Foundation

Debate on the Future of Obamacare

by Demian Brady / /

 

Last week, CNN hosted a debate between Senators Ted Cruz (R-TX) and Bernie Sanders (I-VT) about the future of Affordable Care Act (ACA). They each laid out their contrasting visions for amending and replacing the law. The event represented a crystallization of the current state of debate: one side fails to acknowledge the costs of the law, and the other side has not provided a complete picture of what reform would look like.

Senator Sanders praised Obamacare for expanding insurance coverage. He argued that although the law is not perfect, repealing rather than patching it up will result in problems for “people who are suffering.” His case was based on emotive appeals and he largely left out – and in one case even dismissed – the burdens the law has imposed on the economy, consumers, and taxpayers.

Two examples from the debate highlight this point. Sanders was asked by a salon owner from Texas how she can grow her business under Obamacare’s employer mandate, which requires that businesses with at least 50 employees must provide health care coverage to their workers. This disproportionately impacts smaller businesses that cannot bear the costs without reducing wages or increasing costs – which could drive away customers. To avoid the fiscal crunch, many small businesses have opted to stay under that employee cap and others have increased their use of part-time workers.

Sanders offered the salon owner no options:

He responded that, due to the “dysfunctional health care system right now,” she simply must be required to provide health care to her employees if she expands above the 50-worker threshold. He seemed oblivious that this mandate hinders her, and other small business owners, from expanding and creating more jobs. Sanders failed to account for how Obamacare has negatively impacted the unemployed and uninsured people that it sought to help.

Second, while espousing the ACA’s benefits, he failed to note its fiscal impact. The latest analysis from the Congressional Budget Office estimated that the Obamacare will cost at least $470 billion over the next five years. Its outlay costs are exceeded by its new and higher taxes, which have hurt job growth and driven up costs. Repealing the ACA would mean real tax savings averaging $58 billion per year. Sanders’ also touted his “Medicare for All” proposal as a successor to the ACA. The plan would expand Medicare into a universal, single-payer health care program administered by the federal government, and its costs would be even more exorbitant. According to NTUF’s research, Sanders’s plan would cost nearly $6.9 trillion over its first five years. The Urban Institute estimated that costs could reach $32 trillion over ten years. The program would be funded by massive tax increases of over $1 trillion per year.

Senator Cruz offered alternative approaches to increase free-market competition in health care to spur improvements that bring down costs. He laid out his three core principles for replacing the ACA. First, Cruz would allow consumers to buy insurance across state lines, which is currently prohibited by federal law. Second, he would expand “health savings accounts so [people] can save in a tax advantaged way to meet your own health care needs.” Finally, Cruz would make health care portable so that it moves with the employee if they move from job to job.

These reforms are part of Cruz’s goal of reducing health care regulations and empowering consumers, but more details are needed to address a complete repeal and replacement of the ACA. Additional reform options in other plans would expand risk pools to assist states with coverage of higher-cost individuals, or refundable credits to assist low-income households purchase insurance. These would be similar to the ACA’s premium tax credits but would be more flexible because their use would not be limited to purchase of health insurance exclusively through the ACA’s health insurance exchanges, which currently have very limited options for consumers.

Although the Senators largely disagreed throughout the night, there were two policy areas where they reached a consensus. First, Cruz noted that the ACA's requirements "generate $51 billion in costs and more than 172 million hours of paperwork compliance" on insurers and health care providers. Sanders agreed, but stressed that insurance companies are also to blame. His solution is somewhat paradoxical: Sanders said we need a “simple system” yet his “Medicare for All” proposal would massively increase bureaucratic and administrative complexity.

Second, Cruz and Sanders also supported a plan to allow the importation of prescription drugs. Their statements reflect a deep misunderstanding of the issue and the potential ramifications. Sanders argued that Americans should be able to purchase re-imported prescription drugs that have been approved by the Federal Drug Administration (FDA) and that this will "will drive down prices in this country, because then you'll have international competition."

Just because there is bipartisan support for an idea does not necessarily mean it is good policy. While importation may sound like a free trade stance, this policy could have adverse impacts due to the fact that other countries have set price controls on medication. These controlled prices would essentially be imported, diverting resources from the development of new drugs that will save lives and lead to health care savings.

Moreover, Sanders and Cruz did not note that there would administrative costs to set up the regulatory regime. In 2005, the Congressional Budget Office looked at a similar proposal and estimated that it would have cost federal agencies $1.5 billion over five years, boosted fees collected by the FDA, and that the savings through federal health programs would have been minimal. A former FDA Deputy Commissioner also warned that such a system would increase the flow of counterfeit drugs into the country.


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