Coke and Pepsi Healthcare Reform -- It's All About the Credit

Over the last several years, when the successes and failures of the PPACA/Obamacare/Health Care reform entirely accrued to Democrats, the Republicans fought against market stabilization funds as unwarranted subsidies for insurance companies.  My understanding is that the original PPACA included a market stabilization method, but it was written as being revenue neutral - ie funds from insurers who had healthier than average subscriber pools would be transferred to insurers who had sicker subscribers.  But soon, all insurers were losing money and premiums were rising and insurers were dropping out of the exchanges.  So President Obama transferred money from other sources to give extra market stabilization funds, e.g. subsidies, to insurers.  Republicans fought this action in the courts.  There was a principled position that Obama's actions were not legal, but Republicans were also happy to see the PPACA failing.  If Democrats in Congress could have made any one change to the PPACA last year, it likely would have been to increase these stabilization or subsidy funds, which I presume the Republicans would have fought.

Now, it is clear the public and the media is going to hang any future PPACA problems around Republican necks.  Whether this is fair or not is almost irrelevant -- one can see from Republican actions that they feel this to be true, at least in the Senate.  Because now Republicans are proposing market stabilization subsidies that are likely higher than Democrats would have even dreamed of asking for:

When the Congressional Budget Office (CBO) releases its estimate of Senate Republicans’ Obamacare discussion draft this week, it will undoubtedly state that the bill will lower health insurance premiums. A whopping $65 billion in payments to insurers over the next three years virtually guarantees this over the short-term.

Indeed, Senate Republican staff have reportedly been telling members of Congress that the bill is designed to lower premiums between now and the 2020 election—hence the massive amounts of money for plan years through 2021, whose premiums will be announced in the heat of the next presidential campaign....

Section 106 of the bill creates two separate “stability funds,” one giving payments directly to insurers to “stabilize” state insurance markets, and the second giving money to states to improve their insurance markets or health care systems. The insurer stability fund contains $50 billion—$15 billion for each of calendar years 2018 and 2019, and $10 billion for each of calendar years 2020 and 2021. The fund for state innovation contains $62 billion, covering calendar years 2019 through 2026.

This goes against pretty much all of the principled reasons Republicans opposed Obamacare in the first place, but given the choice of following principle or using our tax money to help buy another couple years in power, both parties will always make the second choice.  Of course, being given all that they would have wanted last year, the Democrats will likely not sign on for this as they don't want to bail Republicans out any more than Republicans wanted to bail Democrats out.


  1. SamWah:

    With PPACA, the Dems did it all, excluding all Republicans, and passed it in the night without allowing any but Dems to see it. Indeed, and Ms. Pelosi said, "We have to pass it to find out what's in it."
    With the current bill in the works, it seems to me the Dems are refusing to have anything to do with it (I could be wrong on that).

  2. An Inquirer:

    Warren, I do understand your point. But we have a mess with Obamacare -- a severe mess that cannot be eliminated simply by repealing Obamacare because so much of the alternatives for pre-existing conditions and medical assistance were destroyed by Obamacare. Therefore, we may need to sacrifice principles for a transition period to allow individuals to adjust and for the alternatives to be re-established.

  3. mx:

    Oops. Turns out the CBO says the bill will actually raise premiums for 2018 and 2019, despite the billions being handed to insurers. Well, they tried.

    If you want to talk about giveaways of taxpayer funds to insurance companies, take a look at page 25 in the CBO report. The ACA requires that insurers have a medical loss ratio of 80%. In other words, 80% of the premiums they collect have to go to pay for health care; the other 20% can be profit, administrative expenses, executive salaries, overhead, whatever. 20% is already an absurdly high amount, but at least it keeps the majority of health care dollars flowing to, you know, health care, and not insurance companies.

    So what happens when states get rid of that requirement, which will impact around half the population according to the CBO? Insurance companies in areas with low competition, which happens in rural counties especially, can simply raise their rates, say 20%. The subsides for the marketplace are based on the average costs of insurance, so the federal government just pays out more in subsidies so everyone's out of pocket premiums are the same, but the insurance company gets to pocket the increase as profit, paid for by the feds (if you make too much money for a subsidized plan and this happens to you, you'll be shopping for a cheaper plan off-exchange anyway). Wash, rinse, repeat, and profit.

    The medical loss ratio was one of the few levers that made sure that spending grew at the rate of heath care growth, not the rate insurance companies wanted it to. Since the federal government is doing most of that spending, that's rather important. Getting rid of it isn't a good example of deregulation. It's a good example of a giant conversion of taxpayer funds to insurance company profit.

  4. fotini901:

    This is absolutely, incredibly not true. Obamacare was debated for months. The public option was taken entirely off the table because of Republican opposition. Over 100 amendments were considered.

    I understand the coke vs pepsi apathy, and the general Coyote-libertarian opposition to the ACA, but let's not tell lies. The ACA's debate and passage was far more transparent than this current nonsense.

  5. me:

    Interesting Gedankenexperiment: what would health insurance for the US cost if a tourist buys it for a one year stay?

    Turns out, that's easy to figure out. Hanse Merkur is a German insurance that offers longterm travel insurance policies.

    Their policy for the US includes complete cost of any doctors visit, hospital stay and medication. Oh, and it covers complete costs for dental as well. For one year, you are completely taken care of, in the United States, no less (and, additionally, anywhere in the world except your home country which is assumed to be Germany).

    Take a moment to guess the price for such a policy, valid for one year.
    I just got a binding quote, turns out it's 1400 Euro, which amounts to about 1600 USD.

    Anyone care to explain why my total expenses for the year on the best plan I was able to find in the states are closer to 10k so far?