ACA Replacement Plan Generates Broad Opposition
Weaker Carrots & Different Sticks = Huge Increase in the Uninsured
The House plan to the repeal and replace the Affordable Care Act (ACA) is having the strange effect of uniting an extremely broad range of federal lawmakers. The plan that was unveiled Monday evening seems to be opposed not only by all the Democrats, but also by the most Conservative Republicans, like the members of the “Freedom Caucus,” and by a number of more moderate Republicans in Medicaid expansion states.
But notwithstanding the broad opposition, it appears that the new 400-page bill will be voted on in two different House committees on Wednesday. What’s particularly alarming is that those committees will vote on the bill without waiting for the Congressional Budget Office’s estimate of the effects on the federal budget and on the number of Americans who have health insurance. Two committees will cast their votes without knowing whether the bill adds up and without adequately assessing the potential damage to health insurance access and affordability.
A month or two ago, the Congressional Budget Office (CBO) estimated that repealing the ACA without a viable replacement plan would increase the number of uninsured Americans by more than 30 million by 2026. We don’t know yet what the CBO will say about the effects of the new plan, which GOP leaders are attempting to rush through both houses, but it’s safe to say that it will cause millions of Americans to lose their health care coverage.
One of the most disturbing elements of the new plan is that it changes the fundamental nature of Medicaid. Without so much as a public hearing on this monumental change, the bill would begin to shift a larger share of the responsibility of rising Medicaid costs from the federal government to the states by putting caps on the federal portion of Medicaid spending for each enrollee. This can be expected to cause states to ration the Medicaid services now available for seniors, people with disabilities and families with children.
Here are some of the other key features of the House GOP plan. It will:
- reduce premium assistance for all or nearly all of the 200,000 Wisconsinites who currently get premium tax credits to reduce the cost of insurance plans purchased through the health insurance Marketplace;
- eliminate the cost-sharing assistance for 129,000 low-income Wisconsinites who also get federal financial support to lower the cost of copays and deductibles for Marketplace coverage;
- allow insurers to substantially increase premiums for older people who are buying individual insurance plans;
- substantially reduce taxes for wealthy Americans;
- eliminate federal funding for Planned Parenthood; and
- end the employer and individual mandates, but in their place allows insurers to impose a 30% surcharge on people who have a gap in their coverage.
The bill seems to be trying to preserve the federal Marketplace that helps low and moderate income people buy private health insurance, but it appears to undermine the long-term viability of that Marketplace. The new proposal replaces the current premium tax credits for Marketplace plans, which are larger for poorer individuals, with much smaller and relatively untargeted tax credits.
The combination of that change and many others, such as elimination of the financial assistance with copays and deductibles, will almost certainly cause many of the healthier participants in the Marketplace to drop their coverage. That is likely to cause what insurance experts refer to as a “death spiral” – which is the cycle of rising costs leading to reduced participation in the insurance pool by healthy individuals, leading to further increases in costs for those who remain, which causes even more people to drop their coverage and further premium increases until the plan collapses.
Some of the early news coverage of the bill has described it as using a “carrot” to replace a “stick” because it repeals the individual mandate and creates a new tax credit for purchasing Marketplace plans. But that’s a very poor metaphor for the proposed changes since the new carrot is actually a much smaller form of financial assistance than the existing subsidies for Marketplace participants, and because the current stick is replaced with a new one – allowing insurers to charge 30% more for people who have had a lapse in their coverage.
We will look more closely at the House GOP plan in the next week or two, and particularly at the implications of the very damaging precedent of enabling the federal government to start shifting onto the states the risk and responsibility for rising Medicaid costs. In the meantime, the details of the plan could be a moving target – partly because so many Republicans have already expressed their opposition, and partly because there’s a very good chance that the Congressional Budget Office will say that it doesn’t add up.