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Donald Trump is about to face a rude awakening over Obamacare - The
Washington Post

https://www.washingtonpost.com/news/wonk/wp/2016/11/12/donald-trump-is-beginning-to-face-a-rude-awakening-over-obamacare/

Donald Trump is about to face a rude awakening over Obamacare

President-elect Donald Trump and President Obama meet at the White House.
(Michael Reynolds/European Pressphoto Agency)

After reiterating his promise to repeal and replace the Affordable Care
Act, President-elect Donald Trump has indicated
<https://www.washingtonpost.com/politics/trump-and-aides-hedge-on-major-pledges-including-obamacare-and-the-wall/2016/11/11/9196b364-a82f-11e6-8fc0-7be8f848c492_story.html?hpid=hp_hp-top-table-main_lede-desktoponly%3Ahomepage%2Fstory>
that
he may keep two of the law’s most popular provisions. One is
straightforward enough — children up to the age of 26 being allowed to stay
on their parents’ plan. The other — preventing insurance companies from
denying coverage because of preexisting conditions — offers a perfect
illustration of why Trump and most of the other Republicans critics of
Obamacare don’t understand the health insurance market.

Let’s say that in the beautiful new world of “repeal and replace,” insurers
are required to sell you insurance despite the fact that your kid has a
brain tumor. Insurance companies know what to do with that. Their
actuaries can calculate that kids with brain tumors typically require (I’m
making this number up) about $200,000 a year in medical care. So they’ll
offer to sell you a policy at an annual premium of $240,000.

* [Donald Trump and the end of history
<https://www.washingtonpost.com/news/wonk/wp/2016/11/11/donald-trump-and-the-end-of-history/>]
*

At this point your response will probably be that such an outcome is not
fair. When the law says insurance companies can’t discriminate on the basis
for pre-existing conditions, surely what it means is that they have to
charge roughly the same price for health insurance, irrespective of your
pre-existing condition. In the language of insurance, that’s called
“guaranteed issue at community rates.”

Unfortunately, in the states that have tried guaranteed issues at community
rates, the insurance markets have collapsed. That’s because if you
guarantee everyone the right to buy health insurance at community rates,
then some consumers will game the system. The young and healthy ones won’t
buy any health insurance at all—they’ll go without until they are diagnosed
with diabetes or a brain tumor or get hit by a truck crossing the street.
And when that happens, they will immediately call up Aetna or Anthem and
exercise their right to buy health insurance at the low community rate,
irrespective of their medical condition. It won’t be long before insurance
companies begin losing a ton of money and are forced either to raise
premiums through the roof or stop writing policies altogether.

* [A new theory for why Trump voters are so angry — that actually makes
sense
<https://www.washingtonpost.com/news/wonk/wp/2016/11/08/a-new-theory-for-why-trump-voters-are-so-angry-that-actually-makes-sense/>]
*

So how do you prevent that kind of gaming of the system by consumers?
Well, that’s easy. You require that everyone buy at least some minimal
level of insurance at the beginning of every year, so they can’t buy
insurance only after they get sick. Let’s call that an” individual
mandate.” But because you can’t expect poor people to pay $1,000 a month,
they will require subsidies to keep their out-of-pocket costs to something
like 10 percent of income. To pay for the subsidies, a new tax will be
required.

So let’s review what just happened. To guarantee that people with
pre-existing conditions can get affordable health insurance, you need to
have rules requiring guaranteed issue and community rating. To keep
insurance companies in business because of guaranteed issue and community
rating, you need to have an individual mandate. And because poor people
can’t afford health insurance, you need subsidies. Combine all three, and
what you have, in a nutshell, is ... Obamacare.

Yes, it’s a bit more complicated than that, but not much. It’s possible to
allow insurance companies charge twice or three times as much, to people
who are older or sicker. You can let healthy people buy somewhat more
barebones “catastrophic” policies to satisfying their obligation under the
individual mandate. You could even avoid community rating by sending sick
people into “high risk pools” where their premiums would be subsidized by a
tax on everyone else’s health care premiums.

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But at the end of the day, once you decide that everyone, regardless of age
or medical condition, should be able to buy health insurance at an
affordable price, you have essentially bought into the idea that young and
healthy people have an obligation to subsidize the older and sicker people
in some fashion. And once you do that, it’s sort of inevitable you end up
where every health reform plan has ended up since the days of Richard
Nixon. You end up with some variation on Obamacare.

* [A new sign Republicans will give Donald Trump the same pass they gave
Bush
<https://www.washingtonpost.com/news/wonk/wp/2016/11/09/republicans-look-like-they-could-change-their-tune-on-debt-under-a-president-trump/>]
*

Of course, if you want to scrap guaranteed issue, scrap community rating,
scrap the individual mandate and scrap the subsidies, as Republicans,
propose, then you end up where the country was in 2008—with a market system
that inevitable gives way to an insurance spiral in which steadily rising
premiums cause a steadily rising percentage of Americans without health
insurance.

There are no easy solutions here, no free lunches. You can’t have all the
good parts of an unregulated insurance market (freedom to buy what you
want, when you want, with market pricing) without the bad parts (steadily
rising premiums and insurance that is unaffordable for people who are old
and sick).

At the same time, you can’t have all the good parts of a socialized system
(universal coverage at affordable prices) without freedom-reducing mandates
and regulations and large doses of subsidies from some people to other
people. Anyone who says otherwise – anyone promising better quality health
care at lower cost with fewer regulations and lower taxes—is peddling hokum.
Trump has vowed to 'repeal and replace' Obamacare. Here's why it won't be
so easy.

Play Video1:52

Trump has vowed to 'repeal and replace' Obamacare. He may find out that
it's not quite that simple. (Daron Taylor/The Washington Post)


Eric D. Schwerin
eschwerin@rosemontseneca.com

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