The House ACA replacement plan will unwind the coverage gains of the ACA, part 1

March 7th, 2017 at 9:57 am

Much as I worried about in an extended piece from yesterday on the problems with Republicans’ replacement ideas, their new bill to replace the Affordable Care Act will lead to less coverage and more cost shifting from government to moderate and low-income families.

I’m crunched for time this AM, so I’ll be adding to this post throughout the day, but here are a few initial impressions:

–The bill will lead to millions losing coverage, due to the repeal of the Medicaid expansion and to lowering the subsidies available to moderate- and low-income households.

–The key disconnect here is that their tax credits are no longer tied to the cost of coverage, so paying for health coverage will mean more out-of-pocket costs than under Obamacare. Once the CBO scores this aspect of the plan, along with the Medicaid part I note next, I suspect we’ll see large coverage losses, possibly unwinding up to 20 million in coverage gains from the ACA.

–As I wrote yesterday, Republicans turn Medicaid financing into a “per capita cap,” a type of block grant. Instead of receiving the federal financing they need to pay for anyone eligible for Medicaid, the per person cap is a fixed allotment that grows at the rate of inflation plus 1 percent. To their credit, House Republicans index the per-capita cap to medical inflation (plus 1), which grows faster than overall inflation. But the key question is: how much less will states get relative to their current allotments? Since Republicans are clearly counting on savings from this switch, the answer can’t be zero (otherwise, why make the switch?). According to a new analysis by Edwin Park, the amount of federal Medicaid support that states will lose under the proposed plan is $370 billion. Under the assumption that states will be very unlikely to replace losses of that magnitude, the result will be diminished coverage for low-income families.

–The bill ends employer and individual mandates and, in their place–because health insurance doesn’t work if people can just seek coverage when they’re sick–allows insurers to impose a 30 percent surcharge on those with gaps in coverage. As I noted in my piece yesterday, low-income persons and those with pre-existing conditions are the most likely to face coverage gaps.

–The plan targets Planned Parenthood by disallowing Medicaid reimbursements. To state the obvious, that has nothing to do with health care reform and is a pure sap to the anti-choice right.

–It’s not all about cutting coverage – the bill is also about cutting taxes for the rich. It repeals two very progressive taxes implemented under the ACA, a Medicare payroll tax on high earners and a tax on the investment income of high-income people. My colleagues previously estimated that the average millionaire household would receive a tax cut of around $50,000 from getting rid of these provisions, and that the 400 richest households would receive an average tax cut of $7 million.

Like I said, I’ll be getting deeper into the weeds on this later in the day–running out now to talk about it on CNBC ~ 11am EST–but this looks very much like what I wrote about yesterday. By significantly ramping up cost sharing, the incentives in the House R’s plan will lead healthy people to leave the risk pool, setting off the adverse selection problem that the ACA was built to avoid. Combine that with the whacking of the Medicaid expansion (turning the problem into a block-grant variant) and you get the predicted result: health care that’s a lot less affordable, thus triggering the loss of the ACA coverage gains, all served up with a huge,wasteful tax cut for the wealthy.

UPDATE: I’ve nothing to add to the above for now but a word on the politics. I don’t understand what R House leader Paul Ryan is up to here. Key groups in the House are ranting that this plan is nothing like the repeal they seek. They want to kill Obamacare and their leadership just delivered unto them “Obamacare lite.” As Ryan Grim pointed out “…so far the Heritage Foundation, Americans for Prosperity, the Koch brothers, the Republican Study Committee and Club for Growth have all come out and slammed Paul Ryan’s version of Obamacare repeal. In other words, everybody.” Meanwhile, from the moderate side, four R senators from states that took the Medicaid expansion object to the bill’s repeal of this part of Obamacare, as they understandably don’t want to see “a reduction in access to life-saving health care services.”

Under the safe assumption that no Senate D’s will help the R’s, if those four hold their position, this can’t pass the Senate. It probably can’t pass the House either. Other than that, it’s in great shape.

So what’s Ryan’s play here (the Congressman, not the HuffPo dude)? I’ve got too much to do to sit around and speculate, but typically, you don’t put out a bill on something this important until you’ve taken the temperature on it from within your party. Perhaps he can say he tried to go with something reasonable (not how I’d characterize this bill, of course), turn things over to the hard right, pass something Draconian over to the Senate where it surely dies, and then blame it on them.

Sadly, that sounds more like the Washington I’ve come to know. Gladly, otoh, the ACA seems a lot more intact for now than you might have thought late at night on Nov. 8th.

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9 comments in reply to "The House ACA replacement plan will unwind the coverage gains of the ACA, part 1"

  1. Jill SH says:

    How soon will we get cost analysis out of the CBO?

    • Jared Bernstein says:

      Total guess: within two weeks. Less of a guess: it won’t be pretty, as it will show higher costs to participants (eg, more out-of-pocket spending than ACA) and less coverage.

