In Address to Congress, Trump Seeks to Advance Obamacare Replacement
In Address to Congress, Trump Seeks to Advance Obamacare Replacement

In President Donald Trump’s wide-ranging address to a joint session of Congress on Feb. 28, he presented principles for repealing and replacing the Affordable Care Act, also known as Obamacare. In doing so, Trump has made a bid to break a deadlock in his own party on how to move forward with health insurance reform.

Since Trump took office six weeks ago, consensus on how to replace the giant health care law has eluded the Republicans. Several plans have been proposed that run the gamut of options, from completely repealing Obamacare and replacing it with market-oriented measures, to allowing states to keep the law if they choose to do so. Meanwhile, pressure is building for the Republicans to take action.

Principles

In his speech, Trump laid out five principles for health care reform.

First, patients with pre-existing conditions should be able to have health care, and there should be a “stable transition” process for those currently receiving insurance through Obamacare onto whatever replaces it.

These measures address two of the great anxieties that have been voiced in town halls around the country: that those with pre-existing conditions might not be able to afford life-saving insurance if Obamacare is changed, and that changes to Obamacare could abruptly cause people to lose their insurance.

Second, Trump proposed providing tax credits and health savings accounts to people so that they could purchase the insurance they want, not a plan forced on them by the government.

Health savings accounts have been fixtures in conservative Republican health care proposals, but the House Freedom Caucus has objected to funding health insurance with tax credits. Tax credits are criticized as replacing one form of entitlement—a subsidy for health insurance—with another form of entitlement. However, Speaker of the House Paul Ryan’s (R-Wis.) plan relies on tax credits.

Third, Trump proposes giving governors “the resources and flexibility they need with Medicaid to make sure no one is left out.” Another fixture in conservative plans has been to give block grants for Medicaid to the states. The states are given a fixed budget and authority to run the program, with the expectation that they will do a better job than the federal government. What requirements specifically are placed on the states depend on the plan that is adopted.

Fourth, Trump called for legal reform and for bringing down the prices of drugs.

General view of the House of Representatives as President Donald J. Trump delivers his address to a joint session of Congress, at the U.S. Capitol, in Washington on Feb. 28, 2017. Trump, in his first address to Congress, laid out his agenda on issues like immigration, the economy, foreign affairs and health care. (MIKE THEILER/AFP/Getty Images)
General view of the House of Representatives as President Donald J. Trump delivers his address to a joint session of Congress, at the U.S. Capitol, in Washington on Feb. 28, 2017. (Mike Theiler/AFP/Getty Images)

Independent of the debate over Obamacare, Republicans have for decades called for tort reform, with the expectation that reducing malpractice awards would have the benefit of lowering the cost of practicing medicine, which would then lower the cost to the patient.

Since being elected, Trump has called for lowering the cost of drugs. According to a Feb. 28 MarketWatch report, Trump’s current thinking involves raising the prices foreign countries pay for American-made drugs. If other countries are getting American drugs at artificially low prices, and those prices can be raised, then drug companies can lower the prices charged in the United States without losing profits.

The challenge facing Trump and the congressional leadership is to bring the Republicans to a consensus on health care, and then to gain enough Democratic votes to pass a law.

Fifth, Trump called for Americans to be able to purchase insurance across state lines, another standard reform in conservative plans. By creating a national market for health insurance, which is currently sold at the state level, Trump said that costs will go down and the standard of care will go up.

Trump was silent in his speech about the fate of several taxes that support Obamacare, which is another point of division within the Republican caucus. The House Freedom Caucus (a conservative GOP group), for instance, favors repealing all of the taxes. Meanwhile, budget hawks insist that funding has to be provided for whatever replaces Obamacare, which likely means keeping the taxes in place.

Death Spiral

Before laying out his five principles, Trump recounted how Obamacare is “collapsing,” and said, “Action is not a choice—it is a necessity.”

On Feb. 14, Kentucky-based insurer Humana announced it was pulling out of Obamacare’s exchanges for 2018. It is the first major health insurance company to do so, although other companies have reduced their involvement in the exchanges.

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In his speech, Trump said that one-third of the nation’s counties have only one insurer, “leaving many Americans with no choice at all.”

On Feb. 15, the CEO of insurance giant Aetna told The Wall Street Journal that Obamacare was in a “death spiral,” and he predicted more insurers would pull out of the exchanges.

Insurers need to submit their rates for 2018 to regulators by May 3, which means that the Trump administration has two months in which to reassure insurers about its plans for how the future of Obamacare and its replacement will play out.

Politics

Increasing the pressure on the Republicans to repeal and replace Obamacare are the political consequences of doing nothing.

In every election since Obamacare was passed in 2010, the Republicans have run on the promise that they would repeal the health care law with market-based alternatives. That promise energized voters who delivered the House of Representatives to Republicans in 2010 and the Senate in 2014.

With the Republicans now controlling the presidency and both houses, voters will feel there are no excuses left for not following through on the promise to end Obamacare. A failure to do so could greatly weaken the Republicans’ electoral chances in 2018.

The challenge facing Trump and the congressional leadership is to bring the Republicans to a consensus on health care, and then to gain enough Democratic votes to pass a law.

A detailed plan based on Trump’s principles would not completely satisfy the conservative Freedom Caucus or the small group of senators who want states to have the option of keeping Obamacare. But such a plan may provide a framework for compromise among the various Republican groups.

If the Republicans bring all 52 of their senators together behind a plan, they will need the votes of eight Democratic senators for the plan to become law. Passage in the House by a unified Republican Party can be assumed, but to escape being blocked by a filibuster in the Senate, 60 votes will be needed.

Trump began and ended his remarks on health care with appeals to Republicans and Democrats to work together for the good of the country.

Senate Minority Leader Chuck Schumer (D-N.Y.) has said the Democrats will not cooperate with Trump. If he can hold his caucus together, then the Republicans will be left helpless, unable to provide a replacement for exchanges that may collapse.

But the shape of the 2018 elections will complicate Schumer’s planned resistance: 25 Democratic seats are up for reelection, and 10 of those are in states Trump carried.

A vote against replacing Obamacare will be a difficult one for senators in red states who may have to face Trump campaigning against them, telling voters their Democratic senator is the reason Obamacare has not been replaced.

In his speech, Trump appeared optimistic that things would work out. Immediately after discussing health care reform, he said, “Everything that is broken in our country can be fixed.”

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