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Repeal Would Be Even Worse Than Obamacare

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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I wouldn’t say the mood among Republicans is exactly giddy. Even Fox News seemed a little bit stunned by the news that Donald Trump had been elected president of the United States. But these past 12 hours, one priority has joined #NeverTrumpers and those who want to Make America Great Again: time to repeal Obamacare.

I’ll believe it when I see it.

Can Republicans pass a bill repealing Obamacare lock, stock and barrel? Technically, yes. They have control of the House and the Senate. Democrats in the Senate could filibuster, but I doubt the filibuster survives Trump’s term in any event, so I don’t see this as a permanent obstacle.

There’s still a wee bit of a problem, however, which is that they have to get Republicans to vote for a repeal.

I have no doubt that Republicans would like to vote for something they can call “repealing Obamacare.” The problem is that repealing Obamacare will involve getting rid of two provisions that are really, really popular: “guaranteed issue” (insurers can’t refuse to sell insurance to someone because of their health status) and “community rating” (insurers can’t agree to sell a policy to some undesirable customer for a million dollars a year; the company has to sell to everyone in a given age group at the same price).

These two provisions are consistently popular with voters across the spectrum. Unfortunately, they tend to send health insurance markets into what’s known as a “death spiral”: People know they can always buy insurance if they get sick, so a lot of them don’t buy insurance until they get sick. Because the sick people are really expensive to cover, insurers have to raise the price of the insurance, which means that the healthiest people left in the pool drop their insurance, which means the price of the insurance goes up. … After a few rounds of this, everyone has a guaranteed right to buy insurance -- but the sticker price is astronomical.

Obamacare is built to counter this problem -- with subsidies to bring down the price for many Americans, with a mandate for individuals to buy insurance or face tax penalties, with rules on enrollment timing to complicate "gaming the system." These are the unpopular parts of Obamacare.

Repeal will involve getting rid of the unpopular bits. But it will also involve getting rid of the popular bits. Republicans will be under enormous pressure to repeal just the unpopular parts, which would, of course, make the individual market even more dysfunctional than it is now. I wish good luck to President Trump or to any member of Congress who explains to voters that if they want the popular parts, they need the unpopular parts too. Believe me, I’ve tried.

So I suspect that “Repeal Obamacare” will meet the same fate as Social Security reform. Legislators were gung ho. Even the base was sort of theoretically in favor of it. President George W. Bush made it his signature initiative for his second term. But the more that Bush talked about what Social Security reform would actually involve, the more he spooked voters.  Even though his party had control of both the House and the Senate, Bush eventually had to admit he couldn’t get it done. His own party would not back him in the face of voter resistance.

Repealing Obamacare is not Trump’s signature initiative; I suspect he doesn’t much care. He won’t be pushing as hard for it as the Bush administration was for Social Security reform. A lot of people in Congress want it -- but of course, until now, that’s been a free desire; they could pass doomed bills to repeal Obamacare without having to face voter wrath when folks discovered that they’d gotten rid of guaranteed issue and community rating. The calculation becomes very, very different when you’re talking about a bill that will actually become law.

So I am skeptical that Obamacare will be repealed immediately. What might Republicans do instead?

The most obvious answer is: Wait for it to die a natural death. While Trump will not be pushing particularly hard for repeal, he will probably not be pushing to save Obamacare either. There will be no special deals for insurers who stick with the exchanges. His Department of Health and Human Services is not going to have a crack team devoted to coming up with ingenious regulatory tricks and dodgy funding mechanisms to make the exchanges work. Obamacare’s market structure is so deeply flawed that even benign neglect will probably prove fatal in fairly short order.

Repealing guaranteed issue and community rating is very hard as long as people can still buy insurance. But if we end up in a situation where, say, half the counties in the U.S. have no policies available on Obamacare exchanges (and most of the functional exchanges are in blue states), then Americans are not going to care so much about a theoretical right to buy insurance, which they can't exercise because insurance isn’t available. This could be paired with things like capping and block-granting Medicaid benefits into what you might call a “non-repeal repeal.”

Because I strenuously opposed Obamacare, you might think that I’d be giddy at the prospect. The problem is that for this to become possible, things have to get much worse before they get better. Moreover, the disaster of Obama’s experiment will have tainted health-care reform. No politician will want to touch it for a good long while. Meaning that we will, at best, manage to return to the situation we had before Obamacare -- a situation that no one was satisfied with. That’s nothing to celebrate on either side of the aisle.

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

To contact the author of this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor responsible for this story:
Philip Gray at philipgray@bloomberg.net