Goldman No Longer Believes Republicans Can Repeal Obamacare: Here's Why

One month after Goldman gave up on Trump being able to pass any major (or minor) tax package in 2017, overnight - in the aftermath of Senate GOP's deplorable failure to find the needed 51 votes to " repeal and replace" Obamacare- Goldman's Washington analyst Alec Phillips throws up his hands, and no longer believes that passage of Obamacare is possible.

In a note that looks at the current state of health legislation, titled appropriately enough "Nearing the End", Goldman summarizes that Senate Republican leaders have postponed the vote on health legislation that had been tentatively scheduled this week. A vote is possible in two weeks, but further delays are possible. 

Phillips does note that there are still some arguments in favor of eventual enactment: Republicans will be under pressure to follow through on a long-standing political commitment, and the estimated deficit reduction and tax cuts in the health bill could be useful in passing tax legislation later. Fixing the existing program for the coming year will also be necessary.

However, he is skeptical and says that "these factors are likely to be outweighed by the political obstacles. Estimates of the potential increase in the uninsured population seem unlikely to improve substantially even after revisions to the bill. Public support for the effort is also weak, and intraparty divisions appear to pose too many obstacles. At this point, enactment of broad health legislation like the House passed or the Senate is contemplating seems unlikely."

That said, Goldman is not too worried about the implications of the Senate's failure, saying that "the prospects for passage should also be somewhat less important to broader financial markets than they might have been several months ago. The debate over health legislation is likely to end—either with enactment or a failed vote—by mid- to late July, allowing the rest of the budget process to proceed, eventually leading to consideration of tax legislation. In the less likely scenario that broad health legislation is enacted, there would be few near-term economic effects as most of the changes do not take effect until 2020."

Goldman's full note:

Health Legislation: Nearing the End

Markets are once again focused on the potential for a congressional vote on health legislation, this time regarding the Senate’s Better Care Reconciliation Act (BCRA). This is presumably due to the need to move beyond the health bill before tax legislation can be addressed, as discussed below, and because of the broader signal that passage of a health bill might send regarding the rest of the Trump agenda.

However, the effort to replace the Affordable Care Act (ACA) has been set back once again with the announcement that no vote will be held for at least another two weeks. At that point, there are three potential options:

  • Passage: If Senate Republican leaders are able to muster a majority in favor of a health bill, the bill would move back to the House for at least one more vote. The outcome there would depend on the details of the final product, but a bill that can manage to win support of 50 of 52 politically diverse Senate Republicans would probably be able to pass the House and become law.
  • Defeat: Major legislation is rarely rejected on the House or Senate floor, since congressional leaders usually know whether there is adequate support. However, it is clearly possible that this bill could end in a failed vote; if Senate Republican leaders determine that there is very little chance of ever coming up with an acceptable compromise, they might allow a vote against the bill to provide a more definitive end to the process and, possibly, as a way to pivot to a short-term bipartisan effort to stabilize the individual health insurance market for 2018.
  • Delay: As of this writing, Senate Republican leaders have opted to delay the vote for at least two weeks, until the week of July 10. A delay could be interpreted as a sign that Republican leaders believe there is a chance of gaining support over the next two weeks for a modified bill. However, it might also simply signal that leaders are not quite ready to give up on the effort, even if they recognize that the odds of eventual enactment are low. Further delays cannot be ruled out, though we would be very surprised if the Senate debate continues past late July.

The situation is fluid but at this point our expectation is that the Senate will ultimately fail to pass broad health legislation similar to the House-passed bill or the recently introduced Senate legislation. While we see this as a fairly close call, our view is based on the following considerations:

