Where did it all go wrong for repeal-and-replacement of the Affordable Care Act?

Short answer:  pre-existing conditions (PECs).  The PEC solution in the ACA is the one part of the law that most people want to rescue, the one that represents financial protection of people who are unable to obtain healthcare insurance because their health issues make insurance unavailable or prohibitively expensive.  But the Republican Congress was unable to agree on a PEC fix.

Longer answer:  the conservative mantra, a big factor in the Republican wins last November, was that healthcare insurance (and healthcare itself) should be offered and purchased in a free market, where the competitive forces of supply and demand would drive down the prices of insurance and care.  But after the dog chased the car for 7 years and finally caught up with it, the dog had no idea what to do with it.  Republicans seemed stunned to learn that the public cared more about taking care of people with PECs than it did about free-market competition for the pricing of healthcare and insurance..

The problem:  after 85 years of living with ever-increasing governmental regulation and price controls, America no longer remembers how markets work.  The ACA solution fixed prices and had people with PECs paying the same prices for insurance as everyone else, which amounted to a cross-subsidy – people without PECs would pay more than they should, in order to allow people with PECs to pay less.

Conservative Republicans in Congress were put-off by the price-fixing/cross-subsidy apostasies.  Recalling the 1970s oil-price debacle, they knew that price-fixing never yields sustainably-lower prices.  Recalling Economics 101, they regarded cross-subsidies as “re-distribution of income,” a sad relic of communism.  But only Sen. Ted Cruz seemed to consider that there might be a way to avoid price-fixing and automatic re-distributions while still taking care of people with PECs.  The Cruz amendment would have been the gateway to a format that Nobel economist Milton Friedman had discussed decades earlier,  vouchers:  first you free up the markets for healthcare and insurance, which drives down prices, and then you give money (or vouchers) directly to people who cannot afford to pay market prices – whether because they are broke or because their PECs put the cost of insurance beyond their means.

It is clear that Americans want to help those in need.  The stumbling block is not a flaw in our moral character, it is a flaw in our governmental approach.  The Cruz approach was to separate the pricing of healthcare and insurance from the granting of assistance to people with PECs.  To those who might ask whether this would induce everyone to put off buying insurance until he or she developed a condition that required healthcare services, the answer is simple:  put the feds in charge of deciding who is entitled to assistance, when, how much, and for how long, and make sure no one gets any money without first having substantially exhausted his or her financial resources. Gaming the system, as people have been gaming the ACA, would be minimized.

A pair of concise summations of this approach:  “If we’re going to subsidize Americans who can’t afford health insurance, do it directly. Don’t do it through the premiums of others,” said Sen. Jeff Flake (R., Ariz.).  “The obvious compromise, the only good solution, is to do both: free-market pricing of healthcare and insurance in order to drive down prices, coupled with government subsidies for the needy to enable them to buy care and insurance at market prices,” said your humble scribe in an earlier blog post.

So, why was the Cruz model rejected?  Were the Republican resisters just under-informed, or should we be more cynical about their motives?  Did the insurance industry or anyone in the “swamp” really want a free-market solution? Why didn’t the Trump administration endorse and sell the Cruz draft proposal?  Does anyone believe that repealing ACA or letting it die on its own would be anything but a meaningless stunt, possibly an invitation to financial or civic chaos, with no way to sustain American healthcare without massive infusions of new money our government does not have?



The way to fix the Affordable Care Act is not to punish the people who are unfortunate enough to have pre-existing conditions or financial need, it is to assist such people in a way that does not undercut the benefits that would be afforded by switching to free markets for the pricing of insurance and healthcare.

Here is the dirty little secret about solutions for healthcare and insurance: there are two primary elements, and there is no such thing as a good solution that addresses only one.  Republicans have no trouble uniting around one of the elements: the creation of a competitive, Milton Friedman-style free market in healthcare and healthcare-insurance, where pricing of healthcare is based on supply and demand and where premiums on healthcare insurance are based both on supply and demand and on actuarial calculations derived from the applicant’s “risk profile” rather than the applicant’s financial means.  Democrats, on the other hand, are united around a demand for the subsidies element:  assisting the needy, including those whose need is created or increased by the higher cost of buying insurance that covers pre-existing conditions.  All the quibbling about Medicaid, taxes, and other issues is misdirection, a subset of the subsidies argument, a small tail wagging a big dog.

Republicans think free-market competition for products and services yields lower prices.  Democrats view that as voodoo economics; in their world, the only way to reduce prices for healthcare and insurance is for government to control prices, a policy Republicans believe solves nothing but leads inevitably to government bailouts, such as the bailout that will soon be needed to rescue the ACA from its death spiral.  Democrats think of governmental assistance in healthcare as an expression of social values, that no one should be denied a reasonable level of healthcare merely because he cannot afford it, even if the reason he cannot afford it is that he has a pre-existing condition.  Republicans are repelled by government handouts in general but are moved by a fundamental inclination toward charity, toward helping the needy.

