The Senate’s efforts to pass healthcare legislation look to be scuttled. Sniping will occur as to who exactly is to blame, but it was caused by a split between centrist Republicans and the more free market wing. The bill itself was largely welfare reform that did little to overhaul Obamacare’s regulatory structure, partly due to legislative constraints. The free market wing initially balked at the bill and agitated to include an amendment freeing states from many federal demands. In the end though, it appears the unpopularity of the welfare reform sunk the bill. Give Obama and the Democrats some credit, their Medicaid expansion put many GOP Senators in a political bind, the damage to the national balance sheet and long term fiscal health of the program aside. The bulk of Obamacare’s insurance expansion is due to its Medicaid expansion and pulling back on federal funding for this program was never going to be popular. It caused a rift between expansion and non-expansion states and allowed Democrats to claim that the GOP bill would cause millions to lose their insurance.

There is a better route. First they need to deal separately with Obamacare’s regulatory structure and its welfare expansion. Instead of pursing welfare reform, they should be promoting consumer freedom via regulatory rollback. The lack of Sunday show appearances by GOP Senators defending the bill shows how little they believed in it, but a message of consumer choice is an easily defensible one. By avoiding dismantling the program that encompasses the vast majority of insurance gains, they will also dampen political attacks about insurance losses. If anything, allowing consumers to purchase plans tailored to their needs will increase participation, especially from the less wealthy and younger segments. There will be complaints about adverse selection and ‘bad’ insurance plans, but this is simply an argument that the government can solve these problems better than the free market. Obamacare’s ‘fix’ was to force young and poor to subsidize the rich and old and all to purchase coverage they didn’t need. This has led to very few young people signing up, so rather than adverse selection, we got insurance death spirals causing massive insurer exits and few options.

As for the welfare front, the GOP needs to abandon pursuing entitlement reform on their own, it needs to be done in a bipartisan fashion. A grand bargain would look to include reductions to welfare increases, changes in eligibility, and, yes, tax increases, but perhaps in the form of a marginal rate reduction paired with larger decreases in popular deductions. All in all, completely unpopular yet absolutely necessary changes to a collapsing system. Both parties created the problems and changes won’t be made until both parties agree to pay the political price for fixing them.

Healthcare reform looks to be on pause and the country stumbles along with a failing system. The wholesale reform as discussed will not be possible under the 50 vote reconciliation and will require Democrat votes. If the GOP can craft and agree to a platform, it’s possible they can force a vote on the matter by having Trump drop the appeal against a ruling that subsidies Obamacare pays out are unconstitutional. The threat could be used to force a vote in the Senate, but if no one blinks following through would sink the already struggling marketplaces. From there the argument gets political, but pointing out that following the law as written has caused the collapse is a fairly easy argument to make. Not only that, but this action is from the executive, giving some cover to Congress. Considering Trump’s travails, it’s certainly possible that he’d be willing to do it, if only to change the focus in Washington.

A core GOP promise was the repeal of Obamacare. If they don’t make the changes, not only will their voters be demoralized, but it opens the door to a ‘fix’ in the direction towards single payer.

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