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Prospects For A Quick Obamacare Repeal Are Fading Fast

Monday, February 20, 2017 12:01
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Back on January 12th, 8 days before Trump even officially moved into the White House, the prospects of a quick repeal and replacement of Obamacare were looking really good when the Senate voted 51-48 to instruct key committees to start drafting legislation to do away with Obama’s crowning “achievement”.  In fact, that early January budget resolution required lawmakers to submit repeal proposals for consideration by January 27th, a lofty goal, but welcome news to conservative voters around the country that were eager for a quick unwind of the controversial legislation.

Alas, today, nearly a full month after the original deadline of January 27th, no replacement plan has been officially introduced and even Trump admits “maybe it will take till sometime into next year, but we are certainly going to be in the process…it’s very complicated.”

Speaking to a crowd in Florida over the weekend, President Trump said that a replacement plan would be introduced within “a couple of weeks” but steered clear of commentary on when such a plan could be expected to be implemented.  Per The Hill:

“We are going to be submitting in a couple of weeks a great healthcare plan that’s going to take the place of the disaster known as ObamaCare,” he said at a campaign rally in Melbourne, Fla. “It will be repealed and replaced.”

“Just so you understand, our plan will be much better healthcare at a much lower cost,” he added. “OK? Nothing to complain about.”

Meanwhile, a daily tracking poll from Good Judgement pegged the odds of a quick repeal of the individual mandate at 65% back in mid-January, when the Senate passed its budget resolution, but those odds have since dropped to just 35% as the prospects of a long, drawn out repeal are looking more likely with each passing day.

Obamacare Repeal

So why are Republicans finding it so difficult to repeal and replace Obamacare?  Some cite general dysfunction within the Trump administration and/or a fundamental difference of opinion between Trump’s policy advisors and economic experts.  Per Axios, a recent photo tweeted out by Reince Priebus added fuel to the cabinet “dysfunction” fire when it revealed that a recent “repeal and replace” meeting included several members of Trump’s health care and policy teams but not a single representative from Treasury.

Members of the Trump administration got together on Sunday to talk about President Trump’s plan to repeal and replace Obamacare — but a photo tweeted by White House chief of staff Reince Priebus doesn’t show any Treasury Department officials at the table, despite the likelihood that the plan will involve big tax changes.

At the table were many members of the president’s health care and policy teams, including Department of Health and Human Services Secretary Tom Price, yet-to-be confirmed Centers for Medicare and Medicaid Services head Seema Verma, and White House aide Stephen Miller.

But no one from the Treasury Department was there, and a source who heard about the snub from a White House economic adviser said the department feels shut out of the process.  “There’s always tension between health policy folks and economic policy folks in any administration, but this is an entirely different level.” 

That said, Goldman’s macro team recently provided an alternative explanation that revolves around, among other things, arcane procedural limitations in Congress (see “The Honeymoon Is Over: Goldman Slams Trump’s Economic Plan, No Longer Expects A Border Tax“):

The original strategy of Republican congressional leaders was to repeal major aspects of the law using the budget reconciliation process, which allows certain fiscal legislation to pass with 51 votes in the Senate, i.e., only Republican support, and to follow this with separate legislation to establish a replacement program at some later point. The expectation was that the repeal would take effect with a delay, giving lawmakers perhaps two years, until after the midterm election in November 2018, before the new program would actually need to be implemented.

This was intended to serve two purposes. First, it allowed for quick passage of an Obamacare repeal bill using the reconciliation process without the inevitable delays associated with devising a replacement plan. An important consideration was that the budget resolution for a given fiscal year allows for only one reconciliation bill for spending and another for taxes. Since the ACA includes spending and tax provisions, repealing it would use up both reconciliation instructions, leaving no opportunity for tax reform. To address this, Congress is likely to pass two budget resolutions this year. The first, for FY2017, is the resolution that would have normally passed last year and passed a few weeks ago. This will allow the reconciliation process for the ACA legislation. Once that bill has passed, Congress is then likely to pass the FY2018 budget resolution, which will actually guide fiscal decisions over the coming year and lay the procedural groundwork for upcoming tax reform and, possibly, infrastructure legislation. The upshot is that procedural constraints dictate that one bill is passed before the other is considered, and the ACA repeal bill was expected to be the easier task and therefore came first.

The second reason for the repeal and replace strategy was that Republican leaders hope to gain bipartisan support for the “replacement” legislation, because it would give the program a greater political mandate than the ACA had—reducing the likelihood that Republicans alone are held accountable for any future problems—and because some of the desired changes are regulatory rather than fiscal in nature and thus cannot be made through the budget reconciliation process, necessitating separate legislation that would require 60 votes in the Senate.

However, several Republican senators have objected to this two-stage approach, instead calling for at least some aspects of the “replacement” plan to be included in repeal legislation. While individual lawmakers’ motivations likely differ, among the concerns raised have been the potential problems in the insurance market that prolonged uncertainty regarding the replacement plan would cause, and the possibility that no replacement would ultimately be enacted, leaving some current enrollees without coverage.

So how will the Obamacare repeal process play out…

In our view, Republican leaders have two basic options. First, they could attempt to pass a partial reform of the program—stopping short of a true replacement—through the reconciliation process, with the expectation that it could constitute a sufficient reform once combined with administrative and regulatory changes the Administration can make without Congress. On the legislative side this could include, for example, increasing state flexibility with regard to the Medicaid expansion, and revising the distribution of the refundable tax credits used to finance coverage in the private market, combined with funding for a high risk pool for higher cost enrollees. On the administrative side, this might include changes to required benefits and changes in the regulation of premiums.

A second option would be to pause the work on Obamacare repeal and to address it at a later date, during or after the tax reform debate. However, while this might allow Congress to focus on tax reform and other areas that might be of greater significance to financial markets, it would create political problems, as many Republican lawmakers continue to be very focused on repeal.

Campaign promises, meet Washington D.C. realities….


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