To a visitor from Mars, the obvious compromise, the only good solution, is to do both: free-market pricing of healthcare and insurance in order to drive down prices, coupled with government subsidies for the needy to enable them to buy care and insurance at market prices.  In the markets + subsidies model, government’s main role would be to define and identify financial need, including need arising from having a pre-existing condition. Government assistance, in the case of people whose financial need arises from the higher cost of insuring people who have a pre-existing condition, would make up the difference between the premiums charged to such people and the premiums then being charged to people who have no pre-existing conditions but otherwise-similar risk-profiles.

This compromise model would embrace both the Democrats’ social policy and the Republicans’ free-market policy.  The two policies are compatible, even complementary:  the cheaper the prices for care and insurance, the lower the governmental outlay for subsidies.  Why hasn’t Congress gone to this solution?  One possible explanation:  (i) the Republicans fear that their constituents oppose the notion of subsidies and vouchers –  government “handouts;” and (ii) the Democrats fear markets and are afraid this solution might actually succeed and expose the fallacy of the price-control model. Meanwhile the public, if you read between the lines of the various polls, actually wants this kind of compromise.

Speaker Ryan knows all of this.  In fact, the compromise model is pretty much baked-into the plan that Ryan drafted and the House approved, though it is obscured by the complexity and indirectness of the drafting.  For whatever reasons, a lot of important people act as though they do not understand what Ryan has crafted  – including the president, many Republican senators and representatives, and most conservative talk-show commentators (the primary spokeshumans for the Deplorables).   Granted, the Ryan model contemplates additional actions by the executive branch (Executive Orders, etc.) in order to accomplish major parts of the overall free-markets/subsidies model, such as giving the states the power to waive the “community rating” system of pricing insurance – a critical component of price-controls.  Some congresspeople might not trust the White House to come through with such actions.

In all events, both the House bill and the Senate draft bill, warts and all, are way better than the ACA.  We would be well on our way toward a much-freer market once either bill were enacted and the Administration started peeling back the key ACA regulations, and the individual states waived the federal regs that mandate the terms of private insurance policies (like the community rating requirement), and the states switched to getting block grants for Medicaid.  The president knows all this – but by now he might be giving-up on the anti-Trump wing of his own party and deciding whether to go shopping elsewhere for ACA solutions, even if those solutions might give short shrift to free-market principles.

The president should consider that the compromise suggested here, markets-plus subsidies, would hold considerable appeal for the public, that the public would support it, probably love it, because it addresses their wish to retain the subsidies, and if they also get lower prices as part of the deal, that would be a win-win.  Once the Cruz/Lee faction gets it that their constituents want both market economics and charitable behavior, they might find the plan harder to resist.



Why do we still have press briefings by the Press Secretary?  In fact, why do we still have a press secretary, if his primary function is to argue with an adversarial press corps?  The mainstream media have become so partisan that the briefings no longer serve the function of keeping the public informed on current events; the reporters believe their role is to present opinions and arguments and to bait the Trump Administration into policy debates. These adversarial proceedings have little upside for the Administration and are a waste of its time, because the only verdicts from these contests are the ones the media choose to declare.  Guess who turns out to be the winner most of the time.

The purpose here is not to debate the existence or utility of leftward bias in the media.  Everyone knows what is going on, that the media have supplanted the Democratic Party as the political representative of the American Left and are attempting to re-educate the electorate in a leftward direction. Everyone knows the Deep State and the Never-Trump wing of the Republican Party are more foe than friend. Everyone knows there is no way for the Right to win a debate when the media act as judge and jury. No matter what the Administration does, the media respond with negative editorial opinion presented as though it were fact, opinion that ignores, distorts, redacts, or misrepresents the Administration’s views.  So, what to do?  How can the public be kept informed, when the Left has a virtual monopoly in the media?

The press briefing is not the answer.  Fox News is not the answer, now that the second generation of Murdochs has destroyed Roger Ailes and Bill O’Reilly and exiled or muzzled many other conservatives in its pursuit of “fair and balanced” reporting.  For now, conservatives still have talk radio and the Editorial Department of The Wall Street Journal, though one wonders how much longer can Paul Gigot et al fight the good fight, considering the paper is owned by the Murdochs and the Editorial Department already has to share quarters with the Journal’s left-leaning News Department?

A proposed solution:  a Trump Administration news service, aimed at those who still know there is a difference between fact and opinion but have no way to know about important stuff that has been buried by the mainstream media, events they had no idea had occurred.  How about a service that would report the most-important news and identify the incorrect, incomplete, or misleading stuff being peddled by The New York Times, the Washington Post, the principal newspapers in most other major metropolitan areas, ABC, CBS, NBC, CNN, NPR, the Associated Press and other national press services, the majority of news-oriented periodicals, and the social media?  There would be no “live” audience, no questions from media people, no debates or arguments with them, just a distillation of the latest news and a listing of errors and omissions made by the media.  Would at least Fox telecast it?  Could it be done via the social media?  Governance by tweet and scripted-announcement, anyone?


