Episode IV: A New Hope. After three previous versions of the House Republican bill to repeal and replace Obamacare failed to garner a sufficient amount of support to advance to the Senate, Vice President Mike Pence on Monday night presented members of the House Freedom Caucus a new proposal that, in theory, would provide states the ability to opt out of key Obamacare regulations that conservatives have been fighting to scrap. The White House is working to put the proposed changes into legislative language that is expected to be released later Tuesday. It will be an amendment to the existing bill and thus would not have to go through the committee process, allowing it to be brought to the floor more quickly assuming it has sufficient support.
Conservatives have opposed previous versions of the repeal and replace legislation, because it didn't go far enough in repealing Obamacare's regulatory regime that drives up premiums. Last week, members of the Freedom Caucus revealed to the Washington Examiner that their demands were down to repealing four of the 12 core Obamacare mandates. They wanted insurers to be able to offer coverage that didn't have to include the 10 categories of benefits set by Obamacare, and they also wanted to allow insurers to be able to charge based on risk — in other words, allow them to charge more for individuals who are sicker, and thus less to those who are generally healthy and don't have the need for expensive comprehensive coverage.
Liberals immediately attacked this approach, because though it still keeps the ban on pre-existing conditions in place, by allowing insurers to charge the sick more and to offer more bare bones coverage, it could in effect enable insurers to cherry-pick healthy customers and put comprehensive coverage out of reach for lower-income individuals with serious illnesses. When I asked North Carolina Republican Rep. Mark Meadows, House Freedom Caucus chair, about this criticism last week, he noted that the caucus supported funding for states to set up high-risk pools to help cover this population.
Translating theory into practice is often difficult, and it will be crucial to see how the revised legislative text handles the details of trying to give states more flexibility. As everybody awaits the text of the bill, here are some key questions to keep in mind.
How much do the changes depend on permanently having a conservative as Secretary of Health and Human Services?
All indications are that instead of directly allowing states to opt out of Obamacare's regulations, the law would be changed to give the secretary of HHS more ability to grant waivers to states who want to opt out of the regulations. Secretary Tom Price, as an opponent of Obamacare, would presumably be willing to issue such waivers. But if the regulations remain on the books, it also could mean that when a Democrat eventually wins the White House, a future liberal secretary of HHS may be able to rescind the waivers, and thus re-impose Obamacare's regulatory regime with the stroke of a pen.
Does the legislation rig the game in favor of opting out of the regulations, or keeping them in place?
It's one thing to claim to give states flexibility, but a lot depends on how easy or hard it is to opt out, and how the financial incentives are set up. Sens. Bill Cassidy, R-La., and Susan Collins, R-Maine, for instance, introduced a bill that was advertised as giving states the flexibility to keep or dump Obamacare. But in practice, those states that wanted to go their own way would have to do so without the same financing, even though they'd still have to pay the taxes to support states that opted in. So how will this revision be designed? How many hoops will states have to jump through to be able to waive the requirements? Will the tax credits for individuals to purchase insurance be contingent upon them being residents of states that keep Obamacare regulations intact? Or, on the flip side, will states that opt out of the Obamacare regulations receive more money for high-risk pools?
How will the Congressional Budget Office score such a proposal?
The experience Republicans had with trying to repeal and replace Obamacare last month reinforced the importance of the CBO score to the political process. But this new proposal would present a lot of challenges to CBO scorekeepers. Whether a state keeps Obamacare regulations in place or scraps them would have dramatically different effects on cost, coverage, and premiums. How could the CBO ever predict how 50 different state governments are going to react to the new options created by such a bill? Any estimate is likely to take a considerable amount of time, and would probably be less reliable than a typical CBO score. The CBO score, it should be noted, plays a key role in the process of determining whether the bill can get through the Senate by a simple majority vote by way of reconciliation.