Harry Nelson

Winners and Losers under the AHCA

Last week was a big one. On Thursday, the 7th anniversary of the Affordable Care Act vote, ABC7’s Elex Michaelson invited me to comment on winners and losers on the Republican American Health Care Act (AHCA), just as Speaker Ryan postponed the vote because he didn’t have the votes to pass it:

Then, on Friday, Speaker Ryan decided to pull the AHCA indefinitely, an embarrassment for both Ryan and President Trump. What’s ahead?

1. Slow Bleed on the ACA: The ACA is still unraveling despite the non-vote and failure of “Repeal-and-Replace”. The main reason is that, on his first day in office (Jan 20), Trump issued an Executive Order to “minimize the economic burden” of ObamaCare “pending repeal” by ordering executive agencies (like the IRS) to “take all action consist with law” to prepare for repeal. As a result, the IRS announced it would no longer be penalizing uninsured people who failed to get insurance as required by the ACA individual mandate. This threw the insurance companies into a tizzy because it means people aren’t incentivized to buy insurance plans, hurting their business. More broadly, much of the ACA uses language that “the Secretary [of the Department of Health and Human Services] SHALL . . .” HHS Secretary Tom Price is closely aligned with the view of Speaker Ryan and we expect him to get orders from the President to continue standing down on enforcing the ACA, leading to more financial problems as the insurance exchanges become less functional, with continued uncertainty over the funding shortfalls in the insurance exchanges. Democratic State Attorneys General may challenge this inaction, but, meanwhile, Friday’s non-vote on the Republican bill is more like a slow bleed-out rather than a quick death for the ACA.

2. Republicans Shift their Focus to Tax Reform with a Big Decision Ahead: With Friday’s debacle on the AHCA, Republicans are turning to a broader tax reform measure. The Administration and Speaker Ryan face a choice: If they want to win over the conservative Freedom Caucus, they could throw some of the many healthcare-related tax repeals that were part of the AHCA into a broader tax cut effort, further weakening the ACA by starving it financially. This is the more predictable course. Alternatively, with frustration over the intransigence of the conservatives, Trump and Ryan could look to moderates and Democrats to put together a coalition that would make the 39 conservative members of the Freedom Caucus irrelevant. That would mean a compromise on the Medicaid Rollback, which was the most publicly objectionable part of the AHCA. (Medicaid went from 50m beneficiaries in 2008 to 70m today, and most of these 20m people would lose coverage in coming years under the AHCA). If Trump and Ryan compromise with Republican and Democratic moderates on Medicaid, they will be looking in return to save face with support for the AHCA’s revised insurance model of lower tax credits and shifting the penalties from government-imposed to insurance-company-imposed (which the conservatives derided as ObamaCare “Lite”), which may be more palatable despite the AHCA model’s flaws because the insurance exchanges aren’t working anyway. We’re not betting on this strategy, but there’s no question that frustration with the Freedom Caucus is high and President Trump would love to cement his “deal-maker” persona with this kinds of a move.

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