Will Trump Really Kick 22 Million Off Health Insurance?

(A version of this article was published by Forbes.)

Now that repeal of Obamacare is within striking distance, Obamacare’s supporters and the media are aghast at over 20 million people potentially losing their overly expensive health insurance.

If Republican politicians cannot overcome this objection, they will never move forward with repealing and replacing Obamacare. U.S. Senator Lamar Alexander, Chairman of the Senate’s Health, Education, Labor, & Pensions (HELP) Committee anticipates it will take “several years” to transition out of Obamacare to a patient-centered health system.

Why would Republican politicians balk at fulfilling a promise on which they have campaigned successfully since 2010? The answer lies in the swamp which President-elect Trump promises to drain – Washington, DC. Remember every industry in the health sector acceded to Obamacare in 2010 because it would permanently divert funds from the rest of the economy into the health sector.

Some of those industries were taxed to fund the new spending. They went to work immediately to repeal those taxes, while retaining the spending. Republican politicians have been a little too eager to accommodate both goals. As the newly elected Congress prepares to start work in January, those industries are lobbying hard to maintain this objective. Their goal is not to repeal and replace Obamacare, but to repeal taxes specific to each industry and leave us with deficit-financed Obamacare.

The capital markets expect a unified Republican federal government to go back to the GOP’s traditional big-spending ways: The yield on the 10-year Treasury note has increased from 1.83 percent the day before the election to 2.40 percent today. This is mostly driven by President-elect Trump’s promise to spend on infrastructure and the market interprets this positively for economic growth. (See note below.)

Supporters of unfunded Obamacare spending will win if they manage to scare Republican politicians by hanging 22 million newly uninsured around their necks. 

Fortunately, there is a good response to this charge.

First, the number is incorrect. It comes from a December 2015 analysis by the Congressional Budget Office (CBO), which examined the Republican-majority Congress’ first attempt to repeal Obamacare through “reconciliation,” a procedure that allows a simple majority in the Senate to overcome a filibuster. President Obama vetoed the bill last January.

If it had become law, the bill would have improved economic growth such that government spending would have shrunk by $1.4 trillion over ten years, while tax revenues would have shrunk by $900 billion, reducing the deficit by almost $500 billion.

Yes, the CBO reports the repeal-through-reconciliation bill would have increased the number of uninsured by 22 million. However, that is largely because the CBO, like all government agencies, mischaracterizes health insurance. If people become dependent on welfare for medical care (through Medicaid or Children’s Health Insurance Program), government agencies (and the media) move them from the “uninsured” column to the “insured” column.

Imagine if agencies failed to differentiate people receiving cash (or pseudo-cash) welfare benefits (such as Temporary Assistance for Needy Families or Supplemental Nutrition Assistance Program) from people receiving wages from employment. On the contrary, if an unemployed person starts receiving cash welfare we do not move him to the “employed” column and announce the problem is solved.

The same principle should prevent agencies from including people receiving Medicaid in the same category of as those who pay for their health insurance, either through work or individually. Repeal through reconciliation would reduce the Medicaid population by 14 million, according to the CBO.

The number of people who would lose private health insurance would be 18 million, mostly those who are currently subsidized through tax credits in Obamacare’s exchanges. Employment growth in the wake of repeal would add 10 million to the rolls of those with employment-based benefits, so the net reduction of people with health insurance plus welfare benefits for medical care would be 22 million.

Still politically terrifying? The Economist reports non-college educated whites and those who suffer obesity, diabetes, heavy drinking and irregular physical activity swung significantly from Romney in 2012 to Trump in 2016. These are Obamacare’s “beneficiaries,” and they had had enough after two years of it.

Perhaps these voters remember the share of U.S. adults who had private health insurance in the first half of 2016 is the same as persisted until 2006. Obamacare has not achieved a breakthrough in coverage. It has just restored us to where we were a decade ago. These voters do not want a government handout lubricated by lobbyists, they want the broken promise of affordable health care delivered.

Note: At the time of writing, the 10-year Treasury Inflation-Protected Security had a yield of 0.45 percent, versus 0.12 percent on November 7, 2016. This implies the 57 basis point widening of the yield on the 10-year Treasury note is comprised of 33 basis points of higher expected real growth and 24 basis points of higher expected inflation, from an annual average of 1.71 percent to 1.95 percent over the 10 years.)