Over the past seven years, Republicans in the House of Representatives voted to repeal the Affordable Care Act–President Barack Obama’s signature reform of the U.S. health insurance system–50 times. But when it mattered yesterday, they were unable to coalesce around a bill, and abandoned the effort, leaving the law they dubbed Obamacare in place.
"Obamacare is the law of the land, it will remain the law of the land until it's replaced,” said Speaker of the House Paul Ryan (R-Wis.) at a press conference. “We are going to be living with Obamacare for the foreseeable future."
Given that, what does this failure–a big embarrassment for Ryan and for President Donald Trump–mean for policy and for the business world? Some thoughts.
Party time for providers! One group of people celebrating: Hospital administrators. Obamacare has resulted in a dramatic increase in the number of people who have health insurance, some through private insurance and others through the government’s Medicaid program. That means hospitals have less “bad debt”–meaning medical bills that will never be paid off. According to the Congressional Budget Office, the GOP’s Obamacare replacement would have resulted in 14 million fewer Americans having health insurance next year. Shares of hospital stocks rose Friday: HCA nearly 4%, Tenet 7% and Universal Health Services 3%.
Is tax reform really coming? Large U.S.-based companies, including Apple, Microsoft and Pfizer, are holding more than $2 trillion in other countries because if they brought the money back to the U.S., they would pay taxes on it. Changing the corporate tax rate so that they will spend that money here was one of Trump’s big campaign issues, and the reason he had the backing of billionaire investor Carl Icahn.
The pharmaceutical industry would be one of the big beneficiaries. Valeant Pharmaceuticals, which made a habit of buying smaller firms and raising the prices of their products, did so in part by having a Barbados tax domicile. Big firms, including Allergan, Mylan and the medical device firm Medtronic, all have headquarters out of the U.S., in order to get tax breaks. If Trump can get tax reform done, large U.S. drugmakers like Merck, Amgen and Eli Lilly could go on a buying spree, buying up smaller biotechnology companies.
Tax reform couldn’t happen before healthcare reform, because tax reform requires knowing what the U.S. budget looks like. With healthcare reform tabled, the GOP can move on. But do Trump and Ryan still have the political capital to get it done?
What happens to the individual insurance market? Some 12.2 million people buy insurance through the exchanges set up under Obamacare, which allow insurance companies to sell insurance to individual people, some of it paid for in part by government subsidies.
As Dan Diamond at Politico outlines, there’s a lot that the Trump administration can do to make these markets function less efficiently, from not enforcing Obamacare’s individual mandate, which forces people to pay a tax if they don’t buy health insurance, to not paying for TV advertisements to make people aware they should enroll.
Health insurers have been withdrawing from some markets because they’re simply not making enough money. Not enough young, healthy people, who pay premiums but don’t rack up big bills, are buying insurance. ACA markets could “implode,” as Trump has predicted, and the Trump administration could help the process along. The Congressional Budget Office, in its reports, has characterized the ACA market as stable. But more doubts give insurers like UnitedHealthcare and Aetna, which have decided to pull out of Obamacare exchanges, no reason to come back.
Could a centrist plan emerge? This debacle revealed a sharp divide in the Republican party: between conservatives on the right who don’t want any of the ACA’s coverage expansion of government-paid healthcare to exist, and those who want reform but want to keep some coverage. In particular, Republicans in states that participated in the expansion of Medicaid don’t want to throw people off the program.
Could there be a second path to a law, between that latter group and moderate Democrats who want to make changes to the Affordable Care Act? Maybe. One more moderate option was put forward by Republican Senators Susan Collins (Maine) and Bill Cassidy (La.). The plan would allow states to choose between funding that is something like what is available in the ACA, an alternative plan, or saying no to increased Medicaid funding. The plan got a Twitter push from Republican Senator Charles Grassley (Iowa) on Friday. It’s not clear why Democrats would go along, though, unless the threatened Obamacare implosion actually happens.
