Let's Talk Healthcare

A couple of weeks ago Donald Trump said, "Nobody knew healthcare was so complicated."

It's a weird statement, because most people do know healthcare is complicated, a lot of people have been trying to inform Trump its complicated for the past year, and that Trump is perhaps the last person to finally realize this.

So let's talk about healthcare in the United States. In Western countries its considered one of the worst systems, by liberals and conservatives alike (for different reasons). But I'll try to summarize it.

Note; what I write below isn't exactly what happens, but it's good enough to understand the new GOP healthcare law.

First there is Medicaid. This is healthcare for the poorest Americans, though there isn't a clear line of what defines poor. 70 million Americans, or about 21% of all Americans get insurance through Medicaid. It is funded both through the federal government and through state governments. It's also considered a terrible health insurance plan, with some studies showing uninsured people are healthier than people on Medicaid. I think that it is more correlation rather than causation, as people on Medicaid are obviously the poorest Americans and the least likely to afford healthy lifestyles. This doesn't really dispute that Medicaid is some bad health insurance though. It's still one of the most popular government programs at 66% approval.

Now, Obamacare actually offered to expand Medicaid for more Americans, as long as the state was willing to shoulder 10% of the cost to do so. 31 states agreed to do so, 19 refused. Obviously the 19 that refused are the most conservative areas of the country.

Next is Medicare. This is health insurance for the elderly, specifically 65 and older. Medicare is considered far superior to Medicaid, though is still lackluster to many private plans. This is a big reason why Bernie Sanders was arguing to create "Medicare for all," rather than "Medicaid for all." Medicare has approval of 77%.

Then there is the best off people, those that get insurance through their job. This is often the best deal one can get in the US, with much of the cost on the business and not the individual.

And lastly there is everyone else, which is where it gets really confusing.

You see, healthcare in the US is some of the most expensive in the world. Per capita, Americans spend $9,451 per year on healthcare. Compare that to $5,228 in Sweden, $4,608 in Canada, and $4,003 in the UK. It's difficult to argue that healthcare is twice as good in the US than in these countries.

Health insurance could also be picky with clients. Before Obamacare, companies could refuse service to those with pre-existing conditions. If you were born with an insulin problem for instance, the only way you would get health insurance is if you agreed to extremely expensive plans, and most companies would just refuse to cover you.

Simply put, many Americans find health insurance so expensive they go without it, which is actually costlier to society. Because legally in any emergency situation the hospitals have to fix ER problems and charge you after, people simply add it to their debt that they can never pay.

Obamacare tried to fix this by expanding Medicaid, making denial of healthcare service illegal, and making a new exchange where the government is the middle-man with private insurance. These exchanges are subsidized to lower the normal costs of health insurance. With one key element; if one isn't covered by insurance already, and you don't get any, you pay a fine.

The fine is used to pay for the new subsidies and Medicaid, but is more in place to force healthy people into buying insurance. Because Obamacare essentially allows sick people to get health insurance cheaper than they normally would, but also makes it more expensive for healthy people. In order to health insurance in general to work, healthy people subsidize the sick.

Now the reason people think Obamacare can fail (the "death spiral") is that many people find paying the fine better than getting insurance. This can lead to insurance companies finding the costs of the sick too high and the revenue from the healthy too low to do business profitably.

So... here's what the new GOP plan (Trumpcare) tries to do.

1. Removes the fine
2. Creates new tax credits of $2,000 to $4,000 dependent on age (ends at 60)
3. Creates tax-free savings accounts for health espenditures
4. Phases out Medicaid expansion
5. Allows insurers to charge pre-existing conditions clients 30% more

There's more, but these are they main points. And it's why nobody likes it.

You see, without the fine the "death spiral" actually accelerates because there is no punishment for healthy people to go uninsured. The fine is the least popular part of Obamacare, but necessary to make it all work.

The tax credits and savings accounts are nice, but only for Americans who pay taxes and can afford to save. So not very helpful to poorer people who don't pay taxes and live paycheck to paycheck.

And overall, it's expected to cost more, cover less people, and make health insurance more expensive.

The Democrats don't like it for pretty much all those reasons.

The most conservative Republicans don't like it because they don't really want a replacement at all. They want everything repealed, and then force insurance companies to do direct competition with each other nationwide. And they aren't happy about the added debt.

The most moderate Republicans also don't like it. They tend to come from states that expanded Medicaid whose voters will likely react badly to losing health insurance, or seeing their premiums accelerate in price.

So the Republicans are caught in a Catch 22. If they pass this law, they'll likely drive up turnout of moderates and Democrats against them in 2018. And if they do nothing, Republican voters will stay home in 2018 because they didn't meet their promise.

The Republican leadership is going to try to ram this through, and hope it works out. But whatever happens as a result, the voters are going to know who to blame.