particular groups. These partial measures have become major obstacles to efforts to control costs and to extend protection to the uninsured. The resistance to reform didn’t arise because Americans were such determined individualists that they rejected all government help; much of the resistance has come from members of an entitled majority with a privileged position in the public-subsidy system.

The potency of these entitlements lies in the psychology of self-exemption they instill; the beneficiaries do not understand themselves as benefiting from government assistance or as sharing a common condition with the excluded. The tax subsidies for employment-based insurance are nearly invisible to those who receive them; Medicare invites seniors to believe that they have earned its benefits, whereas other claimants have not. Morally armed, they can reject helping others in need as a matter of high principle; after all, Americans shouldn’t look to the government for help (p. 280).
Now that some ten million Americans have obtained subsidized private coverage through the ACA exchanges (and another ten million plus through the Medicaid expansion), they too are a constituency. While  we are perhaps no closer than when Starr wrote to universal acceptance of the goal of universal coverage, the prospect of taking insurance away from one more enfranchised group is plainly giving Republicans pause. A post-King deal to maintain some version of the ACA's subsidized private coverage might be the worst possible way to obtain the acceptance of the ACA's goals and means that Starr deemed dangerously lacking. But such a deal could generate such acceptance.


  1. If the states keep guaranteed issue, I do not think that the so-called Republican 'flexibility' will amount to a hill of beans.
    And if the states are allowed to re-introduce underwriting, will any insurers step up? Insurers cannot design new products overnite.

    1. The insurers that have grandfathered and grandmothered plans could probably launch short term products in 3 to 6 months as the claims systems are still running in parrallel between PPACA and pre-PPACA products.