Republicans should not be shocked if President Trump decides to dump them and work with Democrats on future projects.  Now that the Paul/Cruz/Cotton/Freedom Caucus crowd has determined that RyanCare was not pure enough for them, the president might well decide that his new party is a bunch of losers and that he might do better by building a coalition among blacks and the “ordinary” folks who dragged him across the finish line in PA, Michigan, Ohio, Wisconsin, and other bluish states.  Obviously, the ideological, socialist wing of the Democratic Party would never support him, just as the ideological free-market wing of the Republican Party has now disappointed him, but that leaves a big space in the middle, people who don’t give a hoot about Marx or Milton Friedman but are quite concerned about the security and prosperity of the nation.

Irony abounds.  RyanCare was inspired by a free-market vision but became, under the restless pen of Speaker Ryan, a horse built by a committee, an altogether different creature.  Who among us really understood Phase I, which seemed intended to buy support among moderates of either party by providing financial assistance to the needy – but ended up as an indecipherable jigsaw puzzle of progressive-style redistribution?  Who believed that Phases II and III, which were deferred because they supposedly could not qualify for the filibuster-proof “reconciliation” process, would suddenly turn the pricing of healthcare and healthcare-insurance over to a competitive, deregulated, free market? Answer: very few of us.   RyanCare’s heart might have been in the right place, but the plan looked more like a Soviet Five Year Plan than like something that Hayek or Milton Friedman would have liked.

Could it have been otherwise?  Sure – plenty of smart conservatives have articulated elegant, simple, free-market models that could have been understood by the voters.  The common theme of these proposals was that government was to get completely out of the business of controlling the healthcare insurance business and determining which treatments and procedures you are allowed to obtain, from whom, when, and at what price.  Government’s one and only role in healthcare and insurance would be to provide financial assistance to people who needed it in order to pay the market price of healthcare and insurance.  Medicare would merely verify eligibility and collect and disburse money.  Clearly, the transition from the central-planning model (ObamaCare) to the free-market model would have taken time, effort, and money and would have involved special provisions (e.g., grandfathering) to address individual cases of hardship or unfairness, but that would have been a one-off project that would ultimately add enormous value. On the contrary, it appeared that under RyanCare, the government would jump in and manage the transition but that it would never jump back out.

Would a simple, free-market model have been approved by Congress?  The guess here is that it would, as the provisions for transition and for assistance to the needy would have gotten the moderate Republicans on board, and the provisions for deregulation and free-market pricing would have warmed the hearts of Rand Paul, Tom Cotton, and the rest of the purists, and the support of both moderates and purists would have carried the House and put a lot of pressure on a lot of Democrats in the Senate, as the Trump machine flexed its new muscle and made things tough for Democrats up for re-election in red states.  And if it had not worked, the blame would have lain squarely with the Democrats, which the voters would have noticed.  But now we will never know.  The Republicans got too cute and now both the party and the president have taken a huge blow, and only the president appears to have at least one path to recovery, a path that should infuriate Republican voters.


Let me be clear (OK, sorry, that line was plagiarized):  a lie is not a false statement, an inaccurate prediction, or an opinion with which one disagrees.  Here is a typical definition of “lie” (from Wikipedia):  “A lie is a statement that is known to be untrue and is used to mislead.”    Another (from Dictionary.com):  “an untrue or deceptive statement deliberately used to mislead.”    Note the key words: “known,” “deliberately,” “used to mislead.”  A statement that eventually proves to be false but was believed by the speaker to be true when he uttered it, is not a lie.  For example, the assertion that “Bush lied” about Saddam’s WMDs is not correct, as it has never been demonstrated that Mr. Bush knew, at the time he made the indicated statements, that his statements were false.  His statements might have been false statements, but they were not lies.  If ObamaCare somehow survived and succeeded during the remainder of the Trump administration, Mr. Trump’s prediction of its failure would not be a lie, it would just be a flawed prediction.  When the president states that economic nationalism is preferable to free trade under certain circumstances, that is not a lie, it is just a controversial opinion.

President Trump has issued false statements, bad predictions, and suspect opinions, but few (if any) lies.  On the contrary, he has made a remarkable number of specific promises and has already kept a great many.  It is now clear that he did not lie when he said he would nominate a conservative to the Supreme Court and said he would attempt to limit illegal immigration, to replace and reform ObamaCare, to demand more from our NATO partners, to cut red tape in government, to balance the budget, etc.  In this writer’s lifetime (which covers a lot of presidencies), no other candidate has even come close to matching this president’s record of laying out an extensive and specific set of campaign promises and then, once elected, systematically keeping those promises, acting upon one after another after another with alacrity, vigor, and passion.