The Rust Belt Is Burning: Republicans Lay Waste to their Base on Health Reform

The Rust Belt Is Burning: Republicans Lay Waste to their Base on Health Reform

William Tecumseh Sherman, who laid waste to the South at the end of the Civil War, famously said, “War is Hell”. So, too, is health reform. And like Sherman’s infamous March to the Sea, where he burned town after Confederate town, the Republican War on Obamacare entered its attrition phase with the introduction on Monday in the House legislation to repeal and replace ObamaCare, except that Ryan is marching in the wrong direction; his troops are marching “north” and burning towns behind their own lines.

Ryan’s bill released Monday was greeted with a chorus of derision from the newly empowered Republican base; some conservative wags dubbed the bill “RINOCare”. Thoughtful conservative analysts savaged it. Michael Cannon, the hard core libertarian Cato Institute health analyst, called it “a trainwreck waiting to happen” and suggested that “ it will create the potential for the sort of wave election Democrats experienced in 2008” In Reason.com, Peter Sunderman wrote, “it’s not clear what problems this particular bill would actually solve.”

Ryan’s draft neither repeals nor replaces ObamaCare.

It retains the insurance underwriting rules that have raised the cost of health insurance, as well as ObamaCare’s 10 million person Medicaid expansion (until 2020). And then, it shrinks Medicaid only by attrition, protecting the enhanced federal match for the expansion population.

It leaves the exchange system intact, removing the individual mandate and replacing the income-related premium subsidies with an age-related system of refundable tax credits tilted toward younger people. The refundable tax credits are a much better mechanism that the complex and difficult to administer premium subsidies, but they are way too small to help lower income and older people stay insured. Many millions of families will return to the ranks of the uninsured.

It also doesn’t effectively stabilize the individual insurance market. While Ryan’s bill creates a $100 billion slush fund for states to protect the individual market, that they might use for high risk pools or other purposes, it accentuates the risk selection problem by letting the potentially sick enter the market with only a 30% premium penalty for a year.

Robert Laszewski, a fierce critic of ObamaCare, argued that “this sum of money wouldn’t come close to dealing with either the Obamacare individual health insurance market problems or the gap that gutting Medicaid would create.” He went on to argue that

“Obamacare is so poorly constructed it is literally an anti-selection machine. The Republican proposal is worse.” Mario Molina, whose Molina Healthcare sells coverage on nine ObamaCare exchanges, said, “You’re going to see big rate increases, and you’re going to see insurers exit markets.”

The bill also doesn’t reduce federal spending or costly regulatory mandates enough to matter to Republican “deficit hawks”. Though it has yet to get a CBO score, it is highly likely that the bill increases the federal deficit, which will be unacceptable to the large fiscal conservative wing of the Congressional Republicans.

But worst of all, it lays waste to President Trump’s electoral base– Baby Boom vintage working class white voters in Appalachian and the Rust belt, as many as 5-7 million of whom got coverage from ObamaCare. The median age of a Trump voter is 57, and they came from counties with serious underlying health problems.

These working class Trump voters get clobbered by Ryan’s bill.

The AARP, which advocates for older folks said: “This bill would weaken Medicare’s fiscal sustainability, dramatically increase health care costs for Americans aged 50-64 and put at risk the health care of millions of children and adults with disabilities, and poor seniors who depend on the Medicaid program for long-term services and supports and other benefits,”

Thanks to the switch from income related premium subsidies to a fixed and not terribly generous refundable tax credit, 60 year old workers all across “Trump Country” earning $20 thousand a year (thus ineligible for Medicaid) take between a 50-75% haircut on federal help that will push millions of them out of health coverage, according to a Kaiser Family Foundation analysis.

What Ryan’s bill DOES do is repeal $600 billion in taxes on the wealthy, as well as pharmaceutical companies, health insurers and health manufacturers. It also lifts the $500 thousand annual cap on deductibility of health insurance executive salaries imposed by ObamaCare. And it spends a remarkable six pages making ABSOLUTELY CERTAIN that winners of high dollar state lotteries are NOT going to be eligible for Medicaid!

If Trump had run on Ryan’s plan- cut taxes for the rich and throw millions of working class people back into the raging sea of no health coverage- he would never have been elected President in the first place. If the bill is enacted, Trump’s promises to “cover everybody” and provide people “something terrific”- better coverage for less out of pocket cost- will look as specious as President Obama’s campaign promises about cutting family costs by $2500 a year and “if you like your health plan, you can keep it”. “TerrifiCare” this bill isn’t.

Trump is now in a very difficult position. Even if he pushes hard, it is unlikely that this bill, as written, gets the 50 Republican votes he needs to clear the Senate. If he pushes hard and loses, his ability to enact the vital tax cuts and infrastructure plans equity markets and businesses expect will be impaired, and the economic problems he promised to address will not be solved.

It is not clear that Trump has the political leeway to cancel the Medicaid expansion without damaging the political fortunes of the sixteen Republicans who expanded their programs. And his staff clearly has no grasp of the magnitude of change required to reverse the meltdown underway in the individual insurance market, nor the votes in the Senate to change the key elements of ObamaCare that have led to that meltdown.

What Trump’s colleagues in the House have done with Ryan’s bill , unwittingly, is set fire to their own government. As pollster Sean Trende demonstrated in his masterful electoral analysis, The Lost Majority the wave elections of 2006, 2008 and 2010 were “illusory” realignments of American political power.

What the wild swings in these elections-from Republicans to Democrats and back to Republicans in three successive seasons- showed was an increasing disconnect between the day-to-day reality of American voters and their political elites. Trende’s analysis foreshadowed Trump’s surprise victory.

Trump understood that disconnect better than any other actor on the 2016 electoral stage, and connected with a lot of hopeless, dispossessed and angry voters. Unless he can turn his generals around and stop setting fire to his own people, his reign, to paraphrase Hobbes, will be nasty, brutish and short.

Jeff Goldsmith is an associate professor at the University of Virginia and leads Health Futures Inc., a consultancy focused on health policy.