Jim de Bree: Thank you, John McCain

Jim de Bree
Jim de Bree

Senator John McCain, who is free of any constraints caused by re-election concerns, continues to serve his country by objectively looking at health care legislation.  I spent eight hours in the past few days reading the Graham-Cassidy Bill and have concluded that, if it passes, I will likely have to go back to work full time to help my daughter pay for her medical care.  (She has cystic fibrosis.)  As I write this column, it appears that the bill will not pass, but stranger things have happened inside the Beltway.

As many readers know, I have spent a considerable amount of time studying various health care delivery systems around the world and have analyzed previous GOP attempts to repeal and replace Obamacare.  I spent my career studying and analyzing tax legislation and I can say that Graham-Cassidy is one of the most poorly written bills I have seen.

Like other Republican sponsored healthcare legislation, this bill fails to deal with the underlying factors driving health care costs in America.  One problem with Graham-Cassidy is the imprecision of some parts of the bill.  While working out Obamacare’s details was an exhaustive process, its provisions provided a relatively objective framework.

Conversely, Graham-Cassidy is more subjective.  For example, the bill removes the existing mechanisms for subsidizing individual policies by providing block grants to each state.  Each state is expected to formulate its own plan provided that it “maintains access to adequate and affordable health insurance coverage for individuals with pre-existing conditions.”  However the terms “adequate” and “affordable” are not defined.

While the House version of this bill limited the ability to apply pre-existing condition limitations to states that adopted a mechanism called high risk pools, Graham-Cassidy allows any state to utilize pre-existing conditions in formulating its insurance coverage.

The bill also repeals the individual mandate requiring everyone to carry health insurance or be subject to an excise tax.  Without an individual mandate, insurance companies cannot be expected to provide coverage without imposing restrictions on pre-existing conditions.

Consequently, state governments and insurance companies, are likely to define adequacy and affordability in a broader context than consumers expect.

On the Sunday morning news programming, Kaiser Permanente CEO, Bernard Tyson, explained that the new legislation widens the difference between having access to coverage and having access to care.  Before the ACA insurance companies provided coverage that excluded care for pre-existing conditions.  Graham-Cassidy reopens that door.

Another interesting aspect of the block grants is that it diverts federal funding away from states that have broadly implemented the ACA (mostly blue states) to states that have not (mostly red states).  California is the biggest loser in this process, so it will be interesting to see how California Republicans can take the position that their constituents are not hurt by Graham-Cassidy.

This is not the first time that Republicans have vilified blue states.  Their tax reform proposals eliminate the deduction for state income taxes which is directed at blue states that tend to have higher state income taxes.

What is forgotten in this process is that, when compared to red states, blue states generally pay a higher share of federal income taxes than they receive in federal spending.  Graham-Cassidy accelerates this trend.

Favoring states that are the base of a party’s political support may be good politics in the short run, but it is poor policy inasmuch as it is unfair and furthers the political divide over the long term.

One has to ask why the Republicans are proposing unpopular legislation that is detrimental to many—particularly to those who suffer from chronic illness.  The answer is two-fold.

First the Republicans have spent eight years demonizing Obamacare and have made campaign promises that they perceive need to be fulfilled in order to keep their base happy.  Unfortunately, instead of tackling the underlying drivers of health care costs, they have resorted to gimmicks that only exacerbate the situation rather than providing a real solution.

The second reason is that, by cutting government healthcare spending by $240 billion over ten years, they can also cut corporate taxes by a similar amount.  Both Speaker Ryan and the Trump administration have proposed massive tax cuts which are going to be extremely difficult to fund.  The Administration’s release of tax reform proposals is imminent.  Observers have speculated that they are awaiting resolution of the health care issues before releasing the tax reform proposals.

Once more is known about the tax proposals, I will discuss them in future columns.

Meanwhile, we all owe a debt of gratitude to Senator McCain and his Republican colleagues who oppose the Graham-Cassidy bill.

Jim de Bree is a retired CPA living in Valencia who hopes that Graham Cassidy will not force him to return to the workplace.

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