The consequences of repealing and replacing Obamacare: A troublesome paradox

evan_goldsteinTo the approval of millions of Americans, President-elect Donald J Trump campaigned on directing the US Congress to repeal the Affordable Care Act (ACA or Obamacare). As the dust settles from Mr Trump’s surprising victory on 8 November, the Republican Party finds itself with looming control of all three branches of the US federal government.

Paul Ryan, the US speaker of the House of Representatives, is ready to oblige Mr Trump’s promise to repeal the ACA, having made a similar promise in his A Better Way plan, the presumptive blueprint for the Republican Party—and soon Americanpolitical agenda.

Indeed, it will be difficult to immediately repeal the full law. However, the Trump administration will be able to swiftly end federal bureaucratic enforcement of the ACA, and the US Congress will be able to defund the ACA through the budget reconciliation process. (In fact, the Republican controlled Congress already prepared and passed such legislation in 2015, only to be vetoed by President Barack Obama—a bill that will no doubt resurface on President Trump’s desk.)

The consequences? Since the enactment of the ACA—the US’s most comprehensive health reform legislation since the passage of Medicare and Medicaid in 1965 and its most ambitious attempt to achieve universal health coverage—the number of uninsured individuals in the US decreased from 49 million in 2010 to 29 million in 2015, including upwards of 11 to 15 million low income Americans who gained health insurance through the ACA’s Medicaid expansion provision. Many policy pundits and analysts surmise that most of those individuals, somewhere between 15 and 20 million, will become uninsured under Trump’s campaign proposals.

What will replace the ACA?

How will Mr Trump and the Republican Party make good on their promise to not only repeal the ACA, but also replace it with something that can fulfill their corollary promise to “give every American access to quality, affordable healthcare?”

History shows that Republicans vehemently oppose state administered, single payer options (whether of British or Canadian flavor) and instead favor market based, pro-private competition solutions. Fatefully, while political opponents decry the ACA as “socialized medicine,” the ACA truthfully embodies market oriented reforms aimed at harnessing competition and placating the private healthcare industry. So what other options exist?

While economic theory illustrates how markets can efficiently and equitably allocate resources to consumers, a free market cannot work in American health insurance and healthcare. Time and again, history shows that American healthcare markets are susceptible to market failures, plagued by moral hazard, adverse selection, and suboptimal competition, which influence prices, costs, and utilization.

Alas, since the 1970s, famed Stanford and RAND economist Alain Enthoven championed the managed competition model to illustrate how markets and competition can work in American healthcare, if properly designed and regulated to neutralize sources of market failure. Among the necessary corrections? Employer and individual mandates that all citizens must acquire insurance, an iteration of which even the conservative Heritage Foundation has supported; standardized benefits; and guaranteed issue, which prevents insurance companies from denying coverage to individuals with pre-existing medical conditions. Sound familiar? (See: the Affordable Care Act. Or the Swiss or Colombian healthcare systems.)

While Mr Trump and Mr Ryan espouse maintaining guaranteed issue, they flatly reject any government mandate that citizens must acquire insurance. Yet guaranteed insurance coverage in the absence of mandated coverage tends to be disastrous, resulting in the death spiral of rising costs. Sicker people gleefully enroll while healthier people do not need to, leaving insurance companies to cover a riskier population. Insurers raise health insurance prices to cover costs, further encouraging healthy people to drop coverage, and so on.

Hence a troublesome paradox emerges: Mr Trump and the Republicans aspire to replace the ACA with a market based solution; however, they concurrently reject the necessary theoretical and practical provisions required for an effective market based solution.

Lackluster campaign proposals: Is all what it seems?

Can we properly expect Mr Trump and the Republican Party to act on their campaign proposals, turn back the clock, and leave millions of Americans without health coverage? Doing so could quickly become politically devastating. Based on income, millions of Americans who voted for Trump were likely eligible for subsidized or essentially no cost coverage through the ACA’s Medicaid expansion and the Health Insurance Marketplace. As gleeful as they may be about electing President Trump, will their fervor endure if they find themselves unable to access life saving treatment and medication?

Or do Mr Trump and Mr Ryan have other plans? While campaigning, Trump’s policy proposals lacked clarity and depth, which has bred uncertainty among pundits and analysts. An astute businessman, Mr Trump may heed the advice of wise pro-market economists like Dr Enthoven and develop new solutions in due time. Likewise, a prudent statesman, Mr Ryan surely understands the political stakes.

Contemporary political theory posits that Democrats “own” certain issues, such as social welfare, while Republicans “own” others, such as taxes and spending. History shows how the parties vie for issue ownership, which fosters constituent persuasion and electoral advantages.

Standing prominently in the national policy spotlight, buttressed by the expectations of millions of voters, the Republican Party has the opportunity to make good on its promises to repeal and replace the ACA and—if done properly—steal ownership of the healthcare coverage issue, position itself as a party of social welfare, and expand their constituent base for years to come.

However, if they do not deliver, and if they instead choose to gamble away this opportunity for short term ideological gains, they stand to alienate tens of millions of Americans.

Evan Goldstein is a health services management and policy doctoral student and Dean’s distinguished university fellow at the Ohio State University in Columbus, Ohio, US. He completed his MPhil, public policy, at the University of Cambridge where he was a Cambridge Trust Scholar. Before returning to the US, Evan conducted global health advocacy strategy evaluation for the prevention of noncommunicable diseases department at the World Health Organization.

Competing interests: I have read and understood BMJ policy on declaration of interests and declare the following interests: None.

  • The Saker

    How can repealing the ACA be good when it will take away healthcare from millions of poor people?