On Thursday, May the 4th, the House of Representatives voted in favour of the Republican Bill to repeal the Affordable Care Act (ACA/ Obama Care) and replace it with the American Health Care Act (AHCA/ Trumpcare) – with only one vote to spare. The House Republicans now own healthcare, and the Democrats have made it clear they want no part in this bill.
Keep in mind that this is just a bill; before it becomes law, it has to go through Senate. Nevertheless, the GOP is celebrating this political victory as if it were set in stone. But it is not so simple, and there is good reason to expect (hope?) that the Senate won’t vote in favour of this act, or at least amend it. But more importantly; the current state of the bill reveals Trump’s problematic view on social policies and their worrisome implications. Furthermore, the process through which the Republicans pushed this bill through, in a desperate attempt to repeal Obamacare is not pretty or laudable.
History of Opposition
Given that the repeal and replace of Obamacare had been on the Republican agenda ever since the ACA became active, you would be forgiven for expecting an elaborate plan that at least Republicans, as a class could identify with. Nonetheless, the earlier version of the AHCA proposed by the Trump administration in March was very poorly received, even by Republican factions. The defunding of Planned Parenthood, in particular, received a backlash. The Center on Budget and Policy Priorities (CBPP) had estimated that if the first version of the bill were to become law, it would cause almost 24 million people to lose coverage by 2026. For these reasons, it had been labelled ‘dead upon arrival’ by members of the Democratic party as well as by (moderate) Republicans. Other factions of the conservative class called the bill “Obamacare Lite,” pointing out that despite Trump having strongly expressed his disapproval of Obamacare multiple times, he had not managed to come up with a plan for health reform that was strikingly different whilst still providing the same amount of care.
The costs and coverage of the current Republican health care plan have not yet been reliably valued or analysed, yet it was rushed through the House. Their rush raises the pertinent question of why House Republicans were so eager to have this vote at this present juncture. The haste with which the bill was rushed, forestalling any detailed analysis of its costs and benefits certainly does not evoke confidence in the financial stability of the AHCA.
What is equally disturbing is the way the Trump administration reportedly pressured members of House of Representatives that voted against in the first round in to changing their original vote. Allegedly, chief of staff Reince Priebus personally exerted pressure on lawmakers and tried to turn no-voters by asking what they needed to get him a ‘yes.’ Trump himself has apparently made phone calls with several members of the House as well in the days leading up to the vote, and not all of the conversations were friendly or civil. The Republican win of last Thursday was enabled by last minute-changes to the bill, one of which adds an extra $8 billion to the Bill provide coverage for people with pre-existing conditions – although states are still given an opt-out for this mandate. Last-minute reforms also include waivers for states against certain consumer protections like age rating and essential health benefits. With merely 217 votes (216 being the necessary amount to pass) the bill has passed through the House.
Even though one cannot state with certainty whether this bill will become law, it is important to analyse not just its content, but also the process with which Republicans have pushed this bill. His approach to health reform shows where Trumps priorities really lie. Spoiler alert: the bill contains very little of the promises he made during the elections.
Obamacare – A Brave Attempt at a Complex Issue
Many critics of Obama point to the expenses of ACA as a way of dismissing the health care act altogether. But it is important to realise that the financial problems of the US healthcare system are far older than Obamacare, and are not caused by it. American healthcare is the most expensive healthcare system in the world per individual ($9403,- per capita – against $3,935,- in the UK). One explanation for these high costs is the inflated price mechanism in the privatised USA healthcare system – therefore, the same medical treatments or procedures often cost more than they do in, say, Europe. This is partially due to the lack of a unified system that negotiates standard prices with healthcare providers, drug manufactures etc. Government funded programmes like Medicaid and Medicare often offer cheaper prices, which is not surprising: businesses are likely to offer discount if they can lure in a big contract. But most healthcare providers in the US profit from the inelastic demand; if you are in need of care, you’re going to have to pay for it. You can’t shop around for better options. The complexity of the system adds to immense administrative costs as well.
To be clear, Obamacare didn’t solve all these problems; the ACA did not grant universal healthcare and is not as radical as sometimes portrayed. ACA merely added to the already existing system rather than replacing it. The ACA left the market mechanisms intact and fluctuations in premiums still occur. However, it did indeed guarantee better access to healthcare, and it is largely due to these regulations:
- Insurance companies could not discriminate based on gender or pre-existing condition.
- Premiums could only vary according to age.
- ACA provided government subsidies for those that could not afford healthcare insurance but fall below the threshold for Medicaid.
On diving into the subject, Trump has infamously stated:
“Nobody knew that healthcare could be so complicated.”
Setting aside how this remark displays once again the President’s ignorance on various key issues of the practice of governing, let’s make one thing clear: healthcare is indeed a complicated structure, and no one expects a simple solution. However, going through the AHCA it also becomes clear that some of its key-proposals will have undesirable effects for healthcare provision, particularly for the vulnerable in the US – including the working class who in large part voted for Trump.
Trumpcare vs. Obamacare – A Comparison
- First off, Trumpcare has proposed to get rid of income adjusted tax subsidies, one of the pillars of Obamacare that made it possible for people with low income – but over the threshold to obtain medicaid- to get healthcare.
- Income based tax credits will be replaced with flat tax credits based on age (ranging from $2000 for ages up to 29 to $4000 per individual 60 or older). Overall, the tax credits will be less generous for lower-income groups under Trumpcare than under Obamacare.