  • Coverage estimates: While it is certainly possible that the Congressional Budget Office (CBO) will estimate that the next iteration of the Senate proposal will increase the projected uninsured population by less than the 22 million increase it estimated would result under the most recent proposal, this seems unlikely to change substantially. Repeal of the individual mandate alone has been estimated to reduce coverage by 15 million, and the repeal of the Medicaid expansion and the cap on the future growth rate of the program would reduce coverage further.
  • Public support: The Affordable Care Act (ACA) is much more popular than the pending legislation, and even among Republican voters views are mixed (Exhibit 1). One problem congressional Republicans face is that public sentiment regarding the ACA has shifted since the debate began, possibly because the public has become more aware of the coverage expansion under the ACA.
  • Thin margins: Even with Vice President Pence casting the tie-breaking vote, 50 of 52 Republicans would need to support the bill. This means bridging the gap between the most conservative senators (shown at the top of Exhibit 2) and centrist Republicans (toward the bottom of Exhibit 2) and those representing swing states (to the left of Exhibit 2).
  • Medicaid politics: 20 Republican senators represent states that have expanded Medicaid under the ACA. While many of them appear likely to support the bill, the proposed cuts have been difficult for some expansion-state Republicans to support, including Senators Capito, Heller, Murkowski and Portman.

Exhibit 1: The ACA has become more popular recently

Source: Real Clear Politics, Goldman Sachs Global Investment Research

Exhibit 2: Opposition at both ends of the political spectrum

Source: Federal Election Commission, Voteview, Goldman Sachs Global Investment Research

Of course, there are arguments in favor of eventual passage. These include:

Campaign commitments: After House Republican leaders postponed a long-awaited vote on their health legislation earlier this year, it had appeared that debate might turn to other issues on the agenda. However, the health effort was of such political consequence that Republican leaders ultimately returned to the issue. It is possible that congressional Republicans will continue to press the issue until health legislation is enacted, even if it takes a while longer. That said, our sense is that Senate Republican leaders like Sen. McConnell have a limited appetite for further debate on health care, as discussed below.

Fiscal benefits: The Senate health legislation has two potential benefits for the rest of the fiscal agenda. First, CBO estimates that the bill would reduce the deficit by $321 billion over the next ten years. These savings could potentially be redirected toward other legislative efforts, like tax reform. Second, the bill repeals the taxes enacted in the ACA, reducing revenues by $563 billion over ten years. By offsetting these tax cuts with the spending cuts in the health legislation, this would relieve pressure on congressional Republicans to address the repeal of ACA taxes in tax reform legislation later. That said, our expectation is that the final Senate bill, if it passed, would probably not save more than the $119bn the House bill was estimated to save. While helpful, this would not meaningfully change the outlook for tax reform.

Fixing the existing program: The Senate legislation includes $50bn over the next four years for this purpose, as well as explicit funding for cost-sharing reduction (CSR) payments (the uncertainty surrounding the Trump Administration’s willingness to continue making CSR payments had led some insurers to increase their proposed premiums for 2018). If the Senate does not approve the pending legislation or something similar, congressional Republicans may attempt to pass a more narrowly focused package to stabilize the individual insurance market which includes the subsidized plans offered through “exchanges”.

While the health debate is clearly relevant, in our view it is becoming less important to the broader agenda, for a few reasons:

  • The debate on the current health bill will end soon, one way or the other: Market participants have focused on the health vote in large part because it is seen as a prerequisite to passing tax reform. The health bill is being considered under the 2017 budget cycle, through the “reconciliation” process that allows for Senate passage with a simple majority (i.e., potentially only Republican votes). Since Congress can consider only one reconciliation bill for tax and spending per budget cycle, and budget cycles cannot overlap, Congress must conclude its debate on the healthcare bill before it can formally begin considering tax reform. If the Senate passes the bill in the next few weeks, the process could then turn to the FY18 budget resolution, followed by tax reform. But it seems unlikely that the Senate will debate health legislation after July, so whether it passes or whether it fails, health legislation seems unlikely to delay tax legislation much further.
  • There isn’t much signaling value left: Earlier this year, the health debate was seen as a signal of how successful the Trump Administration and congressional Republicans might be in getting other aspects of the agenda through Congress. However, at this stage, it seems fairly clear that intraparty disputes and a thin margin in the Senate have made sweeping reforms difficult. As a result, eventual Senate passage of the health legislation wouldn’t meaningfully change our expectation of what might be possible regarding tax reform, for example.
  • Health legislation is unlikely to have substantial economic effects in the near-term. While the current legislative debate on health care could have important consequences for those enrolled in subsidized benefits and, to a lesser extent, enrollees in the individual market more generally, it seems unlikely to meaningfully affect the economic outlook, for two main reasons. First, most of the reduction in benefits would take place in 2020 and beyond. In 2018 and 2019, the bill would actually increase the deficit by about $30bn each year, as the value of the tax cuts starting in 2018 more than offsets the spending cuts. Second, the ACA’s disinflationary effect is unlikely to reverse as a result of this legislation. We previously estimated that two policies accounted for most of the policy-related slowdown in medical inflation over the last couple of years: the cuts to the growth rate of Medicare reimbursements and the shift of the uninsured into the Medicaid program, which pays less for a given service than most other sources of coverage. The legislation would not reverse the Medicare cuts. If legislation is enacted it might result in a gradual reversal of the coverage effect but probably only in 2020 and beyond.

