A Rational Look at New Health Care

There’s a lot less to worry about than you think.

The bill repealing Obamacare was not passed by evil monsters. Nor was it passed by “Republicans voting from their puny reptile amydalas [sic],” as my mother declaimed in her Facebook hot take yesterday morning. Nor was it passed by heroic defenders of freedom, despite the cries of victory heard emanating from those who believe taxation is theft.

No, sadly it was passed by very ordinary human beings, 100% of whom didn’t read it. And you can’t blame them for that. AHCA is 126 pages long, plus two amendments. You can read it here, but you won’t. Nor will any of your friends posting statuses about it. Nor will a single one of the journalists who’ve written articles about it. Nor has Jimmy Kimmel, despite his tearful plea, nor has Donald Trump, despite his triumphant hand-waiving. That’s just how things go these days. We get emotional about stuff we don’t understand. We don’t even try to understand it before we get emotional about it. Yet most of that emotion, if we‘re honest with ourselves, occurs because we don’t understand it.

Because here’s the thing. AHCA is really not that impactful. In fact, it’s very, very unlikely to have virtually any impact on your life or the lives of your loved ones at all. The problem is that no one understands it, so it appears like the end of the world, or the beginning of it, depending on your perspective. But AHCA does little besides tweaking a very bad system and allowing it to remain very bad.

Why Obamacare Sucked

Obamacare’s mistake is asking insurance companies to not act like insurance companies. It forces them to ignore almost all factors about you—age, gender, pre-existing conditions—that determine how likely you are to cost them money. But insurance companies are professional gamblers. They bet on the odds of something bad happening to you, just like you would dice at a casino. It’s against their nature to not properly hedge those bets. Obama knew this of course, but he trusted the Scorpion to cross the river anyway.

Gambling is a supremely stupid system through which to manage public health, as has been proven time and again via failed privatized healthcare systems throughout the world. Health—like safety—should not be governed by the risks of a prospective market. You don’t pay the police for saving you from an intruder, nor should you owe an ambulance driver for saving you from a heart attack. Health care is something we should pay for in our taxes, and should be governed by a system geared towards maximizing the public good, not maximizing profit. Even Adam Smith, the ideological father of contemporary free-market capitalism, argued that certain goods were too intrinsically valuable to be governed by a supply-and-demand model.

So the beginning of the problem with the American health system is that health is treated more like a normal good (e.g. a playstation) than an almost perfectly inelastic one (e.g. life saving medicine, or love). Add to that the American propensity for usury (which further warps the market by allowing health providers to charge prices that virtually no one can afford) as well as the gambling-like nature of insurance itself, and you can see why things are such a mess. We pay much more than people in other countries for a system that disappoints us, indebts us, and often kills us.

Obamacare acknowledged this, but the solution it offered was to essentially force insurance companies to act like non-profits or governmental institutions—institutions whose central motives aren’t risk and profit. It makes absolutely no sense for an insurance company, if it’s actually an insurance company, to charge someone the same rate when the risk of insuring that person is higher. That would be like Las Vegas asking its casinos to make their odds more fair to increase tourism. It’s the exact opposite of what insurance companies do, and it’s why so many of them, even of the big ones, stopped participating or went out of business under Obamacare. It’s why even Obama’s non-profit co-ops overwhelmingly failed.

Besides screwing the insurance companies themselves, Obamacare also screwed most individuals by making their premiums much higher, even if they were low-risk insurees. Suddenly, someone’s health had no relationship to the cost of their insurance. What if life insurance premiums had no relationship to your smoking habits? If car insurance had no relationship to your driving history? Obama said to insurance companies “you figure out how to be a profitable company that operates against its own profit-motive,” and, of course, this screwed up the pricing structure beyond recognition, and most of us felt the heat. Most Americans’ health care costs went up under Obamacare, not down.

Why AHCA is Not a Big Change

The purpose of AHCA is more or less to untangle the Obamacare mess. It allows the states to decide whether they want to waive out of the Obamacare mandates, and lets insurance companies charge people premiums that more accurately represent their risk.

One way it does this is by upping the limit on premiums for older patients from 3x what younger patients pay, the Obamacare limit, to 5x. Thus, if you’re older, you’ll pay more under AHCA than you did under Obamacare, at least until you turn 65 and get free healthcare through Medicare, which AHCA doesn’t touch. If you’re younger, you’ll pay less, because insurance companies will more accurately mitigate their risk by raising prices for the old, who use health care services much more. Or you’ll pay nothing because you’re on your parents’ plan until 26, an Obamacare holdover which AHCA also doesn’t touch. So under AHCA, some will pay more and some will pay less, but all will pay a rate that more accurately reflects how often they go to the doctor. That’s really not all that insane. It might even be fair.

