UK

Donald Trump's Latest Obamacare Disaster Explained For Brits

What’s wrong with Obamacare?

18/07/2017 14:04 BST

Donald Trump has been dealt another major blow in his much-vaunted promise to repeal and replace Obamacare, a central pledge of his election campaign.

To the British observer accustomed to the NHS, the notion of replacing laws that help to insure the poor by taxing the better off appears at first to be a callous example of rich Republicans looking after their rich friends.

But it’s not quite that simple.

What Is Obamacare?

The Patient Protection and Affordable Care Act, also known as Obamacare or the ACA, was established with the simple aim of extending health insurance to all Americans.

Dario Ayala / Reuters
Barack Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010

Around 15% of the US population did not have any healthcare coverage because either their employers did not offer insurance, or they did not qualify for government programmes designed to assist poor and elderly people.

Obamacare attempted to bridge that gap in a number of ways, most notably by:

  • Requiring businesses with more than 50 full-time employees to offer mandatory health insurance
  • Banning insurance companies from denying coverage to those with pre-existing health conditions
  • Allowing young people to stay on their parents’ plans until the age of 26
  • Expanding the eligibility requirements of Medicaid, the government health programme for those on lower incomes 

But the fundamental pillar behind Obamacare is that those Americans who can afford health insurance pay higher premiums. This helps fund subsidised coverage provided by government-run marketplaces to those on lower incomes.

This, as we shall see, is an example of redistributive economics that does not sit well with Republicans, who advocate small government and view the forcing of insurance on citizens as government overreach and unwarranted intrusion into the running of businesses and into private lives.

Is Trump A Fan?

No.

What’s Wrong With Obamacare?

More than 20 million people gained health coverage under Obamacare and there are countless people who claim it saved their life but this is only part of the story.

Kevin Lamarque / Reuters
Activists protesting against the Republican plan to repeal Obamacare in March.

Whilst the underlying premise is a noble one, the reality of its implementation has revealed a flawed plan with a “structural imbalance”.

Former Aetna CEO, Ronald Williams, told CNBC in February:

“In health care you really need a balance of people who need health care today, tomorrow and in the future and the rate structure was set in a way that those who needed health care today got the most affordable premiums.

“That means typically older citizens got a much better deal.

“Younger participants in the exchanges and who purchase individual insurance paid more and they just didn’t see the value, and therefore they did not come forward and sign up.”

Those who don’t sign up are eligible to pay a $695 (£534) fine, but this is significantly less than the average annual insurance premium for 21-year-olds ($1,999-$4,360 in 2016 depending on the level of cover).

This means the money needed from younger, healthier and better-off people to pay for the subsidies for those on lower incomes hasn’t materialised.

This in turn means higher premiums for those who do sign up, leading to a vicious cycle of those deciding to drop out of the system.

This year premiums are set to sky-rocket by 22%.

Why Do Republicans Hate It?

As well as the reasons outlined above, Republicans have deep-rooted ideological opposition to anything that requires an increase in government intervention and a redistribution of wealth, all of which smells to them like socialism

ERIC THAYER / Reuters
Senator Rand Paul is one of the Republicans who opposed the Senate bill.

What Have The Republicans Proposed?

In an attempt to correct the perceived overreach of Obamacare and reduce premiums for the middle-classes, Republicans have been trying to draft their own bill, American Health Care Act.

The latest version that collapsed kept some taxes on the wealthy but made large cuts to coverage for the poor and also allowed insurers to offer less coverage.

An non-partisan report into the proposed bill by the Congressional Budgetary Office concluded 22 million people would lose their coverage.

Why Did It Collapse?

A version of the American Health Care Act was passed by the House of Representatives in May but Senators wrote their own version to deliberate.

Opposition to the bill within the Republican party comes from two camps - the moderates who baulk at the prospect of stripping coverage from 22 millions, and the hardcore conservatives who want a fully market-based health system.

Satisfying both camps has been a delicate balancing act managed by Republican Majority Leader, Mitch McConnell.

Carlos Barria / Reuters
Trump celebrating the passing of the House bill. He later called it "mean"

Republicans have 52 seats in the 100-seat House and faced with a united Democratic opposition, he only had room for two rebellious Senators.

In the end two, Utah’s Mike Lee and Jerry Moran of Kansas, joined moderate Maine Senator Susan Collins and conservative Rand Paul of Kentucky in voting against the bill.

What Does This Mean For Trump?

This is a major blow for Trump who made repealing Obamacare a central pledge of his 2016 election campaign, promising to do it “immediately” (and then claim that he had never said this).

The defeat lays bare his limited clout with senators and makes a mockery of his claims to have signed more bills than “any president, ever”.

What’s Next?

Now, McConnell has said, the Senate would vote on a measure the Republican-run Congress approved in 2015, only to be vetoed by Obama - a bill repealing much of Obama’s statute, with a two-year delay designed to give lawmakers time to enact a replacement.

Trump embraced that idea last month after an initial version of McConnell’s bill collapsed due under Republican divisions, and did so again late Monday.

But the prospects for approving a clean repeal bill followed by work on replacement legislation, even with Trump ready to sign it, seemed shaky.

Trump and party leaders had started this year embracing that strategy, only to abandon it when it seemed incapable of passing Congress, with many Republicans worried it would cause insurance market and political chaos because of uncertainty that they would approve substitute legislation.

But at least The Donald is staying optimistic...