Like Obamacare, the Senate’s health insurance bill transfers wealth but less so

If you want a case study in the primary role of government, the latest health care insurance industry bill (H.R. 1628, the Better Care Reconciliation Act of 2017) provides one. Senate Democrats and Republicans yesterday having been throwing the predictable barbs at each other as highlighted by Senator Chuck Schumer’s (D-NY) description of the bill as mean, countered by Senate Majority Leader Mitch McConnell’s (R-KY) retort that Obamacare is on the brink of total collapse and that something needed to be done to save health care for America’s citizens.

But behind the posturing and talk of people being kicked out of the insurance market is the agreed upon transfer of capital from taxpayers to the health insurance industry; for that is American government’s primary mission; to transfer capital into the hands of the private sector so that returns on capital are hopefully optimized and bond holders (investors) are satisfied.

Take Section 106 of the bill. The section describes two funds; a short-term assistance fund designed to address disruption in coverage and access to health insurance, and a long term state stability and innovation program, designed to help high-risk individuals access health care. In 2018 and 2019, $15 billion will be transferred to health insurance issuers via the short-term assistance fund with the amount falling to $10 billion in 2020 and 2021. While proceeds from the long-term state stability fund go first to eligible states, eventually those funds will go to insurers. According to the bill, states will receive $8 billion in 2019; $14 billion in 2020 and 2021; $6 billion in 2022 and 2023; $5 billion in 2024 and 2025. and $4 billion in 2026.

And while Congress will have to wait until next week for the Congressional Budget Office to issue a score on the bill, Wall Street is keeping a score of its own. The NYSE Health Care composite was up 1.3% post release of the Senate bill. And while some insurers expect to maintain revenues and profits in the future immediate of the bill’s passage as a result in the removal of taxes on healthcare plans, eliminating the expansion of Medicaid may hurt hospitals, other health care providers, and insurers who administer Medicaid.

Major investment banks haven’t said anything about the bill and yesterday’s slight uptick in share values may be very short-lived if Congress cannot return Medicaid back to a major tax transfer program. The irony here is that conservatives are doing a poorer job of applying the role of government versus the progressives across the aisle that pushed the Affordable Care Act. The risk to conservatives is that reversing their position on Medicaid expansion will make them look like they have capitulated and such a reversal won’t look good to their base of supporters.

Either way, insurers overall will benefit from continued and less-taxed growth.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in capital, Democrats, GOP, government, health care, healthcare, Republicans and tagged , , , . Bookmark the permalink.

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