Posts tagged ‘ACA repeal and replace’
CBO score shows 24 million more uninsured by 2026 under AHCA
Photo by Andrew Malone
Getting everyone into the tent proves trickier than anticipated
On the surface, it can be confusing what Republicans are trying to accomplish with their recently introduced American Health Care Act (AHCA). After all, no one consciously drafts a plan to reduce coverage and raise premiums; the ever-rising cost of health care will do that quite well on its own. The CBO score shows higher costs in the near term, but then a 10 percent reduction in projected average premiums vs. the status quo in 2026. CBO also projects that we will have 52 million uninsured in 2026, or an increase of 24 million over today. As discussed in a previous post, for progressives this is ideologically unacceptable since they consider health care to be an absolute right. Others with concerns likely fear the use of the increased number of uninsured as a campaign issue in the next election cycle.
Well, exactly what were the drafters trying to accomplish? As we discussed in a previous post, many of the maneuvers in AHCA are purposed to draw in young, healthy people into the insurance pool, in order to offset the cost of older and sicker people. In the conservative view, it is wrong for government to mandate the purchase of health insurance; instead, the product must be made attractive enough that young invincibles buy it voluntarily. The increase in the allowed rating multiple from 3:1 to 5:1 does this, since having older people pay more means younger people pay less. Another measure is the $100 billion Patient and State Stability Fund, which is money in the bill that is likely to be used by some states to make reinsurance payments to health plans, thereby lowering everybody’s premiums somewhat.
So could that work? It’s possible to make insurance more affordable for the young by taking those steps, in my opinion. The problem is that those actions also have other consequences:
- First, when you shift the cost of insurance away from the young and healthy, you have to put it somewhere, and that appears to be to the old and sick. Premium projections for poor 60 year olds net of subsidies go up by about $10,000 a year. For someone in this working poor group, the premium could be half of their entire salary. As a result, CBO projections suggest that the uninsured rate for those age 50-64 making <$30K/yr. will rise from 12% to an impressive 30% of the population. Again, no plan is able to take the same benefits and make the cost lower for everyone; if somebody pays less, somebody else has to pay more. In essence, some of the people you were trying to subsidize in the first place end up uninsured as a consequence of the effort to make it more affordable for the young invincibles.
- Second, the CBO projections say that by 2020, about 9 million fewer people will be buying coverage in the individual market. By 2026, those losses shrink to 2 million less, but this is largely because the CBO anticipates some employers stopping providing insurance as a benefit altogether, shifting people from employer-sponsored insurance to the individual market. The CBO agrees that more young people will sign up, but that will be more than offset by older people dropping coverage because they simply cannot afford it. The reasons are complicated, but have to do with the CBO’s lack of confidence that the penalties in the AHCA for being uninsured will be as compelling as the individual mandate in the ACA.
The AHCA still has to work its way through more committees before it makes its way to the floor of the House. There may still be amendments and revisions along the way. There is even talk about a “sidecar” bill addressing sale of insurance across state lines and association health plans. But currently, this shift of cost from younger and healthier to older and sicker is a big issue for Democrats and moderate Republicans (not to mention AARP, who have termed the AHCA an “age tax”). That, in addition to the substantial increase in the uninsured rate, makes this bill tough to swallow for a broad swath of Congress and its constituents. Whether it can survive with this shift is something that will be hotly debated in the next couple of weeks before Congress’ Easter recess.
It’s here, it’s here, the House Republican ACA repeal and replace bill!
How it’s evolved since A Better Way
House Republicans released their draft of the ACA repeal and replace bill, the American Health Care Act, they have been working so hard on. To the surprise of many, several parts of the ACA that were in question (esp. the first two) survive in this bill:
- Essential health benefits, including maternity care
- Prohibitions on annual and lifetime limits
- Dependent coverage until age 26
- No raising rates for pre-existing conditions
- Medicaid expansion through 2020
In addition, there were things expected that didn’t materialize (both of which might be inappropriate in a budget reconciliation bill):
- Sale of insurance products across state lines
- Association health plans
In a prior post, I talked about high-risk pools, and how simply segregating people with high cost doesn’t change the overall amount paid for the care, just how the cost for that care is redistributed. What this is looking more and more like, in my opinion, is very similar coverage paid for through alternative mechanisms. Because AHCA repeals all of the ACA’s taxes on the wealthy and industry, this largely results in substantial tax relief for the wealthy, and additional cost for the sick and the poor.
