Friday and Saturday (2/24-2/25) saw several developments concerning the future of the ACA. We now know more directionally about the “replacement” plans, where this is will all end up is still anyone’s guess.
Let’s look at what happened and what it might mean. Here’s the timeline:
- Fri AM - First analysis of the net financial impact on Americans of the proposed Republican modifications to health care premiums after tax credits, plus cost sharing.
- Fri PM – Leaked full text of Republican legislation presumably presented to CBO for scoring (dated February 10, 2017)
- Fri PM – updated Medicaid details leaked
- Sat – Presentation to National Governor’s Association on the impact of ACA replacement
After seven years, the Republicans have put together draft legislation on how they would replace the ACA. Based on other developments, parts of the draft are already out of date (particularly the Medicaid section); however, understanding the approach taken is still informative (and terrifying).
Let’s review the highlights… (Below, for those interested, I go into the gory details and provide links for each of the four developments.)
The analysis based on the general approach (not the specific draft legislation) does not paint a pretty picture. Higher costs for most coupled with fewer benefits for those who can still afford coverage and millions losing coverage.
The draft bill contains the following:
- For funding, the plan would eliminate all of the ACA taxes and instead limit the tax deductibility of employer-sponsored health insurance. This is an approach that has been supported by economists on both the right and the left for years (think Cadillac tax), but the forces stakeholders will marshal to prevent this change are formidable.
- Regarding Medicaid, the draft eliminates the expansion and changes the entire program to a per-capita funding basis. These changes have been called a “non-starter” by some in Congress and by several governors (including prominent Republicans).
- Regarding private insurance, the essential health benefits definition is eliminated, a continuous coverage requirement for pre-existing condition coverages is added, and the individual mandate is eliminated. Taken together, these changes are a recipe for market instability.
The most recent information on Medicaid indicates the expansion will continue to be funded at current levels (at least for a period of time) and new money would be available to the states that had not expanded.
The National Governors Association has been meeting in Washington DC. On Saturday, they were given a private presentation outlining the potential impact of a sample replacement plan. It would be an understatement to say most of the governors were not pleased. Across the country, the net result would be millions more uninsured and increased financial burden to the states. (If you just click on one link, click on the one to the actual presentation, it’s eye-opening.)
So, what does this all mean? State budgets threatened, millions more without insurance, and the individual market in a death spiral. If you think that will be a tough sell, you’re right. There is already significant opposition from within the Republican party:
- Kasich says Dems, Republicans need to work together to fix ObamaCare
- Republican Governor Scott Walker Warns Against Medicaid Cuts
- GOP Rep. Mo Brooks says town hall protests may prevent Obamacare repeal
- Repeal of Health Law Faces Obstacles in House, Not Just in Senate “While the 218 votes needed in the House to get the ball rolling remain likely, it is no longer the slam dunk that Republicans had with previous bills to repeal the law, when lawmakers knew their efforts would die in the Senate or on Mr. Obama’s desk.”
- Leaked Draft Shows GOP Plan Will Not Only Replace Obamacare, But Transform Medicaid “The draft would replace Obamacare’s means-tested tax credits with tax credits that are not adjusted for income. This is the key flaw in the House leadership plan, because it means that millions of highly vulnerable people—those near the poverty line and those with poor health status—will not receive enough in tax credits to afford the coverage they need.” – Avik Roy (He was a health care policy advisor to Mitt Romney's 2012 campaign and was the senior advisor to Rick Perry's 2016 campaign. After Rick Perry withdrew from the race, Roy joined the 2016 presidential campaign of Marco Rubio as a policy advisor.)
The details:
Fri AM - First analysis of the net financial impact on Americans of the proposed Republican modifications to health care premiums after tax credits, plus cost sharing.
“We estimate that the Republican approach would increase the average total cost for an individual covered by the Affordable Care Act by $1,744 per year. The impact would be particularly severe for individuals ages 55 to 64, whose total costs would increase by $6,089 annually.”
“These estimates are average cost increases. Scaling back essential health benefits would raise costs for some individuals by even more.”
“Doing so dramatically changes the picture. The Republican plans do reduce premiums — predictably, given how much less coverage consumers would receive. But our analysis shows that the current Republican proposals would substantially increase total costs on average — not to mention the risks of a financially devastating health care expense.”
Fri PM – Leaked full text of Republican legislation presumably presented to CBO for scoring (dated February 10, 2017)
“The legislation would take down the foundation of Obamacare, including the unpopular individual mandate, subsidies based on people’s income, and all of the law’s taxes. It would significantly roll back Medicaid spending and give states money to create high-risk pools for some people with pre-existing conditions. Some elements would be effective right away; others not until 2020.”
“According to the document, there’s only one single revenue generator to pay for the new tax credits and grants. Republicans are proposing to cap the tax exemption for employer-sponsored insurance at the 90th percentile of current premiums. That means benefits above that level would be taxed.”
“The leaked draft makes insurance better for people who are young and healthy. It makes insurance worse for people who are old and sick.”
Highlights:
- Continuous coverage requirement for pre-existing condition coverage
- Tax credits by age, not income, not adjusted for premium costs
- 5:1 rating band based on age (as opposed to current 3:1)
- Essential health benefits package up to each state
- Continue to allow “grandfathered” plans and allow to enroll new members
- Eliminate funding for Medicaid expansion
- Turn Medicaid into a per-capita program, sending each state fixed sum (on a scale of 1-10, with 1 being block grants, per-capita is a 2.
- $100 billion over a decade to finance state programs that would cover people with the highest medical costs (including but not limited to high-risk pools)
Bill text: The _______________ Act of 2017 (Note they could not even agree on a name.)
Fri PM – updated Medicaid details leaked
“It would temporarily keep federal dollars flowing to cover almost the entire cost of the roughly 11 million Americans who have gained Medicaid coverage but would block that enhanced funding for any new participants.
At the same time, the GOP approach would open a fresh spigot of aid for the states — all but one of which has a Republican governor — that eschewed the additional Medicaid money because of their elected officials’ antipathy to the law. This extra aid would probably go to hospitals with a large share of poor and uninsured patients.”
Sat – Presentation to National Governor’s Association on the impact of ACA replacement
From the Axios coverage:
- “The impact would vary by state, but in a sample state that expanded Medicaid, it's estimated that:
- The state would lose $635 million in federal funding, a 65 percent decrease.
- 110,000 current enrollees would no longer be able to afford a plan.
- 20,000 currently uninsured people would buy a plan with the new tax credit provided by the GOP plan.
- Additionally, 115,000 low-income people may lose Medicaid coverage, with no affordable alternative on the individual market.
- A per capita cap — which would limit funding for each person in the program — would reduce federal spending by 24 percent over five years, requiring the state to spend $6.2 billion to close the gap.
- The state would lose $885 million in federal funding, an 80 percent decrease.
- 130,000 current enrollees would no longer be able to afford a plan.
- 10,000 currently uninsured people would be able to buy coverage with the new tax credit.
- A per capita cap would reduce federal spending by 6 percent over five years, requiring states to spend $1.5 billion to close the gap
Key takeaways (excerpted from presentation):
- Medicaid caps are likely to result in state funding gaps
- Capped funding is likely to be paired with more flexibility for states on coverage and benefits
- Because states must balance their budgets annually, reductions in federal funding may lead to cuts in eligibility, benefits, or payment rates
- Per capita caps offer more flexibility to respond to enrollment growth, but they cannot easily adapt to new products or technology (e.g., high-cost drugs)
