Opinion: So Much for Fixing Healthcare

The Senate version of the AHCA shows that politicians can be counted on for only one thing: Making a bad situation worse.

A college professor of economics once told me that the dismal science deals with what is, and it's up to others, such as politicians, to decide what should be.

The Congressional Budget Office will weigh in soon on the effect on the budget from the Senate's newly unveiled healthcare bill. In the meantime, we have what a group of politicians have decided should be.

Let's dispense with the notion of determining whether this bill or any other "healthcare reform" legislation is gentle, harsh, or "mean," or any other of a number of subjective judgments. What's more important is, is it smart?

Well, not really.

It's pretty clear that Senate Republicans went into this not with the attitude of fixing what's wrong with healthcare—which is largely still the fee-for-service system (no matter what anyone tells you about value-based care. Incidentally, real progress has been made on that front, but not because of Congressional decisions).

The Senate version of the AHCA jettisons the smart policy aspects of the Affordable Care Act such as:

• Requiring most Americans to have health coverage or pay a penalty (doing so helps eliminate the "free-rider phenomenon" to an extent).

Neither the ACA nor the AHCA really deals with this problem seriously, but at least the ACA's provision was fair. The AHCA version only allows a 30% surcharge for those re-enrolling after dropping coverage, which is not a legitimate deterrent.

• The employer mandate—requiring large employers to offer health insurance or pay a fine. If employers are to continue to get huge tax benefits for offering employees insurance, they shouldn't be able to game the system.

• Repealing a 3.8% tax on investment income for individuals making more than $200,000 annually and married couples making more than $250,000.

This is nothing more than a giveaway to the Republican base at the expense of the poor. You can debate whether one group should be taxed for another group's benefit, but essentially, this is what all taxes do.

At the same time, the Senate bill doesn't do much to repair the problems with the ACA, such as:

• Excessive "essential health benefits," some of which are inarguably essential, but some of which unnecessarily drive up premiums. The Senate bill will allow states to decide what's essential.

• Open-ended federal matching funds for anyone who qualifies for Medicaid.

• The ACA's lack of progress on cost containment. The ACA got more people coverage, but its impact on bending the cost curve in healthcare has been minimal.

The bill cuts Medicaid by giving states "block grants," that allow them to determine how to disburse the funds, but funding from Medicaid will be cut, eventually falling from 90% of the cost of the Medicaid expansion to much less, possibly even to the standard Medicaid matching rate, which is 57%.

As many as 8 states will drop Medicaid expansion should matching funds for it fall below 90%. The number of people who are covered by Medicaid would be cut.

We'll still pay for these people to receive care, it'll just be that hospitals and health plans will eat it through providing emergency services to those without coverage. Providing care this way is much more expensive, and hospitals and health plans will get back what they give away in bad debt through cost-shifting, as they always have.

Meanwhile, Rome burns.