Obamacare Again. Maybe For The Last Time.

One of the main Trump memes of the election was that Obamacare was melting down and worse, driving up premium prices for non-Obamacare insurance.  The melt down meme comes from the fact that Obamacare premium prices have been going up each year by a lot, while the program to require young healthy people to buy it via a tax penalty has not been working. The second meme that says that Obamacare has been jacking up premiums for non-Obamacare products is simply not true, but has depended on articles that talk about but don't quite say that they are only talking about price increases for Obamacare plans.

Donald Trump, in the few planks of his insurance plan to actually reach the public, has said that he will allow the destruction of Obamacare.  While the GOP didn't capture enough Senate seats to be able to do this directly, they can do it indirectly by cutting the funding while leaving the ACA mostly intact.  This will knock off the people who need the subsidy to get the insurance (i.e. most of them).

Detractors have been pointing out since the beginning of the election season that killing Obamacare will eliminate insurance for 20 million or more people.  Trump's supporters mostly don't care; perhaps it depends on who the 20 million people are. But the political fallout of this Great Leap Backward has gotten enough GOP attention that the party wants to try to keep at least parts of the ACA that are popular.  Two aspects of Obamacare they they don't really want to mess with are the ban on pre-existing condition exclusions and the ability of parents to insure their children until they are 26 years old.  Trump has now indicated that these things will stay in his new plan.  Whether they actually do remains to be seen.

American healthcare and insurance is a very complex thing.  As a complex thing, it is very susceptible to people taking a part of it that they don't (or do) like and pretending that that part represents the whole.  As someone from the business, in the case of the current memes that said that Obamacare must be eliminated because it was driving up premiums in general, I have to laugh.  Because if Trump keeps the ban on pre-existing conditions in force, he will end up moving much of the risk that has been driving up Obamacare premiums directly into the rest of the market causing those premiums to go up.

I'll try to state why briefly and then talk a bit about why we should pay attention to this as a possible clue to what Trump is going to do with other economic policies.

People who bought Obamacare (unless they bought it because the place they worked eliminated commercial insurance knowing that Obamacare was an option) have tended on the whole to be sicker than the general population.  Part of this was because many were poor, and the poor are sicker than the well off.  But a bigger part of this is that people that finally got insurance through Obamacare had not taken care of their illnesses as well as they could have while they had been uninsured.  They then got Obamacare and started getting treatment.

The pre-existing condition denials of the days before Obamacare were meant to create within insurance companies a healthier overall population (or risk pool) in order to keep costs (and premiums) down.  While people often fantasize that insurance companies make their money denying claims, they actually made their money by denying members.  Trump's move to keep the pre-existing condition ban will now cause these sick people (the ones who can afford insurance at least) to get the same insurance as every non-Obamacare person now has.  And everyone will pay extra for this.  In a way, we citizens can pay for this either through a tax subsidized thing like Obamacare or directly through our premiums.  The only difference between these options is that the second is going to throw millions of people back on the streets.  This will have a large social cost too.  But if Trump supporters think that killing Obamacare is going to turn some kind of clock back, it's not. Not unless the pre-existing condition ban is also killed.

And this brings me to a point about Trump's economic policies themselves.  If he won on the basis of the votes of people who felt abandoned by government in an economy that was declining again, and who want some kind of economic clock turned back to an earlier time, this is not in fact going to happen.  It can't.  Eliminating illegal aliens isn't going to make any high paying jobs appear.  It's going to just make the poorly paid jobs that illegals now have appear.  Tariffs are not going to cause American industrial production to reappear.  Aside from the fact that most of those jobs are simply dead due to robotics and other production improvements that have also been going on since those jobs left the country, tariffs will raise the prices of the cheap consumer goods that many of Trump's supporters need because they have low paying jobs.  Also, it will cause interest rates to go up, which will depress capital spending.  And if Trump messes with bonds themselves and defaults on anything, that will cause a massive increase in interest rates, because people will no longer want to loan the US money, and rightly so.

So expect Trump's programs to be modified as his own people start paying more attention to their downstream affects.  The question, the danger, is not whether they will be modified.  The question and danger is whether the modifications will be functional or based on politics.  With Trump's new stance on Obamacare, the wind is blowing toward politics.

 

 

 

unagidon is a contributing editor to Commonweal.

Please email comments to letters@commonwealmagazine.org and join the conversation on our Facebook page.

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