The game theory and political logic of repealing Obamacare

Donald Trump tweeted “If Republican Senators are unable to pass what they are working on now, they should immediately REPEAL, and then REPLACE at a later date!” Is it good politics to repeal Obamacare now and replace it later? Let’s analyze using game theory.

Here are the facts:

• Bills in the Senate are subject to filibuster, which effectively requires 60 votes to pass legislation. But one spending bill per session can be a “reconciliation” bill that reduces spending, subject to only a 50-vote majority (with the vice president breaking ties). Republicans in the Senate want to use the reconciliation rule to pass the changes to Obamacare.
• Senate Republicans’ attempts to pass a replacement to the Affordable Care Act — Obamacare — have fallen short. Senator Rand Paul thinks it doesn’t go far enough in getting the government out of the healthcare business, while Susan Collins and Dean Heller think it reduces insurance options too severely. Several other Senators have also objected, but negotiations to address their concerns might win them over. Since no Democrat will vote for it, though, it’s hard to see how the Republicans can get past 49 votes — short of a majority.
• Republicans are already paying a political price for their attempt to reduce Obamacare, which the Congressional Budget Office estimates would eventually cause 22 million more people to lose their health insurance.

So Republicans are stuck, people will still blame them even if no bill passes, and whatever bill could pass will still retain government support for health insurance in some form.

How does this compare to just repealing Obamacare outright?

What happens if the Republicans repeal Obamacare and don’t replace it?

What if Republicans do what Trump says and just repeal the Affordable Care Act? To do this without creating instant chaos, there would have to be a waiting period. Assume that the repeal takes effect in 2019, two years from now. Could it pass?

• Can the repeal fit within the reconciliation rules? I’m not expert, but I believe so, since it would reduce spending.
• Can the Republicans get 50 votes to pass it? Heller and Collins would probably not vote to repeal, but Paul would. So would other senators who have objected that the Senate repeal-and-replace doesn’t go far enough, such as Ted Cruz. The Senate could probably win over any other fence-sitters by, for example, including funding for opioid treatment. So it would probably pass the Senate with Vice President Pence voting to break the tie. Based on past history, it would likely pass the House as well. Republicans may calculate that they are already paying the political price, so they may as well pass the repeal they’re being criticized for.

What would happen next? Insurance markets would likely implode, because insurers facing uncertainty about the rules will exit. Republicans will say that this shows that Obamacare was failing, as they had been saying all along. And Democrats would blame the Republicans for the repeal.

Could they then pass a replacement?

Any replacement would likely not reduce spending, so the reconciliation rule would not apply — and in any case, there can be only one application of the rule for spending reduction each year. But now the status quo would revert to no government health care rules at all.

In this situation, even Republican health care plans stingier than the current Senate plan may seem attractive to Democrats and to Republicans like Collins and Heller — since the alternative is to leave many millions of former Obamacare users uninsured. The negotiation would favor Republicans.

What about the midterm election?

There’s now a significant chance that the Democrats will retake the majority in the House of Representatives in 2018. However, because there are few competitive Republican Senate seats up for re-election that year, it’s unlikely that the Democrats will take the Senate. Even in the unlikely event that Democrats flipped the Senate, they won’t have a 60-vote majority.

As a result, any substitute health plan would need to win over 60 senators and a majority of the House. Once again, since after the repeal there would be no health care plan at all, even a stingy plan would be an improvement for Democrats. So whatever passes, if anything, will be less generous than the current version of Obamacare.

What’s really happening here?

Here’s a simple way to put it: the Republicans passing a repeal would then be negotiating based on the resulting risk to uninsured people. It reminds me of an old National Lampoon cover. In this picture, the uninsured people are the dog, and the repeal of Obamacare is the gun.

The long-term effects of this strategy

This model does not account for the long-term impact of this strategy on Republicans’ hold on the presidency or the Congress. If enough people hold the Republicans responsible for negative consequences of this vote — and if Democratic candidates can successfully hold themselves out as a better alternative — it could change the complexion of American politics. But given recent voter behavior, that’s far from certain.