Over coming days, we expect to hear more regarding potential modifications to the original Senate proposal. If progress is made during the remainder of the week, it is possible that a revised CBO estimate could be produced not long after the Senate returns from recess on July 11. A vote looks possible anytime between late in the week of July 10 and the end of July, though at this point the odds seem stacked against Senate passage.


MalteseFalcon how_this_stuff_works Wed, 06/28/2017 - 11:31 Permalink

Single payer health care with very high deductible and only for specified, easy to diagnose fortuitous diseases or accidents.The point of the coverage is to prevent BK.Issue it to everyone - 'free'.No one is uninsured.Under the deductible and other causes of 'illness', you are on your own.This won't happen.  Nor will any other reasonable solution be proposed, because just like with 'school prayer' and 'abortion', the political class senses that 'national health care' is a vote and media appearence generating football that they want to kick around for a generation or two.

In reply to by how_this_stuff_works

how_this_stuff_works BaBaBouy Wed, 06/28/2017 - 09:53 Permalink

No, I don't think Oblunder has WON. And the reason is, he doesn't control the outcome. Linked this morning from…

"As I finish my first 100 days back at Summa Health, I continue to absorb all that I've heard from you - the good, the bad and the expected. I have consistently heard that, while you have concerns about Summa's cultural shift, you remain passionate supporters of Summa Health and our community. Now, more than ever, we need your passion and spirit of collaboration because Summa Health's future as Akron's locally controlled adult hospital and the area's largest employer depends on us working together toward unified goals

"This year, inpatient and outpatient volumes are dramatically down and, as a result, we are facing staggering operating losses.

Our current projections show us going from a profit of $30 million last year to a loss of more than $60 million this year. While we have considerable cash in reserve to protect us for the short term, this trend must stop immediately."

A gap of $90 million in just a year. Unbelieveable.

Even the great and powerful OBLUNDER cannot MAKE people use services they don't necessarily NEED. When services become cost PROHIBITIVE, people won't purchase them unless they have to.

Obamacare. DOOMED to fail. Wait on it.

In reply to by BaBaBouy

Oldwood AVmaster (not verified) Wed, 06/28/2017 - 09:40 Permalink

Progressives have set the terms. Any action that can be scripted as "taking away "entitlements"" from Americans, will be a bridge too far for ANY politician, especially democrats.The perceived rule is now that we are entitled to ANYTHING a politician can quantify, from food stamps, to heathcare, to education, to internet service and cellular phones. As budgets have NEVER presented a restriction on spending, no politician can refuse anything to anyone...unless you are a white Christian.Conservatives insisting on repeal of ACA are making sure we end up with a collapsed healthcare system that falls back on Medicaid as the ultimate government funded single payer system. We conservatives were as fucked as a raped virgin once the ACA was passed, as it will never go back to what it was. This is the nature of progressivism, as it is a virus that invades and spreads....a zombie-ism of brain dead eaters with no cure except beheading.

