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Here's the one thing the GOP needs to do to save its health-care bill

  • The GOP is delaying the vote on its Obamacare replacement bill because leadership failed to get enough votes to pass it.
  • The lack of votes comes down to senators' fear about the number of people who will lose Medicaid coverage.
  • So the GOP should leave Medicaid alone for now and focus on actual insurance reform that can pass.
Senate Majority Leader Mitch McConnell (R-KY) speaks during a press conference after a closed-door Senate GOP conference meeting on Capitol Hill, June 27, 2017 in Washington, DC.
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Senate Majority Leader Mitch McConnell (R-KY) speaks during a press conference after a closed-door Senate GOP conference meeting on Capitol Hill, June 27, 2017 in Washington, DC.

Why is the Senate Republican leadership delaying the vote on its Obamacare replacement bill? Obviously, the easiest answer to that question is the GOP simply doesn't have the votes. But dig just a little bit deeper and we find the same problem that's been weighing this replacement effort down since this Congressional session began: fear.

As I have noted for months, the intense political fear of the number of people projected to lose health coverage has made any effort to reform Obamacare almost impossible for the Republicans to pass. I called those people the "Obamacare orphans."

When the latest CBO report came out Monday projecting that the number of Americans losing coverage under the Senate bill will be 22 million by 2026, it was obvious this measure was never going to even come up with for a vote until big changes were made first.

But the CBO report had an even more telling detail, and it proved that using the term "Obamacare orphans" wasn't very accurate. It said that almost 70 percent of that 22 million number would not come from people losing private health insurance coverage, but from the rolling back of the Medicaid expansion that went into effect under Obamacare.

In other words, 15 million people won't be losing "insurance" as we know it with premiums and deductibles to pay, but they'd be losing access to a government entitlement traditionally set aside for the poorest Americans. So the real fear is all about the blow back from "Medicaid orphans."

That, as they say, is a whole different ballgame.

Medicaid enrollment in the U.S. right now is no small issue. Thanks to the expansion, a whopping 74.5 million Americans are currently on Medicaid according to the latest government reports. That is almost double the 39 million Americans who were on Medicaid just as recently as 2007.

"Thanks to the expansion, a whopping 74.5 million Americans are currently on Medicaid according to the latest government reports. That is almost double the 39 million Americans who were on Medicaid just as recently as 2007."

By contrast, the entire population of Great Britain is less than 65 million people. And again, unlike Obamacare, it's an entitlement program that requires no payments or financial commitments from its recipients. Even though it can often be very hard to find good and reliable care on Medicaid alone, it's clearly very popular considering this Medicaid expansion hasn't had any trouble finding more than 35 million new takers in under 10 years.

These massive numbers should make it clear why Medicaid is the key stumbling block in the Obamacare replacement or reform effort. It's not just because rolling back Medicaid would be responsible for the bulk of people losing coverage, it's because even a bare-bones entitlement like Medicaid is so hard to take away once the public gets it.

Now that the GOP senators know where this problem is coming from, it's time for them to throw in the towel for now on Medicaid, leave it for later, and get back to fixing the actual private insurance market.

That means getting back to so many of the insurance market reforms Republicans have said they've supported for years like allowing companies to sell insurance over state lines, allowing all kinds of bare-boned "major medical" plans to be sold everywhere, and expanding tax-free health spending accounts. These are the kinds of reforms that will truly bend the cost curve in health coverage and stop the insanity of using so many subsidies and regulations to help big insurance companies inflate prices.

The Medicaid expansion was not something President Obama or the Democrats talked a lot about when they were trying to sell Obamacare to the public in 2009 and 2010. Most of what we heard was about helping working people afford private coverage and, "if you like your plan, you can keep your plan."

This almost doubling of the number of people getting onto Medicaid was basically never discussed or publicly debated. Now, the Republicans are finding that rolling back this Medicaid expansion won't be possible under the same fog. It's obvious now that they shouldn't even try.

Conservatives and fiscal hawks know the Medicaid issue is not something that should be put aside for too long. That near-75 million Americans on the plan are a major cost balloon that could burst very soon. But after what's happened this week, they must also now know that it's a problem that cannot be politically addressed concurrently with private health insurance. Doing something about cutting back the Medicaid rolls and all the spending that comes with it, can wait at least until the Republicans can put together a reasonable alternative beyond White House Counselor Kellyanne Conway's advice that Medicaid recipients get a job. That will skew all the savings the CBO is projecting for the GOP bill right now, but saving money isn't the issue that's holding up the votes, it's these Medicaid orphans that are too hot to handle.

Delaying the votes on this GOP bill by a week, or even a month won't be enough to get the magic number of Republicans to vote for and pass the measure. The reason is Medicaid. So with time running out, it's time for McConnell to make like a surgeon and cut out the Medicaid part of this bill and focus on private coverage reforms only. That will perform the medical miracle of making things not only politically easier for the GOP, but actually achieving something that will do some good for the rest of the country too.

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

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

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