Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The Republican party had seven years to draft a replacement for the Affordable Care Act. House leadership finally unveiled a plan Monday night, only to see it immediately re-veiled -- with a death shroud. 

The proposed bill manages to do about four things successfully: It cuts taxes for wealthy people, ends Medicaid as we know it to help pay for those tax cuts, reduces the number of Americans who can afford health insurance, and angers such a wide variety of voting constituencies that it is effectively dead on arrival. 

That's bad news for anyone hoping for a relatively quick and orderly transition from the ACA. But the dysfunction may actually be good news for hospitals and Medicaid-focused insurers. Shares of those companies have crashed since President Donald Trump's election, on the assumption the ACA's Medicaid expansion would be wiped out. But in this bill, cuts to the program are delayed by several years. And the fact that the proposal is so very unviable reduces the downside risk even further.  

A Break in the Clouds?
Medicaid focused health insurers and hospitals have had a rough time since President Trump's election
Source: Bloomberg

Why so dead? Republicans need 50 votes to pass the bill in the Senate. 

Democrats won't support a bill that cuts taxes for the wealthy and could make health insurance unaffordable for many. They'd rather keep the ACA. That's 48 votes gone. Four moderate Republicans signed a letter Monday saying an earlier GOP draft of this bill did not provide enough stability for Medicaid recipients. This version may not do the job, either. 

Very conservative members of the Republican party dislike the inclusion of refundable tax credits for low-income Americans. Sen. Rand Paul of Kentucky called the bill "Obamacare Lite" in a tweet on Tuesday. Senators Ted Cruz and Mike Lee joined Paul in objecting to a previous draft of the bill on similar grounds and demanding a full repeal. They may join his latest dissent. The Republican Study Committee, a conservative group in the house with more than 100 members, wrote a memo calling the tax credits "a Republican welfare entitlement."   

The Congressional Budget Office, a nonpartisan group that analyzes the cost and impact of legislation, has yet to score this bill. Such an analysis will likely show the plan is expensive in both dollars and lost insurance coverage. That may switch the vote of Sen. Bill Cassidy of Louisiana, who wants a bill that doesn't increase government debt or the uninsured rate. 

There will likely be negotiations and fixes, and the Senate version of this bill will differ from the House's. But what's arguably the core proposition of the bill -- gutting Medicaid to pay for tax cuts and changing who gets tax credits -- is exactly what dooms it to failure. That may not be fixable. 

Razor Thin
If Republicans lose 3 votes on their ACA replacement bill, it won't pass, and there are several avenues by which that could happen

House leadership has also yet to explain how to pay for the bill. The idea in previous drafts was to tax employer health benefits. But after it became clear that approach was a political landmine and would dramatically shake up the employer health insurance market, it disappeared from this draft.   

A prolonged fight over this bill will be disruptive for everyone in the health-care sector. But the legislative incompetence on display here means the GOP may never actually succeed in killing the Medicaid expansion. And this bill suggests there has already been some GOP moderation on Medicaid. That ought to remove some of the pall over insurers and providers (not to mention the patients) involved in the program.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net