GOP Obamacare Replacement Threatens Poor, Medicaid
Republicans have worked tirelessly to repeal the Affordable Care Act since the 2010 mid-term elections, and with 52 seats held in the Senate and 238 (54.7%) of the House of Representatives, President Trump may have an opportunity to make significant changes to health care law. They cannot repeal the ACA outright — the Democrats can still filibuster and the GOP would need 60 votes to break it, and getting 8 Democratic senators to defect is unlikely. Instead, they will use a process called reconciliation to gut the financial workings of the law, which can be achieved with a simple majority, but restricting what aspects of the law can be changed to those concerning fiscal policy.
Speaker of the House Paul Ryan and Secretary of Health and Human Services Tom Price unveiled the outline of their plan to “repeal and replace” Obamacare, laying out what they envision the benefits to be without specifying how these costs would be offset. The GOP claims that Obamacare has entered a “death spiral”, citing lack of competition in certain markets — “Nearly 1/3 of US counties have only one insurer offering exchange plan” according to the Associated Press, and escalating premiums, which are set to rise 22% in 2017. President Trump promised better, cheaper health care for all Americans. What does that mean, exactly?
The Affordable Care Act was created to increase coverage through two vehicles — private insurance plans and the Medicaid expansion which the Supreme court ruled individual states could opt out of in 2012. 31 states and the District of Columbia expanded Medicaid to insure individuals making less that 138% of the federal poverty level, $27,821 annual income for a family of three in 2016. This expansion was designed to fill the gap between where individuals become eligible for subsidies buying private insurance and the traditional Medicaid threshold, 44% of the federal poverty level ($8,870 for a family of three, for those doing the math at home). In 19 states, 2.6 million individuals between 44% and 138% federal poverty level income were left hanging. States that expanded Medicaid saw their uninsured rates drop from 14.9% in 2009 to 9.2% in 2016, whereas states who did not expand went from 18.2% to 13.8%. More people are getting access to health insurance, and costs for Medicare are stabilizing. Since 2010, the number of Americans without health insurance has dropped by an estimated 20 million people.
Speaker Ryan’s plan, unironically named “A Better Way”, would change focus from giving help to individuals based on income and need to a program providing refundable tax credits based on age (regardless of income) and utilizing and enhancing HSA’s — health savings accounts. HSAs are accounts where individuals can deposit pre-tax income to be used on qualified medical expenses, such as dental, vision or chiropractic care. Ryan’s policy brief criticizes the ACA, saying it “…limited how individuals could spend and save their health care dollars.” Ryan’s plan would allow flexibility in some areas, such as over the counter purchases that were not previously covered, via Health Savings Accounts. These accounts are disproportionately utilized by higher income Americans.
Ryan’s plan also calls for a portable, monthly tax credit to be used to assist in purchasing health insurance. This tax credit would be based on the consumer’s age, and grow over time. Older individuals tend to have higher medical expenses than, say, a 25-year old, so this makes some sense and is much easier to administer than verifying millions of individuals’ incomes each year. However, it doesn’t have a qualification for income, so an impoverished 64-year-old living on fixed income could get the same amount per month as billionaire 64-year-old Rex Tillerson. Low and middle-income Americans would stand to lose coverage if they cannot afford the difference between their subsidy and their monthly premium.
The biggest part of Ryan’s plan, however, lies in the changes to Medicaid. He would roll back the Medicaid expansion, currently is responsible for 10.7 million individuals enrolling in health insurance across the 31 states and the District of Columbia. Medicaid would be put on a budget via a per-capita allotment. From the policy brief, “The amount of the federal allotment will be the product of the state’s per capita allotment for major beneficiary categories — aged, blind and disabled, children, and adults — multiplied by the number of enrollees in each group. The per capita allotments for each beneficiary group will be determined by each state’s average Medicaid spending in a base year, grown by an inflationary index.”
Ryan’s plan seeks to move toward a block grant or per-beneficiary allotment, and using the formula above, would likely significantly reduce Medicaid funding over time, and would likely not be indexed to inflation, population changes, demographic shifts or costs of living for the recipients of said grants. Administrative costs for services administered by the grant are shifted from the federal government to the states, reducing total available funding for services without reducing fraud, waste or abuse, as the GOP intends.
What Price and Ryan’s law does not change: the minimum benefits insurance must cover, requiring insurers to cover pre-existing conditions at the same rate as healthy individuals, and dependents staying on parent’s coverage until 26. These terms raise the cost of insurance, but cannot be touched via reconciliation. Also, these provisions are quite popular and would potentially upset constituents who have grown accustomed to them. President Trump has also voiced support for these provisions.
Perhaps a better approach for Mr. Ryan and Mr. Price — instead of removing coverage from Americans and threatening the successes the ACA achieved, focus on the areas where the ACA clearly failed. Premiums continue to rise faster than income, along with out-of-pocket costs. Rising out-of pocket costs are listed as the number one concern for Americans, regardless of political affiliation. The health insurance industry is still complex and frustrating, and America is still not as healthy as expected, given our affluence. If the GOP could address these concerns while maintaining or expanding coverage, their plan would decidedly be an improvement over the current system.
A Better Way is still awaiting analysis from the Congressional Budget Office, who will have enrollment change and cost projections in the coming weeks.
