Cassidy's option not as good as other tactics

The question posed by Louisiana Sen. Bill Cassidy’s latest effort is whether those wishing to have sanity return to American health care insurance can use this as a bridge to get there or if letting the stench worsen has a better chance of succeeding in that.

Cassidy and three co-sponsors rolled out legislation yesterday to make substantive changes to health care policy, to mixed reviews from his fellow Republicans and conservatives and predictably partisan caterwauling from Democrats and the political left. It will act as an amendment to a budgetary bill and must pass within the next two weeks, but only after vetting from the Congressional Budget Office to ensure it does not raise significantly the national debt.

For that reason, it has slim chances of passing. The compressed time frame leaves little opportunity for analysis and to gather support. At present, a majority of Republicans would vote for it, but all but two would have to commit. Cassidy and his co-sponsors argue that not only does this represent the last chance to alter substantially the failing Patient Protection and Affordable Care Act (“Obamacare”) for at least a year, but also allege that without it a “single-payer” system become probable – a ruinous government-run health care system that promises worse care for at least a trillion dollars a year more.

There is much to like about the amendment. As with previous recent efforts designed to replace Obamacare, it scraps the horribly wasteful fee-for-service arrangement for Medicaid and replaces it with a block grant system that allows states to choose how best to prioritize their health care spending. Better, it does not discriminate against states that wisely chose not to expand Medicaid, federal regulations of which very poorly set priorities, by creating a much more comprehensive and precise funding formula based upon enhanced population demographics.

Having this ability will let states rein in exploding Medicaid costs. As one example, it would create greater incentives to combat fraud and improper payments, preventing the all-too-common scenario in Louisiana of taxpayers being cheated.

It also loosens some regulations governing provision and funding for insurance on private markets. By letting states set their own regulations for the kinds of policies and conditions permitted, that can free people from paying for services they don’t need and induces greater patient responsibility that will contain costs, pressuring premiums downwards for many that have skyrocketed because of Obamacare and would have gone much higher if not for special taxes and increased debt spending subsidizing premium payments for some.

However, that aspect is the legislation’s greatest flaw. It continues almost all the additional taxes imposed by Obamacare in large part for subsidies benefitting individuals who previously afforded their own health care. While the legislation has these sunset in 2026, political pressure might make it impossible to cut these out by then. As long as these continue, the punitive redistributive effects of Obamacare will remain.

Thus, to move health care insurance and thereby provision into a better place, policy-makers must consider whether this amendment does a better job than, for example, the alternative of yanking illegal cost sharing reduction payments worth around $7 billion a year that bail out insurance companies, as federal law requires them to charge only certain rates for lower-income households. Under this scenario, Pres. Donald Trump could order the payments stopped, citing the unconstitutionality, but, like his recent statement that he would rescind an illegal executive order of his predecessor but invited Congress to act to legislate legally in this area, he could ask the same to assist insurance companies.

This could create pressure to relax regulatory standards that would bring costs down and/or increase the nearly zero costs to lower-income households, asking them to pay their fair share when many are forced to endure double-digit increase in premiums annually to subsidize them. If not, rates will zoom even higher and whether Democrats or Republicans get blamed and in what proportions no one can predict. Therefore, balky Republicans – and perhaps a few Democrats – next year will have every incentive to make significant changes in order to avoid possible electoral repercussions. These changes well could go beyond what Cassidy and his colleagues now propose.

Practically speaking, the path of making starker to the public the internal contradictions of Obamacare through this and other defunding tactics probably would produce more beneficial change than with what Cassidy has offered in the time frame possible. As such, unless changed to reduce its cost to American taxpayers – an uncertain proposition given the rules under which the budget must be considered – his approach does not offer as much as others can.