ObamaCare – What’s Next?

 

Republicans are basking in the glow of passing major tax reform legislation. Will they try to reform ObamaCare again in 2018?

Some would argue that’s dead and gone, time to move on to something else. Others want to take another swipe at repeal and replacement. Which plan is best?

Avik Roy, healthcare economist writing in The Wall Street Journal, says an intermediate plan would be best. With the elimination of the Individual Mandate of ObamaCare, which was passed as a rider on the tax reform bill, there are other changes that can be made to improve the situation without a full repeal.

Why not leave things the way they are now?

Roy says the growth in spending on healthcare entitlements like Medicaid and Medicare threatens to overwhelm the Treasury, starving the federal government of the funds needed to pay for everything else, including education, welfare, and national defense. Even Democrats should recognize the importance of these other budget items. ObamaCare has increased the actual total spending and the rate of growth of spending on healthcare, despite its promises to do the opposite. (see recent post ObamaCare Fails to Contain Costs)

What changes can realistically be achieved in this partisan Congress?

Full repeal and replacement is probably unrealistic, given the absolute resistance of the Democrats to any change and the lack of unanimity on the Republican side. Fortunately, the policy landscape has improved with the elimination of the Individual Mandate and the relaxation of restrictions on alternative forms of short-term insurance by Trump’s executive orders.

Medicaid Reform

Roy believes the most important change and the greatest opportunity is in reforming Medicaid. To put this in perspective, the cost of government spending on the ObamaCare exchanges in 2016 was $42 Billion. The cost of Medicaid to the federal taxpayers was $358 Billion and to state taxpayers was $208 Billion for a total of $566 Billion in 2016. In other words, Medicaid spending is more than ten times the spending on the ObamaCare exchanges.

It gets worse. By 2025, the Centers for Medicare and Medicaid Services (CMS) project national Medicaid spending will reach $929 Billion, an increase of 64%. By comparison, the Congressional Budget Office (CBO) projects national defense spending in 2025 of $726 Billion, an increase of 24% over 2016 levels. That means Medicaid spending will exceed our national defense spending in the next 7 years!

This might make sense if Medicaid spending was a good investment in the health of our people. However, multiple studies have shown that Medicaid patients have no better healthcare outcomes than people who are uninsured. This is primarily because of the problems of access to healthcare experienced by Medicaid patients.

ObamaCare made all of this worse by extending eligibility to able-bodied adults for the first time. This added about 15 million to the rolls of Medicaid.

Roy suggests Republicans address this problem by several approaches:

  • Revive the Graham–Cassidy Plan – which proposed block grants to the states with the flexibility to design their own Medicaid programs. Focus it solely on Medicaid to convert states’ healthcare entitlements into competitive insurance markets.
  • Per-capita allotments – that tie long-term Medicaid spending to various measures of inflation. States must first get the flexibility to reduce waste and fraud and to focus Medicaid resources on the people who most need them.

 

The long-term savings from Medicaid entitlement reform would significantly impact the rest of the federal budget, allowing funding of badly needed welfare reform, infra-structure spending, and national defense. We cannot allow these critical issues to become underfunded because of the current avalanche of Medicaid spending.

(For more on Medicaid spending see my last post, California Medicaid Spending Out of Control.)

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