      • Jill SH says:

        Well, we knew that. Just really helpful to have the CBO confirm it.

        As the day has gone on, I’m thrilled? /amazed? /comforted? but the massive negative reaction from so many Republican and conservative sources.

        Maybe they won’t be able to decide anything and the ACA will stand. [I can dream, can’t I?]

  2. watermelonpunch says:

    I’m an ordinary person, not some policy expert or whatnot, and I don’t need the CBO to tell me that tax credits no longer tied to the cost of coverage is going to lead to most people not being able to afford coverage. This is obvious. What’s a couple thousand going to get someone who actually needs to see a doctor sometimes? And what good are HSAs anyhow other than being a big time sink of paperwork hoops to jump through.

    • bt says:

      You don’t need to look far past the fact that they will repeal all of the taxes in the ACA.

      Less revenue –> larger deficits and less coverage.

      And if you are a Republican, deficits are not a problem. They are the weapon to destroy the government. First, the tax cuts which will pay for themselves, then the deficits, then comes the cuts because we can’t afford anything because of the deficits. Lather, rinse, repeat.

    • JF says:

      HSAs involve paperwork. But first you have to deal with the sales functions in irder to chose the people who will gandle the paperwork after you’ve sent it to them.

      But you also have to deal with sales and marketing, many of them if you get lots of choices for having ‘insurance’ too. Then you have paperwork on the buying and then on the filing of claims.

      So this approach adds lots of sales functions and lots of paperwork for you and for those who actually provide the health care, you know, doctors and nurses and their offices.

      And every new policy you buy will be different from other people’s policies, hardly uniform commerce coming here. But lots of opportunity to flimflam and snake oil at the time of sales, and then again when you have to defend your claim that the care you got was actually covered, though we can bet some of the paperwork will be lost in the shuffle.

      We do not need more sales functions, more claims submitting processes, and more frustrated clinicians too. This is all going in the opposite way from common sense.

  3. Smith says:

    Thank you for giving this link and highlighting the real story:
    ” Signatories included Sens. Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska—Republicans from states that expanded Medicaid under Obamacare.”

    You are somewhat guilty of burying the lead. This should be banner headlines everywhere but the media is instead obsessed with intelligence agencies reading our mail and listening to our phone calls. So what. At least someone is paying attention to what I write and say. Of course this was under a Democratic president., But I do understand the potential for abuse (Watergate like intelligence gathering, dossiers and political persecution of enemies list, suppression of opposition activities).

    Back to our story. This was always a likely (and welcome outcome). Republicans unable to replace Romneycare without losing important swing votes, give appearance of desire to repeal, to satisfy base and wealthy donors, but Democrats (with critical assistance of a few moderate Republicans) block the move.

    It’s not over yet, moderates could cave, be bullied, or challenged from the right, or mollified with special treatment for their states. Democrats should make sure these moderate Republicans have incentive to block repeal. Unfortunately, that would not help Democrats regain control of the Senate. This bears watching.

  4. SPENCER says:

    This looks like what Ryan has been proposing for years.

    It sets up a battle for the soul of the republican party between the Ryan-like true believers and Trump who actually wants to help the middle class but who idea how to do it.

  5. Phil Freihofner says:

    Trump has spoken of the need to do the Health Care Decimation & Millionaire Tax Relief package prior to tax “reform”, but has been typically opaque and incoherent as to why this has to happen in this order. I’m trying to get a better grasp of how this works. Does it have something to do with ensuring that both can get through the Senate without allowing filibusters. Do you (Jared) know what the mechanism is for that?

    Can Trump (and Ryan) use the coming tax-changing legislation as a carrot or stick to motivate Republicans to come together and pass AHCA? (In otherwords, pass this because it is something and we have to do something before we get to the important stuff.)

    Or to put it another way, if we somehow manage to bottle up AHCA, does that help impede this Republican leadership’s entire destructive legislative agenda?

    Background quotes that I am responding to:
    (1) Trump states ACA repeal must come first:
    “Before we do the tax — which is actually very well finalized — but we can’t submit it until the health care statutorily or otherwise,” Trump told reporters before a White House budget meeting. “So we’re doing the health care — again moving along very well — sometime during the month of March, maybe mid-to-early March, we’ll be submitting something that I think people will be very impressed by.”

    (2) Tax “reform” requires maneuvering to prevent filibuster (making use of “reconciliation”?)
    “If Congress fails to pass a budget blueprint for the fiscal year that begins in October, Mr. Trump’s promise to drastically rewrite the tax code could also die because the president was counting on that budget resolution to include special parliamentary language that would shield his tax cuts from a Democratic filibuster. Without it, any tax legislation would have to be bipartisan enough to clear the Senate with 60 votes.”