Obamacare Lite looms as alternative for GOP

The GOP must resolve its intraparty differences on healthcare ideology. And Democrats will have to decide how far they are willing to go in reducing coverage and subsidies before signing onto a replacement package.

Now comes the reality. It was a lot easier to campaign against the Affordable Care Act than to come up with a viable alternative.

With that dawning realization, health policy experts associated with both political parties are asking if President-elect Donald Trump and congressional GOP leaders might decide it’s politically smarter to reach a deal with Democrats this year to refashion and rebrand the ACA, rather than erasing it and trying to create a new system from scratch.

Both parties have powerful political reasons to avoid disrupting healthcare for the 30 million Americans who obtained coverage through the new individual marketplaces or state Medicaid expansions. Trump has vowed to come up with “something terrific,” a promise the opposition party is certain to remind voters of throughout his term. Meanwhile, 13 Senate Democrats last week signaled to GOP leaders they are willing to cooperate on improving the law.

But both sides will have to make major concessions to reach a compromise. The GOP must resolve its intraparty differences on healthcare ideology. And Democrats will have to decide how far they are willing to go in reducing coverage and subsidies before signing onto a replacement package.

“The more pragmatic Republicans could say they repealed the parts of the law that are the most onerous, modified it with conservative ideas and claim victory,” said Chris Condeluci, a political consultant who served as a senior Senate GOP staffer during passage of the ACA. “But will they be able to roll the conservatives who won’t go along with Obamacare Lite, and win Democratic support to get it across the finish line? It’s an open question.”

If Republicans insist on rolling back the Medicaid expansion or capping and cutting federal Medicaid funding, it’s unlikely many if any Democrats will go along. “I’m skeptical of a deal because of the deep polarization of the parties and, even more crippling, the split between GOP pragmatists in the Senate and Freedom Caucus ultraconservatives in the House,” said Lawrence Jacobs, an expert on healthcare politics at the University of Minnesota.

There are plenty of areas where pragmatic Republicans and Democrats could reach agreement, such as tightening enrollment rules to reduce costs, giving insurers more leeway to sell cheaper plans to younger people, and replacing the ACA’s individual mandate with strong incentives for people to maintain continuous insurance coverage.

The two sides also could come together on giving states greater flexibility to design their own coverage systems. Red states would be free to move

Clashes also loom over the size of the subsidies that would replace the ACA’s tax credits and cost-sharing reductions; the adequacy and affordability of the replacement coverage; and the percentage of the population that would gain or lose insurance.

to voucher-type models while blue states could keep the ACA framework or adopt a public insurance plan.

For Trump and congressional GOP leaders, a healthcare deal with Democrats this year would get a politically vexing issue off their backs and free them to tackle other major legislative priorities such as job creation, tax reform, immigration and trade.

Still, partisan calculations could easily derail any deal as party leaders look toward the 2018 congressional elections. Trump tweeted last week that Republicans shouldn’t rush into repeal and instead should let Democrats take the blame for Obamacare’s collapse. On the other hand, he called for Republicans and Democrats to work together on a “plan that really works— much less expensive & FAR BETTER.”

That goal could be impossible to achieve if Republicans push ahead to quickly abolish the ACA’s various taxes and spending cuts, which would eliminate the funding for an alternative coverage system. “If Republicans kill the revenue sources right off the bat, that could kill a deal, because you’d have to find the money somewhere else,” Condeluci said.

Focus groups of Trump voters conducted by the Kaiser Family Foundation last month found that most participants want more affordable health plans with low out-of-pocket costs, better access to cheaper drugs, and more robust provider networks. Accomplishing that would be difficult without adequate federal funding and significant regulation.

Already, prospects for bipartisan cooperation are waning. Democrats, healthcare industry groups, and even some Republicans criticized the GOP’s moves last week to pass a budget resolution setting up an expedited partyline repeal of most of the ACA—perhaps as early as next month—while deferring consideration of replacement legislation for months or years. House Speaker Paul Ryan’s announcement last week that the repeal bill would end federal funding of Planned Parenthood’s women’s healthcare services was another partisan red flag.

“It seems Republicans just want to go through with repeal and delay,” said Dr. Ezekiel Emanuel, a University of Pennsylvania health policy professor who helped draft the ACA. In a New England Journal of Medicine perspective article, President Barack Obama warned that Republicans would be “reckless” to repeal the law without replacing it at the same time. “Tens of millions of Americans will be harmed,” he wrote.

Some conservative experts have urged Republicans to slow down, draft a replacement plan that could attract Democratic support, and pass repeal and replace as a single package. That’s the approach favored by at least four Senate Republicans.

As part of a replacement package, James Capretta, a conservative health policy expert at the American Enterprise Institute, urged Republicans to embrace universal coverage through tax credits; let people keep their ACA coverage or switch to a new, conservative tax credit system; preserve Medicaid as a safety net system for the poor; and replace the ACA’s individual mandate with a system of automatic enrollment in basic insurance, from which people could opt out.

“There’s a lot of overlap between conservatives and liberals—universal coverage, no pre-existing conditions, affordability, making it easy to shop,” said Emanuel, citing conservatives such as Capretta.

A tough but potentially solvable issue will be how to ensure that people can access individual-market coverage regardless of pre-existing medical conditions, while at the same time maintaining a viable mix of healthier and sicker people in the risk pool. Republicans want to establish state high-risk pools that would offer plans to people with pre-existing conditions. But that would require large government subsidies.

The Republican alternatives to the individual mandate, such as lateenrollment penalties and benefit waiting periods for people who have had a break in coverage, will also face pushback from Democrats, who remain skeptical about those approaches. They note that people typically have breaks in coverage when they suffer adverse life events such as job loss and can’t afford to pay premiums.

Democrats also oppose high-risk pools, which generally did not work well in the pre-ACA days. They want to avoid returning to the days when insurers used medical underwriting to decide whether to accept applicants and how much to charge them.

Still, some liberal experts suggest Democrats could accept auto-enrollment and benefit waiting periods for people with insurance gaps. The idea, drawn from behavioral economics, presumes the vast majority of people without insurance would not take the extra step to opt out of an automatic enrollment system. “The question is whether there is a sweet spot that provides sufficient (consumer) protection without regulations that conservatives might view as too onerous,” said Larry Levitt, senior vice president of the Kaiser Family Foundation.

Clashes also loom over the size of the subsidies that would replace the ACA’s tax credits and cost-sharing reductions; the adequacy and affordability of the replacement coverage; and the percentage of the population that would gain or lose insurance. Republicans want to replace the ACA’s incomebased tax credits with smaller tax subsidies for far more people. They also envision leaner benefit plans with higher deductibles and out-of-pocket costs.

“It’s thinning the soup, a smaller pot available to a larger number of people,” said Joel Ario, a managing director at Manatt Health Solutions who served in the HHS during the Obama administration. “That’s a difficult issue to get through.”

Trump remains the wild card. Even though he tweeted last week that the ACA is “lousy healthcare,” some observers wonder if he might break with congressional Republicans and push for a deal with Democrats to keep popular provisions in the law. Kellyanne Conway, his senior adviser, said last week that Trump doesn’t want anyone who currently has coverage under the ACA to lose it.

In contrast, Ryan and Senate Majority Leader Mitch McConnell, when asked last week if the GOP plan would preserve coverage for everyone who has it under the ACA, both refused to commit. “I’m not going to get ahead of our committee process,” Ryan said.

The stakes are high for Trump. Getting to “something terrific” can’t happen without Democratic cooperation. And if they don’t pass a replacement plan and the individual insurance market crashes, “Republicans will pay a huge political price,” Ario warned.