Donald Trump’s belief that Obamacare is 'exploding' is false and self-destructive

President Donald Trump holds a rally at Municipal Auditorium in Nashville, Tennessee, March 15, 2017.
Jonathan Ernst | Reuters
President Donald Trump holds a rally at Municipal Auditorium in Nashville, Tennessee, March 15, 2017.

Donald Trump's initial reaction to the news that his plan to repeal the Affordable Care Act wouldn't pass the House of Representatives was unusual, to say the least.

"I've been saying for the last year and a half that the best thing we can do, politically speaking," he argued in a statement to the press delivered in the Oval Office, "is let Obamacare explode. It is exploding now."

Presidents fail to accomplish policy goals all the time. George W. Bush wanted to privatize Social Security. Barack Obama wanted to close the Guantanamo Bay detention facility. But both men, having failed, saw it as their responsibility to continue administering existing programs in a responsible way. They didn't muse aloud that some kind of catastrophe might redound to their political benefit — in part because it probably wouldn't have.

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But Trump seems, based on his public statements at least, to be sincerely convinced of two things. One is that the failure of Obamacare repeal is okay because the law is doomed anyway. The other is that the doom of the program would be good for him politically, because it would just go to show what a dope Obama was. The former of these beliefs is definitely false — it reflects an apparently serious misunderstanding of the content of the legislation, as well as the nature of recent problems in one part of the program. The second part is probably wrong too.

Aspects of the program have, however, run into trouble. And if Trump believes exacerbating that trouble is in his interest, he can probably make it happen — with consequences that, ironically, are likely to be most severe for his own supporters.

Most of Obamacare isn't explosive

Like a lot of Trump's public policy thinking, the notion of a self-destructing Affordable Care Act appears to be a piece of deliberately misleading conservative political rhetoric that Trump may be taking literally. When Paul Ryan said in his January 12, 2017, weekly briefing that "the law is in what the actuaries tell us is a death spiral so we've got to intervene to prevent this from getting worse," he was engaged in a rhetorical sleight of hand. Ryan was trying to suggest that voters shouldn't worry that his replacement plan would leave fewer people covered, and with lower-quality coverage, because Obamacare was in a death spiral anyway.

But the law itself is quite expansive, and only one portion of it is even theoretically subject to the possibility of a death spiral. You can think of ACA as impacting the health care system in five major ways:

  1. Strict new consumer protection regulations governing the insurance plans that most working-age Americans get through their jobs
  2. Expansion of Medicaid so that states can, if they so choose, cover every poor person at little cost to the state government
  3. Major reforms to the way Medicare pays its bills that are designed to save money and improve efficiency throughout the system
  4. The creation of subsidies and regulations so that people too young for Medicare and not poor enough for Medicaid can buy comprehensive insurance on individual market exchanges
  5. New taxes on high income households and elements of the health care provider industry that help pay for items 2 and 4

Out of everything on this list, it's only the fourth part that could enter a death spiral or "explode." Taxing rich people in order to expand Medicaid may or may not be a good idea, but it works just fine. The consumer protection regulations are so popular that Republicans never talk about them. And though Republicans characterized the Medicare payment reforms as "cuts" during the 2010 campaign and ran against them to good effect, when it came time to craft a Republican replacement plan, they kept them in place, quietly recognizing that this aspect of reform is mostly working.

The health insurance marketplaces created in bucket four are, in some respects, the headline feature of the Affordable Care Act and are often used as a synecdoche for the whole. But the consumer protections and delivery system reforms impact more people, and both conservatives and liberals care a lot about the taxes and Medicaid expansion. Even if the marketplace did explode and go away, the law would still be a big change.

Obamacare marketplaces aren't exploding

The other thing about Ryan's claim that "the law is in what the actuaries tell us is a death spiral" is that it wasn't true. PolitiFact rated it false, and when the Congressional Budget Office — whose director was picked largely by Ryan himself, along with then-Rep. Tom Price, who now serves as Trump's health and human services secretary — scored the American Health Care Act, it reiterated that Ryan and Trump are wrong about this.

An insurance death spiral occurs when rising premiums cause the lowest-need clients to leave the risk pool, which drives up premiums further and pushes more low-need clients out of the risk pool. Premiums did spike significantly in 2016, so one of the predicates for a possible death spiral was in place. But CBO's analysis suggests the situation should stabilize rather than spiraling out of control:

Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.

Translating from wonkese, these are two key features of the Affordable Care Act's design that prevent it from death spiraling. One is that subsidies are bigger for lower-income clients, and the other is that subsidies are bigger for people in places where health insurance premiums are high.

