Repeal in haste, repent at leisure

In the early hours of Thursday morning, with a three-vote margin, the US Senate approved a budget measure that sets up the repeal of the Affordable Care Act, better known as Obamacare. There could be no clearer sign that the Trump administration intends to keep its promise to “repeal and replace” the outgoing president’s signature domestic policy achievement without delay. As things stand House and Senate committees have less than a fortnight to produce legislation that will replace a healthcare system used by more than 20 million Americans. Earlier in the week the president elect confirmed that he planned to strike down the old system and install its replacement “essentially simultaneously.”

The opening moves to repeal Obamacare may occur faster than expected, but eight Democratic Senators must vote with the Republicans if the second half of the promise is to be delivered. Here, the necessary deal-making will soon test the new president’s mettle. During one of the televised presidential debates Trump boasted that his temperament was ideal for the Oval Office. Overhauling such complex legislation will test this assertion almost immediately. His predecessor, the famously low-key ‘no-drama’ Obama squandered nine months at the start of his presidency wrestling with the nuances of rival healthcare proposals and the resulting compromise barely satisfied his party but managed to inflame the GOP into seven years of obstructionism.

The Republicans already have alternative healthcare plans in mind, but there is no consensus among them. The new administration will have to pacify not only its free-market fundamentalists (who view the ACA’s intervention in healthcare markets as a tax), but also more ambivalent legislators who have benefited from its provisions, not to mention cut deals with Congressional Democrats who view the hasty dismantling of President Obama’s legacy with wariness if not suspicion. After reconciling agendas from at least four Senate committees, factoring in projections from the Congressional Budget Office, the new administration must forge a single document that is acceptable to these factions and offer it for debate, and approval, in the Senate and Congress. If previous efforts are any indication, such horse-trading will require a minimum of several months.

Many Republicans believe an interim period of at least two to three years will be needed for a full transition out of Obamacare – nothing remotely close to the timeline that Mr Trump seems to have in mind. What he does have on his side, however, is a group of GOP legislators so determined to unravel Obama’s legacy that they were willing to vote against Democratic amendments that would lower the cost of prescription drugs, let 26-year-olds keep their plans, prevent gender discrimination, or exclude people with pre-existing conditions. These are risky positions for any elected official, so a significant portion of the GOP clearly believes that it can deliver on the repeal-and-replace promise in short order.

Mr Trump may not be able to move Washington any faster, but his impact on financial markets is essentially simultaneous. During his mid-week press conference, after he said pharmaceutical companies were “getting away with murder”, investors took less than 20 minutes to shave more than US$24 billion off the stock values of the country’s nine largest pharmaceutical companies. Such volatility has made Trump a difficult figure to read, even for seasoned investors. Towards the end of last year the renowned hedge fund manager George Soros lost nearly a billion dollars on bets that the US stock market would fall after Trump’s election. Equally large amounts will be made and lost as the new administration moves, perhaps too swiftly, to overhaul a healthcare system that consumes more than 17 per cent of the country’s GDP (in 2013 the average US resident spent more than $1,000 on healthcare). The potential political and financial fallout from this political gambit may well be a straw in the wind of what lies ahead in the Trump years, and while its consequences are essentially incalculable they cannot be ignored.

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