In addition, since AHCA allows the premium multiple for older people to be as much as five times that for the young, older Americans on average are likely to see rising premiums, while younger ones will see reductions in prices. Again to cite the prior post, this and continuous coverage provisions are how Republicans seek to draw young invincibles into the pool, without an individual mandate.
All in all, this bill seems to me to be much closer to what John Boehner said a few weeks ago at HIMSS: “They’re basically going to fix the flaws and put a more conservative box around it.” There are ideologic points made in it. They did get rid of the individual and employer mandates, and replaced it with a 30% premium penalty for going without insurance and then enrolling when you get sick. The jury is out on whether that’s a strong enough incentive to maintain continuous coverage, as the Republicans hope. But if the penalty is only 30% for a year, then a young invincible could go without coverage and make up the penalty by staying healthy for a mere four months. Why would I buy insurance under that scenario, until I absolutely needed it? That then risks setting off a death spiral, where there are not enough healthy people in the pool to offset the cost of the sick.
Various organizations are reporting big increases in premiums are the likely result of the tax credit levels proposed, netted against the subsidies that will be lost on the exchanges, especially for older and sicker adults. Defenders of AHCA seem to imply that these increases will be offset by the appearance of cheaper policies that are the result of lifting many of the essential benefits provisions of the ACA and the formation of high risk pools. But again, recall that high risk pooling doesn’t lower overall cost per se, only who pays and how much. And as we saw at the beginning of this piece, many of the provisions that raised the cost of ACA-compliant policies are still in AHCA.
The early reporting on AHCA is that neither moderate nor conservative Republicans are happy with the bill (Democrats are counted as an automatic no). Almost certainly there will be revisions as the relevant committees get to dissect it and weigh in with changes. But it is likely that movement to the left will strengthen resolve on the right, and vice versa. The window of acceptability to both poles is likely pretty narrow, if indeed it exists at all.
Secretary Price’s ACA Replacement Plan
Is the Price Right?
Photo by Gage Skidmore
On February 10th, Rep. Tom Price was confirmed as Secretary of Health and Human Services on a party line vote, 52-47. As such, it seems prudent to learn a bit about his plans for reshaping American health care. The good news is that there is already a document that gives us a detailed view of what he’d like to see in law: he was lead sponsor of the Empowering Patients First Act, that passed the House in 2015. The bad news is that it’s 242 pages long. So here are some important points about it:
- EPFA has many of the elements Republicans have been clamoring for during the last eight years, including expansion of Health Savings Accounts, selling insurance across state lines, association health plans, and high risk pools.
- To replace the individual mandate, there are continuous coverage provisions. This allows insurance companies to charge a premium for those who have not had recent coverage, as a deterrent to those who would otherwise wait until they’re sick to get insurance.
- To replace the Cadillac tax on especially rich health coverage, there is a limit on deductibility of health insurance for companies. While wonks will argue about the difference between these two arcane provisions, the intent and effect of them are the same. Both are intended to blunt the effect of rich health coverage on increasing utilization. This isn’t popular with some in the Republican party, but it’s in here nonetheless.
- To replace the subsidies in the marketplaces/exchanges, there are refundable and advanceable tax credits. So instead of using federal dollars to make coverage more affordable, Dr. Price uses federal dollars to make coverage more affordable. EPFA is different, however, in that while the ACA subsidies are only available to lower income individuals, everybody gets access to the tax credits regardless of income. So even the wealthy will get some federal dollars to buy health insurance.
- EPFA contemplates the return of annual and lifetime maximums. Effectively this opens the door to “running out of insurance” again, not a comforting thought but something that will make insurance cheaper for everyone else. You get what you pay for.
- Medicaid provisions are a bit vague, but speak about states needing to submit plans to insure 90% of children under government programs or commercial insurance. Notably missing are details of coverage for childless adults, a big portion of the expansion population. This leads many to conclude there might not be coverage for those folks under a Price HHS.
There are other competing Republican plans out there, and it remains to be seen how much the final repeal and replace effort resembles Secretary Price’s plan while a member of the House. But it is noted in the press that his plan is one of the more aggressive in rolling back key provisions of the ACA. Many of these same provisions appear in the draft that just came out of the House, which was drawn on A Better Way, the speaker’s plan. 
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