AHCA also removes certain mandatories that Obamacare forced insurance companies to offer as part of every policy. Terrible right? Well hold on. The endgame of this is not just more expensive plans, but cheaper ones too. Insurance companies will simply offer more options. A young hypochondriac can buy an expensive policy with more coverage while a middle-aged cowboy can buy a cheap one with less. Usually it will work the opposite way: younger/healthier people will pay less and older/less healthy people will pay more. Is this fair? Well, even under the most socialized medical systems in the world, you still have to pay something out-of-pocket for care, whether for co-pays or prescriptions or other a la carte costs. If per-care payments are the norm even under socialized health, a switch to higher premiums for more usage and lower premiums for less usage certainly doesn’t represent an extreme change in America.

That said, when evaluating more identity factors to tailor prices, you have to think not just about age, but gender too. Women are three times more likely to see a doctor than men. Will this create unfair disparities in gendered care, with women paying higher premiums than men? I can see the vagina hats now…

But apparently so could the Republicans. The plan is absolutely categorical that women will not be charged different premiums than men:

“Our proposal specifically prohibits any gender discrimination…[it] does not eliminate the standard that women and men are treated equally when it comes to cost.”

Pre-existing Conditions

That notorious taxation-is-theft clique of congress, the Freedom Caucus, demanded that Obamacare’s rules about pre-existing conditions (which essentially make insurance companies pre-existing-condition-blind), be destroyed, which had to happen in order for AHCA to pass. But, realizing how screwed up things were before Obamacare—sick babies really were dying because companies refused to insure them—some conscientious Republicans knew they’d have to prevent insurance companies from flat-out refusing policies to those with pre-existing conditions. As a result, two opposing amendments were added to the bill: the MacArthur Amendment and the Upton-Long amendment. The result is that Obamacare’s rules governing pre-existing conditions will be be rolled back, but so minimally that you might even call the change symbolic.

This part of the bill has been ignored by virtually all MSM outlets: The pre-existing condition rollback in the AHCA applies only to the 7% of the population that is in the “non-group healthcare market” AND only to those whose coverage lapses for more than 60 days.

Text on the bill’s website reads:

“The MacArthur Amendment [the one that eliminates pre-existing condition rules] only applies to the individual insurance market. Most Americans with employer-provided coverage or government coverage (Medicare, Medicaid, Tricare, VA benefits, etc.) would not be affected. Importantly, these higher premiums could only be charged for a period of one year to an individual who did not maintain continuous coverage. After an individual has maintained continuous coverage for twelve months they would then return to standard rates…This means that the protections against being charged higher premiums for a health condition are preserved for every individual market plan holder who maintains continuous coverage.”

It also only applies to states who voluntarily opt-out of Obamacare’s pre-existing condition protections. Therefore, if you’re not self-employed, or not a red state resident (assuming only red states will opt out of Obamacare’s pre-existing conditions rules), or don’t let your coverage lapse for two months, you should be able to avoid the new pre-existing condition rules quite easily.

Beyond that, AHCA mitigates against people with pre-existing conditions being left out in the cold in other ways. First, $130 billion is reserved to help insurance companies balance out high premiums. It is not, as has been reported everywhere, only $8 billion. The $8 billion figure is on top of the existing $130 billion, essentially tacked on at the end in the form of the Upton-Long amendment to placate centrist Republicans. It’s earmarked specifically to reduce premiums and, while the other funds are less directed, they essentially serve the same purpose.

Second, the MacArthur Amendment itself maintains protection for people with pre-existing conditions. To make sure that insurance companies can’t simply charge those people with pre-existing conditions whatever they want (effectively allowing them to deny coverage to patients with pre-existing conditions by simply making premiums too high), the MacArthur amendment forces states to set up specific programs that will mitigate extremely high premiums, or to participate in a federal program that will do the same. And this is all for whatever percentage of those within the 7% “non-groupers” that allow their coverage to lapse for two months.

“To make a long story short, AHCA will likely have a serious negative impact on you only if you are over 26 and under 65 and almost-poor and with a pre-existing condition and part of the 7% of people who use non-group healthcare and living in a state that has voluntarily opted out of Obamacare’s pre-existing condition protections and who is not an existing Medicaid recipient and who has allowed your insurance to lapse for more than 60 days. Unsuccessful middle-aged self-employed ill lazy Alabamans better watch out!”

The Losers

The Almost-Poor

This is not to say that some people won’t be harmed by AHCA. Some will. The people who will lose under AHCA are the exact same people who gained under Obamacare, which is the ten-or-so million almost-poor people who were swept into Obamacare’s Medicaid expansion. Obamacare widely expanded Medicaid by opening up federal matching funds for states to offer free health care to those who make less than 138% of the poverty line, a much higher ceiling than previous Medicaid. AHCA phases out this program by 2020.

