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Here are 3 biggest problems in new GOP health bill

  • Latest GOP health bill is fraught with serious drawbacks.
  • It allows for cheaper plans to be sold and sets aside more money to cover sickest Americans.
  • But also still includes inflationary subsidies and virtual slush funds.
Senate Majority Leader Mitch McConnell, a Republican from Kentucky, walks to the floor of the Senate from his office after a GOP meeting on healthcare at the U.S. Capitol in Washington, D.C., on Thursday, July 13, 2017.
Andrew Harrer | Bloomberg | Getty Images
Senate Majority Leader Mitch McConnell, a Republican from Kentucky, walks to the floor of the Senate from his office after a GOP meeting on healthcare at the U.S. Capitol in Washington, D.C., on Thursday, July 13, 2017.

The Senate GOP leadership unveiled its latest revised Obamacare repeal and replacement bill Thursday that can best be summarized as "one step forward, two steps back."

For each positive change to the plan that would actually improve the health insurance market for consumers and/or increase the chances of getting the bill passed, there's a negative for both voters and the entire reform process.

Here are the three biggest "Jekyll and Hyde" aspects of this plan:

1) Bare bones plans are allowed! But subsidies remain

The biggest change in principal is the new bill finally allows people to buy health insurance plans that offer stripped down coverage with lower premium prices. In return, insurers will still have to offer at least one plan that complies with the "essential benefits" items mandated by Obamacare.

This is something I've pushed for over the course of the last several years. Taken on its own, it brings back the idea of individual freedom and responsibility and reduces the role of the "nanny state."

And that's good, because a key failing of Obamacare was that it literally forced younger and healthier people to buy more expensive plans to help subsidize plans for older, and often wealthier people. Of course, the result was a lot of young people decided to just pay the penalty for not getting covered.

But here's the problem. The new bill still keeps much of the subsidy structure in place to help Americans, based on their annual income, to buy more expensive plans. Subsidies, by definition, drive up costs. And how many people will opt to pay for a cheaper plan when they're still eligible for a government subsidy to buy a better one?

As it stands now, this change won't make enough of an impact.

2) Risk pool money is boosted, but it's not the right risk pool

The key cost inflator in health care is the 5 percent of Americans with serious pre-existing conditions who account for more than 50 percent of our health spending. This fact just screams for the setting up of a separate risk pool system to make sure these sickest Americans can get care while not bankrupting the rest of the system and the rest of us paying for health care. Considering the trillions of dollars we spend on health care in America every year, a good argument can be made to spend even more than $300 billion on such a separate risk pool.

The new bill sets aside another $70 billion in federal funding on top of an already-proposed $112 billion earmarked for states to help reduce insurance premiums and out-of-pocket costs for customers in the individual plan markets. That may sound like a separate risk pool for the sickest patients, but it isn't. It's $112 billion that the states can use to cover pre-existing condition patients, subsidize insurers, or just about anything else that they can claim cuts insurance costs for any of their residents. That's a lot more like a slush fund than a well-defined risk pool for the true source of most of our health care spending.

3) This is still not close to a transparent process

It's good that the Republicans have made significant changes to the bill, but there was something very damning about all the news reports about the new measure: They all quoted lobbyists as their main sources of their information about changes. This is just the latest evidence that Senate Majority Leader Mitch McConnell is often working closer with K Street lobbyists on this bill than even his fellow Republican senators.

Now we can all be cynical from time to time, and no one wants to be naive about how Washington politics works. But this continued behavior by McConnell keeps a dark cloud over the negotiation process. Several Republican senators have complained about it, and today a top staffer for Senator Mike Lee (R-Utah) took this complaint to his Twitter feed:

In addition to the secrecy, there's the problem of the speed with which the Republicans are crafting the bill. It took the Democrats more than a year to get their Obamacare plan ready, but the GOP continues to try to get its replacement bill passed within about six months. McConnell is also still rejecting the idea of simply repealing Obamacare now and passing a more comprehensive replacement later. Hastily constructed legislation is rarely good legislation, but that's not stopping the Republicans now. The legitimate concern is that the public and even a lot of the politicians will miss something in these kinds of bills that are rushed through.

Will the bill pass anyway? Senate Majority Whip John Cornyn says there will be enough votes now to pass this revised bill. That may just be his opinion.

But whether it passes or not, there's still just not enough in this bill to make anyone seriously believe the health coverage market will seethe improvements the public wants and needs. We may like some of these Dr. Jekyl aspects of the measure, but they're still inseparable from the Mr. Hyde horrors found there too.

Commentary by Jake Novak, CNBC.com senior columnist. Follow him on Twitter @jakejakeny.

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