Obamacare 2017
Dueling Republican and Democratic Visions for the American Healthcare System
After years of fervent debate, large-font headlines, and endless sound bites, the Affordable Care Act (ACA) appears to have finally escaped the public eye. Inspired by a similar program in Massachusetts, the sweeping healthcare reform bill was one of the largest and most varied laws in recent history. It incorporated everything from protection for preexisting conditions to increased care standards to a federal exchange where Americans can shop for health insurance plans. It took center stage in 2012, as Barack Obama and Mitt Romney sparred over the law’s constitutionality and viability. By contrast, the 2016 electoral cycle has been largely dominated by Hillary Clinton and Donald Trump’s exchanges on terrorism, immigration, and national security. Nevertheless, the outcome of November’s election will still be consequential for the law most commonly known as “Obamacare”. Republicans propose repealing the ACA altogether and using the free market to drive down costs. Democrats plan to upgrade it instead, incorporating more of the single-payer provisions featured in early drafts.
Despite longstanding opposition to the Affordable Care Act, Republicans only introduced an alternative in June — previous votes to repeal the health law did not include replacement policies — when Speaker of the House Paul Ryan rolled out a comprehensive set of policy proposals known as the Better Way. The Better Way plan seeks to preserve the ACA’s most popular elements. Insurers still could not deny coverage based on preexisting conditions, and young adults could still remain on their parents’ healthcare plans until age 26. However, the biggest changes from the Affordable Care Act would get the axe. Better Way would eliminate the federal healthcare exchange and remove funding to the state-run exchanges, making it difficult for them to break even. The plan’s overall outcome and long-term impact may prove crucial. Ryan may not be running for president this year, but Republican nominee Donald Trump has largely endorsed the Better Way, which has become the party’s blueprint for replacing Obamacare.
Ryan hopes to keep insurance costs low by incorporating more market-based solutions into the healthcare system. The Speaker’s plan is centered on the expansion of Health Savings Accounts (HSAs), an existing system under which Americans can set aside limited, tax-exempt funds for health expenses. Ryan would raise contribution limits and allow spouses to transfer funds between accounts. The Better Way would also encourage the use of “pools”, allowing companies to share health insurance plans and making federal funds available to subsidize plans for people with high-risk conditions that increase their premiums. To further cut premiums, Ryan wants to enable people to purchase health insurance across state lines, presumably increasing competition and driving down rates (as well as allowing the federal government more outreach through intrastate commerce regulations). Finally, Ryan would create a block-grant system Medicaid, giving states a lump sum to be distributed as governors and state legislatures see fit. In conservative states, this could mean hardship for Planned Parenthood, which is often reimbursed from Medicaid accounts. While the Better Way healthcare plan received relatively little fanfare upon its introduction, it has been largely adopted by presidential nominee Donald Trump, making it the de facto Republican position on healthcare reform.
While the Better Way plan has not been put into legislative form and lacks exact figures, analysis of similar measures introduced in the past give some insight into the possible effects. The Congressional Budget Office estimated in December 2015 that repealing the Affordable Care Act would reduce the deficit by approximately $470 billion, but also decrease the number of insured Americans by approximately 22 million. To be successful, the Better Way plan would need to reduce healthcare costs enough to both offset the loss of tax credits from the Affordable Care Act and put prices within reach of people who previously had to rely on Medicaid.
While Paul Ryan hopes that expanding tax-advantaged HSAs and allowing insurers to offer plans across state lines would give consumers enough money to afford insurance without government assistance, his proposals would spend far less per consumer than the ACA. The potential savings from the HSAs, for instance, pale in comparison to the tax credits currently offered through the exchanges. The Kaiser Family Foundation’s health insurance calculator predicts that a median American household would receive just over $6000 per year through Affordable Care Act subsidies. By contrast, even a relatively high HSA contribution limit of $4000 would only give families an extra $600 per year at the current median income tax rate.
Allowing insurers to sell plans across state lines, a perennial Republican favorite, is also unlikely to make up for the loss of the ACA. Supporters claim that the proposal would spur companies that offer affordable plans in one state to export them to more expensive markets, decreasing cost overall. But while this expectation makes perfect economic sense, it does not match the results of previous attempts to make health insurance available across state lines. After Georgia and other states allowed insurers to sell plans from other states within their borders, few companies took advantage of the provision, and the competition needed to drive down premiums never materialized. The cumulative benefits of HSA reform and the state-lines provision are unlikely to make up for the loss of tax credits.
Medicaid would also be heavily affected by the Better Way healthcare plan. The Congressional Budget Office estimated that 14 million people would lose insurance from a repeal of the ACA’s Medicaid expansion. The number might be higher under Ryan’s plan to block grant Medicaid. After the Temporary Assistance to Needy Families (TANF) program was converted to block grants in 1996, states were allowed to use TANF funds to cover other, unrelated expenses. As of last year, nearly half of the money distributed through the system ends up covering unrelated programs. Medicaid coverage could potentially be restricted, or fewer services offered. Planned Parenthood in particular could lose a sizeable part of its customer base. The nonprofit currently accepts reimbursement from Medicaid. Conservative legislatures in states like Texas, which only recently lost a court battle over restrictions on abortion clinics, might act to bar recipients from using Medicaid to pay for Planned Parenthood services.
The Better Way would drastically reshape nearly every facet of the American healthcare system. By contrast, Democratic nominee Hillary Clinton would reform the Affordable Care Act without replacing it entirely. The former Secretary of State faced a strong primary challenge from Bernie Sanders, who favored replacing America’s existing insurance and healthcare system with a single-payer system, which he called “Medicare for All”. Clinton’s platform reflects the concessions she had to make to win over Sanders supporters. The Affordable Care Act initially included a “public option” healthcare plan supplied by the federal government. The final version of the health law allowed only state governments to offer such plans. President Obama reiterated his support for a federal public option earlier this year, and Clinton’s platform also calls to “make a public option possible.” As a first step, she would enable Americans to enroll in Medicare beginning at age 55. Doing so could remove millions of Americans from commercial medical insurance, triggering opposition from many firms, as well as undermining Clinton’s unwelcome image as an establishment, pro-business Democrat. But public support for a public option may overwhelm the insurance industry. Major health insurance companies like Aetna and United Healthcare have backed away from public exchanges over the past year, citing unprofitability. The public-private partnership at the heart of the Affordable Care Act, with the federal government providing an exchange and tax credits to facilitate the purchase of commercial insurance, does not seem to be working. Consequently, consumers angered by decreasing options and increasing premiums are more likely to support the public option. Nevertheless, Clinton has not given up on the exchanges. She has pledged to increase the tax credits currently available for middle-to-low income families paying premiums for plans purchased through healthcare exchanges, and hopes to allow illegal immigrants to participate in the exchanges. (While the Trump campaign asserts that healthcare costs could be substantially decreased by barring illegal immigrants from federal programs like Medicaid, they are already ineligible for any form of public assistance, and have been largely unaffected by the Affordable Care Act). Clinton would also increase Medicaid funding from the federal government. While the former Secretary of State has not released a cost estimate for this plan, she has said she would implement President Obama’s request for further Medicaid expansion, which would cost $25 billion annually. In health care as in her presidential campaign overall, Clinton is pushing for gradual change, choosing to slowly build on the work of the past eight years.
Unsurprisingly for a law of its size and complexity, the Affordable Care Act has had mixed results. A disastrous rollout was followed by a decrease in projected federal health spending over the next few decades. The law may be much less of a political football than in years past, but it remains the most substantial accomplishment of the Obama administration. Whether it will be preserved by his successor is up in the air.