Obamacare’s Medicaid expansion was perhaps its sole measurable success. It succeeded in getting about 11 million more people insured (about a third of its goal), which Nate Silver admits is “the bulk of the people who gained insurance under the [Obamacare].” Essentially, about 11 million people went from having no healthcare to having free healthcare, and it looks like AHCA will hurt somewhere around that number by ending the Medicaid expansion.

Note that centrist GOP senators are already lamenting this fact as a reason to veto or change the bill. “We cannot pull the rug out from under states like Nevada that expanded Medicaid and we need assurances that people with pre-existing conditions will be protected,” said Sen. Dean Heller (R.-Nev) after the House vote. Remember that only three Republican senators need to vote no in order for AHCA to fail, assuming all Democrats vote no.

Potential Medicaid recipients—those just on the cusp of poverty—are, as far as I can tell, the only group that will suffer substantially under the plan. It’s about 3% of us, but with some major subtractions. It doesn’t include those those of us whose states decide to fully fund Medicaid on their own, those of us who are already on Medicaid (AHCA doesn’t kick anyone off Medicaid who’s already on it), or those of us who aren’t sufficiently covered by the AHCA’s low-income tax credit discussed below. Also, younger/healthier people looking for bare bones plans to protect them from catastrophe will be able to find cheaper plans under AHCA than Obamacare.

Planned Parenthood Users

AHCA “defunds Planned Parenthood” for one year by preventing federal Medicaid dollars from being used to pay for services at any place that performs non-medically-necessary abortions. Note that the law does not mention “defunding Planned Parenthood,” only that it removes said funding from all organizations that perform abortions for the one year. That funding is then re-allocated to “community organizations” that provide all the other stuff that PP provides (breast cancer screenings, etc) without the abortions.

The thing here is that the federal government is already banned from providing money for abortions. So before AHCA, it could give money to PP to provide other services, just not for abortions. Now PP will not get federal money for a year, but other organizations performing those services will. Therefore, the federal government is still funding all the same services it was funding before, just not at PP. So young women (and men) who use PP may have to go elsewhere, for a year, to get certain services. Is that inconvenient? Yes. Is it the end of humanity? No.

Urban People?

Obamacare had a bunch of gobbledygook about people in “high premium areas,” which are generally high-cost-of-living places like urban centers, where low-income people qualified for lower premiums and higher tax credits to pay for their care. AHCA replaces this with simpler gobbledygook that basically only considers your age in determining how much your tax credit will be. Keep in mind, all of this applies only to that 7% of the population who shops for insurance alone on private exchanges, but nonetheless it has been reported by some as meaning that low-income urbanites will suffer under AHCA.

The way this will work in practice, however, is convoluted and seems to be based heavily on which state you’re in, and less on whether you’re rural or urban. Some people will pay more and some people will pay less, but there doesn’t seem to be any real method to the madness besides, again, that generally young people will pay less and old people will pay more. Here’s an interactive map that shows the difference in your premium depending on your age, income, and place of residence. As you’ll see if you toy around with the map a bit, it’s not clear that urban people or poor people will consistently pay more. In many cases it’s just the opposite. For 40 year olds making 40k a year, for example, it looks like premiums will be cheaper countrywide:

This map (linked above) shows the differences in net health care cost for 40 year old individuals on the non-group market making 40k/year under ACA (Obamacare) versus AHCA. Areas that are brown are those where AHCA will be cheaper than Obamacare, areas that are blue are those where Obamacare would be cheaper.

The Rub

If you’re old, your premiums will probably be more expensive under AHCA. If you’re young, they will be cheaper. If you’re willing to take the risk of having reduced coverage, you will have the choice to pay lower premiums. If you are risk averse, you can pay higher ones if you can afford them. If you can’t afford them, you’ll be in a very similar boat as you were under Obamacare.

If you are part of a narrow population of new patients who would have been Medicaid recipients under Obamacare, but not before Obamacare, you are at some risk of losing your insurance, but there are a bevy of factors that mitigate that risk. If you’re part of an extremely narrow population of people with pre-existing conditions on the non-group market not covered by Medicare or Medicaid, you are at some risk of paying higher premiums, though there’s a bevy of factors to mitigate that risk as well. Oh, and if you use Planned Parenthood, you might have to go elsewhere next time for your free breast exam.

To make a long story short, AHCA will likely have a serious negative impact on you only if you are over 26 and under 65 and almost-poor and with a pre-existing condition and part of the 7% of people who use non-group healthcare and living in a state that has voluntarily opted out of Obamacare’s pre-existing condition protections and who is not an existing Medicaid recipient and who has allowed your insurance to lapse for more than 60 days. Unsuccessful middle-aged self-employed ill lazy Alabamans better watch out!

That’s basically it. Other than that, we’ll still be stuck in the same absurd system that allows people to profit by placing bets on our health. But, please, don’t let me stop you from losing your mind over AHCA if that’s what you want to do.

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