Republican health care plan: the quick take

Not mine, I’ve been busy.  Drum’s:

It’s pretty much the same as the discussion draft that leaked a couple of weeks ago, and includes the following basic features:

  • Subsidies (in the form of advanceable tax credits) are age-based, starting at $2,000 for young people and going up to $4,000 for older folks.
  • The subsidies begin to phase out above incomes of $75,000 ($150,000 for households). This will affect about 10 percent of the population and probably reduces the cost of the bill by about 5 percent.
  • Obamacare’s Medicaid expansion is frozen in 2020 and then gradually phased out.
  • The bill allocates about $10 billion per year for high-risk pools run by states. This is far too little to work effectively.
  • The tax meant to pay for everything was removed.
  • Insurers are required to cover everyone who applies, even if they have pre-existing conditions. However, if you have a coverage gap longer than two months, insurers can impose a premium surcharge of 30 percent for one year. This “continuous coverage” provision is designed to motivate people to buy insurance, since the bill repeals the individual mandate.
  • The funding formula for Medicaid is changed to a “per-capita allotment,” which is a fancy way of saying it gets cut.
  • All the Obamacare taxes on the rich are repealed…

Needless to say, there’s not yet an analysis from the Congressional Budget Office about how much the GOP plan will cost or how many people it will cover. It’s safe to say that on the cost side, it will be a lot cheaper than Obamacare. In fact, since the tax credits are so stingy, it’s likely that very few people in the bottom third of the income spectrum will use them. They leave insurance too expensive for most poor people to afford.

Because of this, my horseback guess is that the Republican plan will be used by about 3 million people, compared to 10 million for Obamacare. The Medicaid expansion will be unchanged for a while, continuing to cover about 10 million people. Total cost for subsidies + high-risk pools + Medicaid expansion will run about $25 billion per year, compared to $100 billion for Obamacare.

Three million is far too small a pool for any kind of successful program, and the pre-existing conditions clause ensures that the pool will be not just small, but very, very heavily weighted toward the very sick. It’s a disaster for insurance companies, who will almost surely refuse to participate.

That’s my guess, anyway. It’s a bloodbath. More detailed analysis from think tankers will be available soon, and the CBO will weigh in eventually too. It’s not going to be pretty.

And Ezra’s:

Adverse selection seems like a huge problem in this plan. The individual mandate is gone, healthy people can buy coverage at any time with only a 30 percent penalty, and eliminating actuarial values makes it simpler for insurers to pull the young-and-healthy away from older-and-sick. Death spirals seem very likely in weak markets. Republicans will fully own those death spirals…

The plan is strikingly regressive compared to the Affordable Care Act. Cynthia Cox estimates that a 40-year-old making 160 percent of the poverty line would get $4,143 in subsidies under the ACA, but only $3,000 under the GOP plan; by contrast, a 40-year-old making $75,000 would get nothing under the ACA, but $3,000 under the GOP plan.

“In general,” writes Peter Suderman, “it’s not clear what problems this particular bill would actually solve.” This is a profound point. It is difficult to say what question, or set of questions, would lead to this bill as an answer. Were voters clamoring for a bill that cut taxes on the rich, raised premiums on the old, and cut subsidies for the poor? Will Americans be happy when 15 million people lose their health insurance and many of those remaining face higher deductibles? … [emphasis mine]

This bill has a lot of problems, and more will come clear as experts study its language, the Congressional Budget Office release its estimates, and industry players make themselves heard. But the biggest problem this bill has is that it’s not clear why it exists. What does it make better? What is it even trying to achieve? Democrats wanted to cover more people and reduce long-term costs, and they had an argument for how their bill did both. As far as I can tell, Republicans have neither. At best, you can say this bill makes every obvious health care metric a bit worse, but at least it cuts taxes on rich people? Is that really a winning argument in American politics?

In reality, what I think we’re seeing here is Republicans trying desperately to come up with something that would allow them to repeal and replace Obamacare; this is a compromise of a compromise of a compromise aimed at fulfilling that promise. But “repeal-and-replace” is a political slogan, not a policy goal. This is a lot of political pain to endure for a bill that won’t improve many peoples’ lives, but will badly hurt millions.

Of course, from what I’ve read thus far, it seems very unlikely this makes it through the Senate.  Much more to come.

Health care omnibus

So, I was reading this NYT article last night about how conservatives are getting really worried about ACA repeal and are starting a new hard push to get their damn repeal.  Why do the Koch brothers hate people have health insurance so much anyway?  Seriously?  Anyway, reminded me that there’s a number of health care related items recently I’d been meaning to post on, so here you go:

1) Sarah Kliff on the lack of guidance from Trump’s speech:

All of these things are controversial, all offend various stakeholders and please others, and each will provoke a major fight in Congress. Presidential guidance can help steer his party’s legislative path and minimize conflicts on these points. But Trump offered little to none.

Effectively, this was a punt back to Ryan:Trump is not going to step in and help him get the caucus in line. The result will be months more of wrangling over repeal options, with no clear path to passing anything.

