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Trump finally gets that Obamacare repeal must come first

  • President Trump just gave the GOP a way out of their Obamacare replacement bill quandary.
  • They should follow his new advice and the advice conservatives have been giving for 7+ years: just repeal Obamacare first and replace later.
  • A repeal of Obamacare automatically comes with the replacement of something else: Liberty

Attention Mitch McConnell and the rest of the Republicans who dread having to modify their Obamacare replacement bill during this July 4th break: President Donald Trump just gave you a way out.

Well, technically it's the same way out that conservatives have been calling for over the last seven years or so. But in a tweet Friday morning, President Trump strongly suggested the Republicans just repeal Obamacare and worry about the replacement later.

Thank you for finally coming to your senses, Mr. President! Because it's the president who is largely responsible for the mess the GOP is in right now.

His pressure to get a replacement bill done simultaneously with a repeal encouraged politicians like Senate Majority Leader McConnell to obfuscate the process and load up a replacement bill with measures that do little but prop up longtime crony capitalist interests like the health insurers and Big Pharma.

Before President Trump's pressure to craft and pass a replacement bill came up, the Republicans had been laser-focused on repealing Obamacare and phasing it out over a couple of years as they came up with their own sweeping health coverage bill to replace it.

Now President Trump is very publicly reversing himself on that tactic and it's not a moment too soon. America would be better off in every way compared to where it was in 2009 when it comes to health coverage, even if Obamacare rules and laws simply went away.

By insisting that everyone had some kind of insurance plan, the Affordable Care Act gave private insurers enormous leverage as the administration and Congressional Democrats sought a way to not only get them to offer insurance to more people, but also to fill each insurance plan with a series of "essential benefits."

That led to the mandate forcing everyone to get coverage or pay a fine. It also led to a massive subsidy structure that ensured insurance companies made an acceptable profit on those more costly essential benefit plans.

When that still wasn't enough to goose private insurers into providing affordable plans that included all of those benefits, the Democrats had a concurrent plan to massively expand the Medicaid rolls to get closer to their Utopian universal coverage ideal.

Unfortunately, the fines proved to be not enough of an incentive and more than half of the younger and healthier Americans expected to sign up for Obamacare plans stayed away; insurance companies lost out on those expected profits and many of them abandoned the Obamacare exchanges altogether.

This is what the Republicans and the White House are talking about when they say Obamacare is "imploding." It turns out that taking away Americans' freedom and forcing them pay for their fellow citizens' health insurance didn't even work economically.

But won't those supposedly 20 million people who finally got health insurance because of Obamacare be kicked to the curb if Obamacare is repealed? What about them?!?

First off, even a quick repeal does not mean the changes will go into effect immediately. Existing plans will not be canceled overnight. In fact, a two-year transition period is what Republicans have agreed to in the past.

That is a key part of any Obamacare repeal that would give American consumers and businesses confidence about at least the near future. If that two-year period is somehow cut back, it should only be because that elusive replacement bill has finally been passed and signed into law.

Second, that 20 million number has been debunked several times. A study by conservative group the Heritage Foundation crunched the numbers and actually bothered to look at insurance company data and the government's own Medicaid rolls. That study showed that only 14 million Americans gained covered thanks to the ACA and that two-thirds of that 14 million only got covered because of the Medicaid expansion.

But don't just take a conservative group's numbers! Check out what a 2016 study co-authored by Jonathan Gruber, one of the key architects of Obamacare had to say about it:

We find that the biggest factor in the coverage expansion in 2014 was Medicaid, which produced 63 percent of the gains we identified.

That 63 percent number is about as close to the Heritage Foundation's two-thirds figure, (technically, that's 66.6 percent), that you can hope to get. Sometimes math really is bipartisan!

So once again, and as I've written before, the sticking point here is Medicaid, not what we understand to be actual health insurance. But kicking 11 million or more Americans off Medicaid, even though it's often far from very good or accessible care, is no small matter. It will come with enormous media and opposition party hyperbole and protest that will understandably frighten a lot of Republicans politically. That's why coming to some kind of less painful compromise on rolling back or reforming Medicaid needs to be the first item Congress addresses in any actual reform bill.

One obvious compromise is to slow the rollback and/or keep some of the Medicaid expansion in place instead of eliminating it altogether. Another pro-liberty compromise would be to institute the "skin in the game" plan Seema Verma, administrator of the Centers for Medicare and Medicaid Services, helped to implement in Indiana. As a consultant working with Indiana Governor Mitch Daniels, she crafted a policy that charged the state's Medicaid recipients as little as $1 per month, but also provided them with $2,500 in state money to spend on their health care.

After that, as Republicans craft their replacement bill, a major focus should be on establishing risk pools for people with pre-existing conditions who are responsible for so much of our total health care costs. The reform bill or a separate bill should be crafted to economically separate those patients from the rest of the insurance pool.

And let's bring back the pre-Obamacare "major medical" plans for healthy people who might suddenly need expensive emergency care. They were less expensive and popular among just the kind of younger and healthier people who never signed up for more expensive plans under Obamacare. Any GOP replacement effort must make sure those plans come back to market and are available everywhere.

Even with the whopping number of about 75 million Americans on Medicaid and 55 million people on Medicare, the rest of America's total 325 million people are in need of having their private insurance market fixed first.

Removing the mandates that forced individual Americans to buy health insurance and health insurers to offer plans with costly standard options should go a long way to fixing the private market. It should bring back more free market choices to American consumers who want to buy health coverage.

But Obamacare will have one lasting effect that we can all applaud. It's clear that many more Americans are now educated about the positives of getting some kind of health coverage and they've become accustomed to doing so online in the comfort of their own homes.

All of us deserve what an Obamacare repeal would give us automatically. It's something that's just as precious as any public health or economic ideal: Liberty.

Happy July 4th America.

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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