In reply to by AVmaster (not verified)

sickofthepunx Oldwood Wed, 06/28/2017 - 11:03 Permalink

Conservatives insisting on repeal of ACA are making sure we end up with a collapsed healthcare system that falls back on Medicaid as the ultimate government funded single payer system.  this.  was the plan from the get-go.  the irony of the whole situation as that repubs have actually been speeding up the process the last 8 years by styming any effort to make sure aca works (the endless lawsuits, gop governors refusing medicaid expansion, no guidance for insurance companies to be able to plan ahead)the endgame is single payer.  always has been, always will be.

In reply to by Oldwood

HRClinton JackMeOff Wed, 06/28/2017 - 10:32 Permalink

"All great Republics implode from within."So do hopeless Health Plans & Scams.Riddle me this, CONgress and GS:  What's to "Repeal", when the AFA is in the process of imploding anyway? Doesn't ANYONE find that odd?Could it be that the Insurance industry is stirring the pot, and Congressional re-elections / re-erections are on the line?  ID motive (campaign money), and follow the trail. The Contrail/Con-trail.

In reply to by JackMeOff

warsev HRClinton Wed, 06/28/2017 - 12:30 Permalink

Indeed. Repealing the failing Obamacare legislation and replacing it with a plan that is equally likely to fail for the same reasons is poor political strategy. A better strategy would be to wait for Obamacare to completely auger in to the point that common people are begging the politicians to put it out of its misery. THEN put a bullet through it, to the shouts of joy from the citizenry. The way the R's are trying to do it now, if they succeed, they will have a terrible plan that replaces Obamacare, will fail, and will have the R name on it.

In reply to by HRClinton

Crypto-World-Order (not verified) Wed, 06/28/2017 - 09:28 Permalink

Here's why. GS and the gang own this fucked up country with money printed out of thin air and can buy anyone off. repubs or dems, dont matter. They have bowed down to GS. BTW BitchezBTC 2550ETH 297LTC 41.7 What crash? I hope you all bought the dip because if you did you made a shitload of $$$$$$$$

Too-Big-to-Bail (not verified) Wed, 06/28/2017 - 09:21 Permalink

It's no longer about believing if a report from Goldman is true or not, now it is simply trying to figure out what their angle is

Honest Sam Wed, 06/28/2017 - 09:27 Permalink

To blame 'republicans' is a feint, a misinformation campaign to hide the fact that we do not have a republican majority.  50 republicans are more or less cross dressed democrats.So let's dispense with the notion that we have a two party system, at least among those of us who know what's really going on with the Deep  State.AT least Trump got rid of the most hated woman in america, once and for all.That alone deserves a sculpture on the mountain in South Dakota, in place of Lincoln, whose ugly countenance should be obliterated. 

BandGap Wed, 06/28/2017 - 09:29 Permalink

Who fucking cares? The stupid assed system is slowing dissolving anyway. Let it go.Fucking government shouldn't be in the healthcare business anyway. Mainly coverage for the FSA.I think this is a big show to stick it to the insurance companies who wrote this crap.

Expat BandGap Wed, 06/28/2017 - 10:18 Permalink

Why shouldnt't the government be in the health care business?  What makes healthcare offlimits to the government?  What differentiates it from national defense, fire protection, police, and other essential services?  In fact, isn't health essential to both individual and collective wellbeing and wealth?

In reply to by BandGap

larrythelogger Wed, 06/28/2017 - 09:29 Permalink

Before 2014, the GOP said repeal. After 2014, McConnell et al added "repeal and replace." Now, it's "we can't". Gosh, I wonder why. Yet, the GOP is bound and determined to put their name on Obamacare so when it fails, they'll get and take the blame, once again snatching defeat from the jaws of victory, bravely and courageously falling down, rolling over and pissing themselves on camera. Is it possible they want single payer as well and want the same kind of power the Democrats want? Now that would be a shocker, no?

