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It's Time For The GOP To Embrace The Obamacare Exchanges

This article is more than 8 years old.

Here’s a wake-up call to conservatives: Unless you change something fast, your response to the Affordable Care Act will go down in history as a series of tactical errors that created a gigantic government mandate while simultaneously betraying your own principles.

The Supreme Court’s resounding 6-3 rejection of King v. Burwell -- a challenge to Obamacare that was based entirely on an overly fussy reading of a six-word phrase – is a loss for the GOP. It is a win for big business, the GOP's traditional ally, with stocks for hospital chains like HCA and Tenet getting a nice boost. And it is symbolic of the way that the right has forced itself into a polarizing argument about the ACA instead of keeping its eye on its overall goals.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," Chief Justice John Roberts wrote in the majority decision. Republicans need to step up and do the same.

Obamacare is shoddily written, but 11.7 million people are enrolled in its exchanges (some will not continue coverage for the full calendar year) and 10.8 million have enrolled in Medicaid and CHP, the government’s programs for the poor, since 2013. And the law has actually worked as a catalyst to encourage free market solutions to our broken health care system. If such solutions aren’t found, we’re going to end up in the same position as most other modern countries: with nationalized, single-payer health systems.

Here’s a summary of what’s happening: Hospitals are taking on the financial risks that were once borne by insurers, incentivizing them to find ways to save money and improve care. More data is flowing into the system, and more and more consumers – inside and outside the system, are picking their own insurance plans, often giving up the freedom of choice in order to save money. “It’s a great experiment,” says Michael Dowling, the Chief Executive of North Shore-LIJ Health System in New York.

Instead of trying to push these changes, the GOP finds itself making pigheaded arguments based on technicalities. That distracts it from fighting the Medicaid expansion – the part of Obamacare that truly violates conservative principles – and leaves it working against its own policy interests and against the interests of business in general. If they were looking at the long-term, Republicans would embrace the exchanges in the hope that someday they would provide an alternative to Medicaid. Instead they are trying to fight wars they can't win and score political points.

Roberts’ decision clearly outlines the history that got us here. In the 1990s, several states, including New York and Washington, tried to allow more people to get access to health insurance with a pair of regulations: “guaranteed issue,” which means that insurance companies have to sell you insurance no matter how sick you are, and “community rating,” which means that insurers can’t charge you more for being sick. The result was a “death spiral”: individuals stop buying insurance, because it no longer makes sense to pay before you get sick. And then insurers jack up rates even higher, because they’re no longer insuring people in case they get sick, they are simply acting as middlemen as sick people sign up for coverage and immediately go to the hospital for expensive procedures. Fares spiked 70%, and then the insurers simply left the market. In Washington, the state went from having 19 private insurers in its market to two.

Massachusetts, then governed by Republican Mitt Romney, solved the problem. It already had guaranteed issue and community rating, but it added a third reform: individuals had to either buy health insurance or pay a penalty, and it gave tax credits to certain individuals so they could afford the insurance they had to buy. This idea was initially proposed by The Heritage Foundation, a conservative think tank, and it was explicitly the idea that was behind the Affordable Care Act.

Then Ted Kennedy, a long-time health reform proponent, died of a brain tumor. A Republican won the election to replace him, and Democrats lost their 60-seat majority in the Senate. That meant Republicans could filibuster the bill, and so Democrats got the law through with a budgetary procedure that left it a sloppy mess. Among the errors: three different sections called “Section 1563” and seven uses of the phrase “an Exchange established by the State” when Congress meant that exchanges established either by the state or by the feds.

Yesterday’s case occurred because four Virginians argued that since Virginia’s exchange was being run by the federal government, not “the State,” they did not have to pay for health insurance. Many conservatives convinced themselves that this argument – reminiscent of a student trying to get a higher test grade – would somehow win the day. Justice Antonin Scalia, in dissenting to Roberts’ decision, ties himself in pretzels of angry wordplay, but his previous jurisprudence actually backs reading the whole context of the law. “There are dozens of Scalia opinions where Scalia says you’ve got to look at the whole statute to determine there is a clear meaning,” Yale constitutional law expert William Eskridge told my colleague Daniel Fisher.

Roberts, and the majority, backed the old Scalia, not the new one. They reasoned that Congress didn’t set out to create a death spiral, and found other paragraphs in the messy law to support their argument. And now they leave Republicans to face a tough reality.

The U.S. health care system is not driven primarily by free market forces. No modern health care system really is. Instead, it consists of battling monopolies that have been allowed to grow for decades in a fragmented insurance market that until recently did little to constrain costs. Drugs are patented. Medical devices have high barriers to entry. It’s best to be the only hospital in town.

These natural tendencies toward gargantuan size were encouraged by the fact that insurance companies, for years, competed more to give people access to new treatments than to control costs. When an employer pays for health insurance, it goes untaxed, making it cheaper than paying wages. Until costs really got out of control, employers simply didn’t worry. And insurers competed to offer more services, not to cut costs.

The GOP, to its credit, has argued for years that we should get rid of this tax exemption. That was a key part of a proposal by George W. Bush, and of a more recent proposal by Tom Coburn (Okla.), Richard Burr (N.C.), and Orrin Hatch (Utah). But this amounts to a huge tax increase on millions of middle-class Americans. It has not gotten more politically tenable with time.

Obamacare, by contrast, takes a tiny market – just a part of the individual insurance market – and uses it as an experiment. It creates exchanges with certain rules in which insurance companies compete. Warnings of a death spirals have so far not come true. According to The Advisory Board Company, a consultancy that works with hospitals, the average insurance rate increase on the exchanges between 2014 and 2015 was 0%, with only two states, Minnesota and Alaska, showing increases of more than 15%.

Lisa Bielamowicz, The Advisory Board’s Chief Medical Officer, points out that exchanges are becoming common outside Obamacare too, as insurers offer them to employers as a way of reducing costs. “It allows choice to be shifted onto an employee,” she says. “The same dynamics are playing out on the private exchanges as on the public exchanges.” Whereas employees freak out if their employers tell them what doctors they can see, they’ll gladly choose smaller networks when it saves them money. Big mergers like the ones that Aetna and Anthem could help, too, by giving insurers more negotiating power.

It’s far, far too late to suddenly remove the employer tax exemption. But at some point – whether they do it before or after their Donald-Trump-in-a-peacock-suit presidential posturing – Republicans should come up with actual ideas that they can bring to a negotiating table. The Supreme Court may have actually thrown a bone to those of us who want to see bipartisanship here. It rejected the Obama administration’s argument that decisions about the Obamacare tax credits were the purview or the Internal Revenue Service. In the future, changes will have to go through Congress, and that could require that the two parties actually talk – and for Republicans to realize that Obamacare’s exchanges are an opportunity, not an enemy.

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