Here's the biggest problem with the Senate health-care bill

  • The GOP Senate Obamacare replacement bill only has a few good points.
  • Too many Obamacare subsidies remain without the tax revenues to pay for them.
  • And the biggest reason for rising health care costs is barely addressed at all.
Senate Majority Leader Mitch McConnell
Jonathan Ernst | Reuters
Senate Majority Leader Mitch McConnell

As the details of the Senate Republicans' Obamacare replacement bill finally come out, there's little to like, more of the same old Obamacare problems to loath, and an important lesson to learn about how Washington really "works." Already, reports say the GOP doesn't have the votes to pass the bill.

But let's start with the good parts. The bill will allow states to relax the rules on what kinds of health insurance plans that can be sold to customers. It doesn't include a clear repeal of the "essential benefits" Obamacare currently requires each plan to carry, but it will allow the states to reach that same goal via an expedited waiver process. This will especially benefit younger and healthier Americans.

The second key attribute is something liberals will hate, but is necessary just the same. That would be the partial rollback of the massive Medicaid expansion that came with Obamacare.

Obamacare drastically reduced the requirements to get into a program that is meant to provide health care assistance to the poor. By mixing that pool of truly poor people with millions more Americans closer to being in the middle class, the system became more crowded for the truly impoverished.

When you consider that it can often be very difficult to find a doctor who accepts Medicaid patients, this expansion has likely left many of the poorest Americans standing in a virtual line for care behind people who may have incomes 200 and 300 percent great than their own.

"The worst part is the bill doesn't tackle the real source of price inflation in health care."

Predictably, this explosion of new Medicaid patients has delayed the approval process and jammed the system in many other ways. The expansion is truly mind-boggling when you look at the overall numbers. The government's own numbers show that an astounding 74.6 million Americans are currently on Medicaid and its corresponding CHIP program for children. Compare that to the latest numbers for Medicare, which only has 55.5 million Americans enrolled.

The Senate GOP bill calls for phasing out this ruinous and unethical Medicaid expansion, albeit more gradually than the House bill. The House bill wanted to freeze the Medicaid expansion in 2020, while this new Senate bill waits until 2024. Either way, it's not a moment too soon.

Now for the bad parts.

This bill simply does not repeal Obamacare and keeps way too many of the ACA's existing subsidies in place. It does slash many Obamacare taxes, which would be nice on its own, but now that tax revenue will not be there to cover all those subsidies the Republicans are keeping in their plan!

This follows a maddening post-Reagan era GOP pattern where the Republicans at the national or state level manage to cut taxes but either keep spending levels the same or actually increase spending. Tax cuts without some level of spending cuts don't make a lot of fiscal sense. And it's happening again here.

Second, the bill sure seems like it's going a very long way to protect insurance companies more than anyone else. And insurers and hospital stocks showed the gains to prove that in the moments after the Senate plan was released. Government payments to health insurance companies that reimburse them for cost-sharing reductions given to low income customers will continue. 2019 is the target phase out date for that, but as anyone who has followed the never-ending saga of Medicare reimbursements for doctors, those target dates tend to get pushed back in perpetuity.

Plus, the continuing government subsidies to the insurers will discourage many of them from offering those cheaper, bare-boned plans the GOP bill is finally going to allow to come back into the market. After all, if Uncle Sam is footing a big part of the premium bill why wouldn't the insurers push the more expensive plans?

But the worst part is the bill doesn't tackle the real source of price inflation in health care. That would be people with expensive pre-existing conditions that are the reason why just 5 percent of Americans are responsible for a whopping 50 percent of the health care spending in this country.

Instead of a truly fleshed out separation of this costly group into a robust and generous risk pool program, the Senate bill simply copies the roughly $130 billion to $138 billion Washington will send to the states over 10 years to set up risk pools.That is simply not going to be enough.

Last month, I even made the case for allocating $300 billion over 10 years based simple math. By keeping most of the Obamacare requirements on insurers to cover people with pre-existing conditions, premium costs for the rest of us will continue to be under enormous upward pressure. Economically quarantining those patients is actually the more compassionate and practical thing to do for everyone's sake.

But the bottom line is the bill is a disappointment because after more than 8 years of promises and GOP hyperbole, the establishment Republicans in the House and now the Senate have failed to keep their promises and replace Obamacare with something really bold and more beneficial for the American people.

Of course, there's still time to fix a few more things and still craft a measure worth supporting. But with Senate Majority Leader Mitch McConnell pushing for a vote on this before the July 4th recess, that time is running out. The question is whether whatever the Republicans finally come up with will be enough to pass the Senate with just two votes to spare.

I wouldn't hold my breath.

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

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

Correction: An earlier version of this story misstated the number of Republican votes the Senate leadership can spare to pass its health-care bill. That number is two votes, not three.