That means that no matter how high premiums get, there is always a pool of heavily subsidized insurance customers who can afford a plan at little cost to themselves. That means that in most places, there will always be a critical mass of relatively healthy people eager to sign up for some Obamacare insurance at taxpayer expense. The Affordable Care Act's most enthusiastic proponents hoped for something bigger and grander than this outcome, but it is a stable one.

Obamacare marketplaces really are facing serious problems

That Republicans are exaggerating the problems with ACA marketplaces shouldn't distract from the fact that they really are underperforming what the law's architects were hoping for. To many people on the left wing of the Democratic caucus, Obamacare was always a disappointing half-measure. But to its main architects, the marketplaces were intended to be an aspirational model for the entire American health care system. In the short run, they would offer coverage to people who currently couldn't afford it. But in the longer run, they would create a framework for breaking the link between employment and insurance in a way that still allowed for free market competition rather than a large government program.

The exchanges are simply not living up to that ideal.

They are working primarily as a mechanism for providing financial assistance to families that are either relatively low-income or experiencing a very high level of health care needs, rather than as a potential mainstream solution for middle-class people who need insurance but aren't necessarily sick at the moment.

Enrollment being lower than expected is disappointing, but not a disaster. It does, however, create serious problems in places where population density is low. In many rural counties, there simply aren't enough Obamacare customers to support competition among multiple insurers. There are even some places where even the prospect of a monopoly isn't enough to tempt anyone to want to participate. Most Americans live in suburban or urban areas, and this isn't a problem for them, but it is a very real issue for rural America.

Trump could try to sabotage Obamacare

Dating back to before the collapse of AHCA, Trump was known to muse in public about the political merits of ACA exchanges failing.

"Let it be a disaster," he told the National Governments Association on February 27, "because we can blame that on the Democrats."

Michael Grunwald wrote at Politico on March 14 that Trump has "been saying this kind of thing so often that it's worth asking whether he's taking his own advice, trying to sabotage Obamacare for political reasons." And as Margot Sanger-Katz put it for the New York Times on March 24, with legislative repeal off the table, "Trump will need to decide, quickly, whether his goal is to knock over the still-functioning markets, or help prop them up."

The law gives the executive branch a reasonable amount of discretion around ACA implementation, and if the president wants to deliberately use that discretion in ways that are designed to be counterproductive, he can. More broadly, to work well the law requires the voluntary participation of both insurance companies and insurance customers. If the president is using his bully pulpit and other formal and informal powers to discourage that participation rather than encourage it, signup rates and consumer choice could tumble.

Everything about the program was designed, more or less, on the assumption that incumbent politicians would make a good-faith effort to make it work well. After all, it's ordinarily safe to assume that no incumbent wants to preside over a disaster.

The sabotage strategy doesn't make much sense

By the time Obama took office, Bush's signature K-12 policy initiative, the No Child Left Behind Act, had already become unpopular. NCLB also gave the executive branch a lot of discretion over implementation. In theory, Obama could have used that discretion to try to deliberately wreck K-12 schools in America and then blame the already unpopular Bush's already unpopular law for the wreckage.

He didn't do it, in part because to do so would have been grossly immoral, and in part because it wouldn't have worked.

People expect incumbents to solve problems, not complain about them. Obama's White House did try to remind people that both the weak economy he inherited and the unstable situation in Iraq were, fundamentally, Bush's fault. But the public swiftly lost interest in this argument. The bad economy made Obama unpopular, and economic improvement made him more popular. Trump will probably prosper politically if objective conditions in the United States improve, and suffer if they deteriorate. A sabotage strategy might serve the long-term ideological goals of the American conservative movement, but it's very likely to backfire on Trump personally. This is especially true because the people likely to suffer most from Obamacare unraveling — older people in low-density areas — are people who like him now.

Besides which, making the ACA work better is something Trump would probably be good at. The program would benefit enormously from a marketer-in-chief and also from new branding that's less tied to Obama personally. It could also use some cajoling of both insurance company executives and red-state governors to get everyone working harder on collaborating and trying to make the program a success. And because Democrats are ideologically committed to the program's goals, they would mostly welcome an active and engaged Trump, giving his efforts a sheen of bipartisanship.

But for this potential win-win scenario to emerge, Trump has to understand the dynamics correctly. And as a political neophyte with no demonstrated knowledge of or interest in public policy, surrounded by a factionalized White House team that itself includes many neophytes, it's far from clear that he does or will. The fate of many Affordable Care Act marketplaces, like so much else in life today, now hangs in the balance based on how quickly Trump gets up to speed.

Matthew Yglesias is a writer for Vox. Follow him on Twitter @mattyglesias.