- As under Obamacare, there is no obligation to have healthcare coverage. However, Obamacare had a tax penalty for those who neglect to get health insurance if in fact they could afford it (which could go up to $695 a year). Trumpcare has no such penalty. Instead, it states that if someone has a gap of more that 63 days without healthcare, their premiums for future healthcare will be increased by 30% over a period of 12 months. In reality, what this does is discourage those that might be able to afford healthcare after a period of time to get coverage (especially younger people will be willing to take that chance). The financial threshold to get health care insurance will increase once again. When less people get health insurance, the collective return will be lower as well, consequently leading to possible higher premiums in the future. Private healthcare (in the US, the only kind of healthcare) will become more expensive, making coverage once again more dependent on employment, and therefore less accessible for those without a job ( or without health benefits).
- Trump promised not to cut any funding in Medicaid (a government-funded programme that provides healthcare for those with the lowest incomes). However, AHCA will prevent the programme from expanding. Originally, Medicaid was meant to cover only medically vulnerable groups like pregnant women and the elderly. However, under Obamacare the criteria became merely income-related. Trumpcare allows those already enrolled to keep their coverage, but it would mean various low-income groups could no longer enroll in the future.
- Furthermore, Trumpcare restructures the funding of Medicaid. Instead of federal funding based on enrollment, the states will only get a finite amount of funding. The GOP claims that this limited funding will encourage states to tackle fraud and abuse Medicaid, and will stimulate able-bodied people to seek a job with healthcare benefits. The CBO estimates the cuts in funding around $370 million. Republicans also claim the prediction of loss in coverage is overestimated. But if states cannot bring up the difference between the funding they now receive and those they will receive under Trumpcare, the number of enrollees will decrease even further.
Healthcare in America and the ‘Welfare State’
Like most Anglo-Saxon countries, the US is a liberal welfare state (if we follow the classic distinction of welfare states by Esping-Andersen). This means that social security measures are expected to provide minimum basic needs for those that cannot afford it. Collective welfare is typically limited, only accessible for those that meet strict criteria. Supplementary services are often quite extensive, but only available for those that receive enough income to purchase it.
Traditionally, the welfare state aims to redistribute wealth in such a way that it allays poverty and relieves distress, in order to provide everyone with a sufficient life standard. ‘Healthcare’ is an important and indispensable part of the social security institutions that aim to contribute to this cause. The AHCA, however, is most likely to counteract these efforts, undoing a great deal of the Obama administration’s contributions to the redistribution of wealth, another plank of the campaign that Trump ran.
Bernie Sanders has termed the AHCA a “disgrace,” stating that it represents a shift of wealth form the lower and middle class to the richest 2% of the American population. Indeed, the exact opposite effect to what a welfare state should produce. According to some estimates, the tax cuts for the wealthy will amount to a total of $883 billion.
Paul Ryan has claimed that the AHCA will cut costs and put the consumer back “in control.” Even if Trumpcare won’t add to the deficit, the question is whether this will be on the backs of ordinary American people. And in the likelihood that it is, how can Trump justify this as supporting ‘the forgotten people’? Like Obamacare, Trumpcare leaves the market of healthcare providers in place. Unlike Obamacare, Trumpcare decreases regulations for private insurance companies, which will most likely lead to disadvantages for those with no capital and no bargaining position – a.k.a. the working poor.
Most reforms (like changes in tax credits and the tax penalty) won’t kick in until 2020, and people already on Obamacare will receive the same coverage over 2017. Insurance companies will be announcing their rates for next year during the spring and summer. Individuals won’t be able to indicate the exact impact on their personal situation until then. But it is safe to say that those with low-income or high age are most likely to be worse off under Trumpcare (AHCA) than under Obamacare (ACA).
A Hasty Compromise Without Public Consultation
The economic debate regarding healthcare always comes back to the question of when governments should interfere in the workings of the market. Since healthcare in America is largely privatised, major interference will most likely result in disruption of the health care sector and is therefore strenuously resisted.. For this reason, radical changes should be stretched out over a long period of time, and implemented gradually. Trump has let us know that Trumpcare will be implemented in three phases, but so far, the Republicans have nothing to show regarding their claims for future steps of the programme. This, in addition to the apparent lack of costs-analysis that appears to have gone into the framing of the Act, underpins how Trump’s brand of governance is based on leaving the public and other politicians in the dark. Once again, he has shown himself to be a self-aggrandising salesman rather than an honest businessman; advocating for the Trump brand, without bothering to explain the terms and conditions of the contract.
For those who really need it, healthcare premiums will go up, whilst subsidies and tax credits go down. Only the rich will benefit tremendously from tax cuts. Trumpcare serves the interest of the rich rather than the working poor. As far as Trump’s promise of “insurance for everybody” goes, it is safe to say that if this bill goes through the Senate and ends up on Trump’s desk, the President will yet again not have delivered on another of his campaign statements. Partially because his promise of lower premiums and lower deductibles (which is a required down payment for the treatment before insurance kicks in) will not be fulfilled either. The CBO actually estimated that under the first version of the bill deductibles “would tend to be higher.” Funding has therefore been extracted from those who need it most, whilst the highest earners get a massive financial break.
Finally, this plan lacks the same element that Trump’s other policy reform proposals neglect to provide: an explanation of how it is going to be financed. The president keeps promising that he won’t add to the federal deficit, but that does not explain how the repeal of mandates like tanning-taxes and medical-devises taxes will be financially compensated. If you rush a bill through the House without allowing the costs and implications to be analysed, you prevent administrators and citizens, including your own supporters, from genuinely understanding the content and consequences of what you’re proposing. This might be a political ‘win’ for Trump, but it is also a loss for representative democracy. Whilst the members of the Trump administration are patting themselves on the back, the American people should soon realise that when it comes to passing legislation; quality is more important than quantity. This is not transparent governance. This is not acting in the interest of the people. This is stroking ones’ ego, attaining ‘results’ by sacrificing the interests of those who Trump claims to represent.