- - Monday, February 13, 2017


President Trump is forcing congressional Republicans to quickly reckon with reality — either find a way to radically lower health care costs or suffer the wrath of angry voters.

The Affordable Care Act (ACA) was advertised to provide affordable health insurance to virtually all Americans, and on both counts it failed terribly.

Requiring virtually everyone to obtain coverage — either through employers or by purchasing policies on government-run exchanges — Obamacare was supposed to improve insurers’ risk pools and lower costs. By expanding Medicaid, it was supposed to reduce the cost of taking care of poor and low-income individuals by increasing access to preventative care and reducing expensive treatments for ailments left to fester.

Instead, many healthy people chose to pay fines rather than hefty premiums, and many folks added to the insurance rolls were sicker and needed more care than anticipated. Insurance companies lost considerable sums last year, many withdrew from the exchanges and for 2017 premiums jumped 25 percent.

Many self-employed and small businesses lost access to cost effective insurance deemed ineligible by the ACA and faced mammoth premium increases.

Nineteen states have declined to participate in the ACA Medicaid expansion, because many legislators are philosophically opposed to government mandates or are concerned the federal government will eventually reduce support for the Medicaid expansion, leaving the states in untenable fiscal positions.

According to the Kaiser Family Foundation, the ranks of the non-elderly uninsured are down only 13 million and 28.5 million are still without coverage — mostly minorities and lower-income adults. Even with generous subsidies, 57 percent say insurance is too expensive or are unable to get coverage.

Most fundamentally, Americans pay too much for everything from drugs and medical devices to hospital visits and administrative costs — not to mention the high cost of our tort system.

Germany has a private insurance system that requires virtually everyone to participate but spends about 11 percent of gross domestic product on health care, whereas the United States spends 17 percent. The major difference is not quality of care or access to the best drugs and services but rather price controls. For example, new drugs are priced according to how much they improve treatment over existing medicines.

Republicans in Congress are ideologically opposed to regulating prices and argue that permitting insurers to sell policies across state lines would encourage competition and pull down costs. However, states like New York and California have large enough populations to encourage robust competition but scant evidence indicates that their prices are lower than in moderate-sized states.

Now Mr. Trump has issued an executive order instructing federal agencies to “waive, defer, grant exemptions from or delay implementation of any provision or requirement” of the ACA that imposes a burden “to the maximum extent permitted by law.”

That guts the individual and most business mandates and will send the government-sponsored health care exchanges into a death spiral.

Insurance company costs will fly out of sight, and they will leave the exchanges. Many of the 70 percent of counties nationwide that currently have only one or two companies selling policies on their exchanges will have no insurer willing to participate and millions of Americans sorely needing coverage won’t be able to buy it at any price.

Most Republican proposals to replace Obamacare would attempt to maintain affordability through a combination of tax credits and subsidies for purchasing private insurance and with block grants to the states to administer Medicaid.

Those won’t solve the cost problem, and without a penalty for nonparticipation, even more healthy individuals will decide to go without health insurance. As rates continue to increase, even more families who want insurance won’t be able to afford it.

Individually, the states cannot effectively contain costs by regulating prices. For example, doctors can move, and drug manufacturers can forego sales in smaller, less-affluent states to maintain high prices in the big, rich states like New York. Faced with limited budgets under block grants, states will cut back on Medicaid eligibility, leaving even more low-income families without insurance.

Anticipating difficulties with repeal and replace, Americans are having an epiphany — for the first time since enacted, more think the ACA was a good idea than a bad idea.

Simply, Republicans must face the need to regulate prices or risk an angry electorate that can’t afford health care and lose badly in the midterm elections.

• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.

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