Expat larrythelogger Wed, 06/28/2017 - 10:13 Permalink

It is stupid of the Republicans to attempt to replace Obamacare with anything worse.  On one hand, they can't simple repeal it since it is too popular (bizarrely enough, Americans actually like having medical care and not going bankrupt when they catch a cold...imagine that!).  They can't replace it with the even worse versions they have beein dreaming up since those versions cut benefits and transfer more money to the rich (not even Trump Republicans can be quite that overt in stealing from America to feed the insatiable greed of the 1%).  But they dug themselves a hole.  Repeal?  Nope.  Replace?  Only if they don't fuck over Americans like they are trying to do.If Republicans and Trump cared about Americans, they would be cutting military spending, closing tax loopholes, reining in HMO's and pharma, and offering low-priced, complete healthcare to all Americans.  Instead, Trump is running around trying to revive coal, a toxic and non-competitive energy source which employs about 75,000 workers.  If he cared about American workers, he would put his "amazing business genius" to work saving JC Penny which employs over 100k workers.  so I guess that pretty much tells us what Trump really thinks...and knows.Americans want single payer healthcare....despite believing it is a form of Satan worship.

In reply to by larrythelogger

cheech_wizard Expat Wed, 06/28/2017 - 11:23 Permalink

Expat (given it's connotations) is telling us that "Americans want single payer healthcare"...How the fuck do you know what Americans want if you aren't even in country?Standard Disclaimer: Things were actually just fine before Obamacare's power grab. I had great insurance then. 

In reply to by Expat

Expat cheech_wizard Wed, 06/28/2017 - 14:00 Permalink

Ha haha.  You see, I read.  Try it.  Start with small books with lots of pictures.  Obviously you know the internet and this site, so you know it can used for more than just animal porn.  Your attitude is so typical of the small-minded assholes on this site.  You have no adequate or logical retort so you just go ad hominem.  "Ohh, you don't live you can say anything!"  news for you, asshole, the constitution says I am an American citizen and have the same rights you do.  Of course, if you want to make a selection based on some criterion, I vote for intelligence, in which case you can shut up while us smart guys run the country.You assholes are conflating single payer, free markets, and Obamacare.  They are all different things.  Obamacare is government mandated monopolies for the insurance companies.  Free markets means pure selection with no coverage for anyone too old, sick,  or poor (hooray for America!).  Single payer would mean a government run and mandated healthcare payment system such as exists in Canada, France, Germany, the UK, Singapore, Japan, etc.  All of those systems give better healthcare results and cost less than the American system.But don't let facts, which you probably are not even aware of, get in the way of your twisted bias.  So fuck off back to your trailer and your little sister's sweet butt.  I do hope the Republicans pass their ideal bill so you can feeel the pain while enjoying your constitutional rights to die a miserable, untreated death.

In reply to by cheech_wizard

Miffed Microbi… Expat Wed, 06/28/2017 - 12:24 Permalink

Ok I'll bite. How does the government provide low cost complete healthcare to citizens? The government makes nothing. It has no medical skills nor knowledge. All it does is regulate what already exists or funds what it wishes with others money. It has no concern with outcomes because it is never affected by them. This is what you want to determine what is right for you?


In reply to by Expat

Expat Miffed Microbi… Wed, 06/28/2017 - 13:51 Permalink

Well, perhaps the US could simply copy the French or Canadian systems, both of which provide better healthcare at a much cheaper cost.  This notion that the government is incapable and unable to tie its own laces dates back to Reagan.  it is often no more than a snappy line with no substance and proof.  It just makes the speaker sound like a rough and tough Republican, the same kind who goes crying to his government begging for tariffs, bailouts, monopolies, exemptions, gifts, etc. So the government has no concern about outcomes?  Fire departments don't give a rat's ass about putting out fires?  Police don't care if criminals are caught.  The army likes its shiny guns but frankly doesn't care if they work or who they shoot?  That government?You are basically saying that anything the government does is worse that anything the private sector does.  Speaking specifically of health care, I can point to dozens of countries with national health programs where health (outcomes) is far superior and costs are much lower.  So, perhaps it is just that Americans are fucking incompetent and stupid?  That would certainly explain a lot of things.

In reply to by Miffed Microbi…

Last of the Mi… Wed, 06/28/2017 - 09:31 Permalink

The RINO's can't unclench their fist to get it out of the cookie jar and move on to the next one. What they've got their fist wrapped around is our healthcare system. They just can't "let it go". Corruption at it's finest.