Obamacare too hard a nut for Republicans to crack

Paul Krugman: The economics are predicated on the totality, you cannot dump one element without dumping all of them

Will 50 Republican senators be willing to inflict grievous harm on their constituents in the name of party loyalty?

I have no idea. But this seems like a good moment to review why Republicans can’t come up with a non-disastrous alternative to Obamacare. It’s not because they’re stupid (although they have become stunningly anti-intellectual). It’s because you can’t change any major element of the Affordable Care Act without destroying the whole thing.

Suppose you want to make health coverage available to everyone, including people with pre-existing conditions. Most of the health economists I know would love to see single-payer – Medicare for all.


Realistically, however, that’s too heavy a lift for the time being. For one thing, the insurance industry would not take kindly to being eliminated, and has a lot of clout. Also, a switch to single-payer would require a large tax increase.


Most people would gain more from the elimination of insurance premiums than they would lose from the tax hike, but that would be a hard case to make in an election campaign.

Beyond that, most Americans younger than 65 are covered by their employers, and are reasonably happy with that coverage. They would understandably be nervous about any proposal to replace that coverage with something else, no matter how truthfully you assured them that the replacement would be better.

So the Affordable Care Act went for incrementalism – the three-legged stool. It starts by requiring that insurers offer the same plans, at the same prices, to everyone, regardless of medical history.

This deals with the problem of pre-existing conditions. On its own, however, this would lead to a “death spiral”: healthy people would wait until they got sick to sign up, so those who did sign up would be relatively unhealthy, driving up premiums, which would in turn drive out more healthy people, and so on.

So insurance regulation has to be accompanied by the individual mandate, a requirement that people sign up for insurance, even if they’re healthy. And the insurance must meet minimum standards: Buying a cheap policy that barely covers anything is functionally the same as not buying insurance at all. But what if people can’t afford insurance?

The third leg of the stool is subsidies that limit the cost for those with lower incomes. For those with the lowest incomes, the subsidy is 100 per cent, and takes the form of an expansion of Medicaid. The key point is that all three legs of this stool are necessary.

Take away any one of them, and the programme can’t work. But does it work even with all three legs? Yes.


To understand what’s happened with the ACA so far, you need to realise that as written (and interpreted by the Supreme Court), the law’s functioning depends on a lot on co-operation from state governments. And where states have in fact co-operated, expanding Medicaid, operating their own insurance exchanges, and promoting both enrolment and competition among insurers, it has worked pretty darn well.

Compare, for example, the experience of Kentucky and its neighbour Tennessee. In 2013, before full implementation of the ACA, Tennessee had slightly fewer uninsured, 13 per cent versus 14 per cent. But by 2015 Kentucky, which implemented the law in full, had cut its uninsured rate to just 6 per cent, while Tennessee was at 11.

Or consider the problem of counties with only one (or no) insurer, meaning no competition. As one recent study points out, this is almost entirely a red-state problem. In states with GOP governors, 21 per cent of the population lives in such counties; in Democratic-governor states, less than 2 per cent.

So Obamacare is, though nobody will believe it, a well-thought-out law that works where states want it to work. It could and should be made to work better, but Republicans show no interest in making that happen.

Instead, all their ideas involve sawing off one or more legs of that three-legged stool. First, they’re dead set on repealing the individual mandate, which is unpopular with healthy people but essential to making the system work for those who need it. Second, they’re determined to slash subsidies - including making savage cuts to Medicaid – in order to free up money that they can use to cut taxes on the wealthy.

The result would be a drastic rise in net premiums for most families. Finally, we’re now hearing a lot about the Cruz amendment, which would let insurers offer bare-bones plans with minimal coverage and high deductibles.

These would be useless to people with pre-existing conditions, who would find themselves segregated into a high-cost market – effectively sawing off the third leg of the stool. So which parts of their plan would Republicans have to abandon to avoid a huge rise in the number of uninsured? The answer is, all of them.

After all these years of denouncing Obamacare, then, Republicans have no idea how to do better. Or, actually, they have no ideas at all.