The New Republican Health-Care Plan Is Single-Payer for Dummies

It’s important to understand what the GOP is trying to do. 

By David Dayen

 Every time some upstanding leftist brings up single-payer health care, the punditocracy dismisses them as deluded fantasists without any understanding of the realities of government or markets. But House Republicans are apparently going to vote tomorrow on an Obamacare replacement framework that accepts the entire logic of single-payer. It just does it in the dumbest way imaginable.

Let’s understand what House Republicans are trying to do. The American  Health Care Act is described as a repeal to Obamacare. But the party’s constituents and even the president of the United States don’t favor such a move, or at least don’t want to deal with the consequences of denying someone coverage because of a pre-existing condition. Yet this is precisely what the House Freedom Caucus demands, based on their belief that “Obamacare regulations” (like insurance companies having to accept sick people) are raising prices.

So an amendment negotiated between the Freedom Caucus and a moderate Republican backbencher from New Jersey named Tom McArthur gives states the ability to obtain waivers to several Obamacare requirements, including the “essential benefits” package that defines acceptable insurance, and the “community rating” provision that forces insurers to charge the same rate for all applicants, except for a narrow band based on age and whether or not the patient smokes. This effectively repeals the pre-existing condition exclusion, because in the states that receive the waiver, they can charge an unlimited amount to the sick, pricing them out of the market.

States could only get the waiver if they showed that their new plan would either “reduce average premiums, increase enrollment, stabilize the market, stabilize premiums for individuals with pre-existing conditions or increase the choice of health plans,” according to Politifact. But there’s enough wiggle room in there (after all, if you purge the sick from the health-insurance rolls, average premiums would indeed probably go down) that a state government friendly to the cause of dismantling Obamacare would surely grant the waiver.

Moderate Republicans grew nervous at the idea that health care would only be affordable for the healthy and not the sick. McArthur claimed, in  a press release, that no state could get a waiver unless it figured out how to handle those with pre-existing conditions, like by creating a high-risk pool. These are prohibitively expensive and have failed almost wherever they’ve been tried. McArthur also said that only those with a lapse in coverage can be charged more based on health status, but this creates an incentive for health-insurance companies to jack up prices for everyone, to weed out the poor, who correlate with those who require more health care.

The point is, the moderates needed more assurances. So Representative Fred Upton engineered another amendment to alleviate the  consequences of the previous amendment. Upton’s provision would use $8 billion in public funds over five years to compensate people with pre-existing conditions who face higher health-insurance prices (possibly through a privately issued high-risk pool, possibly through just subsidizing those who experience cost increases; it’s a bit unclear at this point). After going over this with President Trump, Upton, and Representative Billy Long reversed their position and agreed to support the bill. The vote is likely to be tomorrow.

This is so convoluted it’s going to be hard to work through. And the money involved, a mere $1.6 billion a year, is really pathetic and nearly 90 percent less of what experts say would be necessary to properly fund such a mechanism. But let’s break down what Republicans are doing. By allowing health-insurance companies to discriminate based on a pre-existing condition, the GOP would break the market for this subset of people. And then they would use government funds to fix this market failure. But they would funnel it directly to health-insurance companies, rather than eliminating the middleman.

This is single-payer for dummies. In a single-payer system, the government picks up the health-care costs for the population, paid for through progressive taxation. The market power of having one insurance  payer can work to lower overall health care costs, making the system sustainable. In Trumpcare’s single-payer for dummies, the fragmented private-insurance middleman remains intact. But taxpayer dollars still pick up the health-care costs for those who cannot afford it. Instead of acquiring market power, they just give those taxpayer dollars to the private middlemen, which tells the private middlemen they can charge whatever they want and always get paid.