2) Ezra Klein on how much Republicans have actually moved to the left on health care:

In some ways I can’t believe how much they have moved,” says Nancy-Ann DeParle, who served as President Obama’s top health aide during the Affordable Care Act’s passage. “They have moved to adopt our goals of getting everyone covered, reforming the worst abuses of underwriting such as preexisting condition exclusions, allowing children to stay on their parents’ plans until they are 26, etc.”

As consequential as the GOP’s movement on the policy is, the bigger change is that Republicans are now prioritizing health reform. It is unimaginable, absent Obamacare, that a newly elected Republican president would make passing refundable tax credits to increase insurance coverage his top priority. The GOP is, and remains, deeply divided on health care, and much more committed to tax cuts.

3) Dave Leonhardt on the Republicans troubles:

Let’s start with reality. Republican leaders are now paying the price for their dishonest approach to fighting Obamacare.

To be clear, there are honest conservative attacks to make on Obamacare. Republicans could have said that Americans who can’t afford health insurance aren’t entitled to it, just as people are not entitled to own a home. Or Republicans could have tried to alter the law — say, with less generous insurance plans.

But Republican leaders chose the easy political route instead. They blamed Obamacare (sometimes fairly, mostly not) for almost every health care problem. They’ve promoted the same fallacy for which conservatives often mock liberals: the free-lunch fallacy.

There is no free lunch on health care. Your health “costs” pay for my health “benefits,” and vice versa. If Trump promises a less expensive system, he is also promising to eliminate some care.[emphasis mine] He could cut wasteful care — and should — but Republicans caricatured the Obama administration’s attempts as “death panels” without offering their own steps.

Now that they’re running the government, free-lunchism has consequences. Their promise to scrap taxes on the wealthy, for example, leaves them without money to cover people. That’s why the independent Congressional Budget Office keeps concluding that the various Obamacare replacement plans would deprive millions of people of insurance.

4) Really, really good piece from Ron Brownstein on the big problems created as Republicans try to reduce risk-sharing:

The problem is that the Republican plans eliminate the ACA’s requirement that all insurance policies provide robust minimum benefits like hospitalization and maternity care. Under a continuous-coverage system, that means healthy people could buy inexpensive skeleton plans and only shift to more inclusive coverage when they get sick, knowing that insurers must sell it to them. Christine Eibner, a senior Rand Corporation economist, said that scenario may prevent insurers from offering comprehensive plans to anyone on the individual market, because the only people buying them would be those with greater health needs. “You have a significant risk that this [entire] insurance market becomes bare bones,” she said.

That risk is compounded by another key GOP proposal: allowing any insurance policy approved in one state to be sold in any state. The ACA already allows interstate sale when all the affected states agree. But no insurer or state has pursued such cross-border sales, largely because out-of-state companies can’t easily compete with local insurers in building an affordable network of doctors and hospitals.

By eliminating minimum benefit requirements, though, the GOP proposals change the equation. The GOP plans would allow an insurer from a lightly regulated state to offer a low-benefit, low-cost plan that peels away younger and healthier consumers in states that require more complete coverage. If only those with greater health needs were left to buy the comprehensive coverage in more regulated states, medical costs would skyrocket—again raising the risk that no insurer would even sell such comprehensive coverage.

Health-savings accounts, another GOP mainstay, would further unravel risk sharing. Those tax-free accounts, which consumers can use to pay medical costs directly, appeal most to healthy people with fewer bills. If healthy people abandoned comprehensive insurance for such accounts, the families with greater needs left behind would again face rising costs and diminished availability of adequate coverage. GOP proposals to allow greater age variation in premium rates push in the same direction.

Reflecting the parties’ larger philosophical divide, the Republican plans prize choice and autonomy while the ACA stresses solidarity. But the practical effect of the GOP alternatives is to advantage the young and healthy over the old and sick. That’s an uncomfortable equation for a Republican Party now preponderantly reliant on the votes of older whites. In health reform, the toughest challenge for Republicans may be upholding the Hippocratic oath—first, do no harm—for their own voters.

5) Josh Barro on the Republican quandary:

The basic political problem he faces is simple: Republicans are in agreement that Obamacare should be repealed and replaced, but their agreement breaks down over what it should be replaced with.

A bill that keeps too much of Obamacare’s spending will alienate conservatives who believe they were sent to Washington to pass a “full” repeal. A bill that cuts too much makes moderate Republicans squeamish, especially those who come from states that depend on expanded Medicaid…

The discussion draft House bill that leaked last week would most likely have been unacceptable to both Paul and Murkowski — handing out too many subsidies for his taste and cutting spending on Medicaid too much for her standards.

This makes me think it’s very unlikely that a bill that can be rammed through the House can also pass the Senate — and therefore that it is unlikely that Ryan’s strategy will lead to enactment of legislation.

But maybe that is what Paul Ryan is up to.

As Brian Beutler of the New Republic notes, forcing a bill down the throats of House Republicans only to see it die in the Senate is not an effective strategy for repealing Obamacare. But it could be a very effective strategy for getting conservative voters to blame the Senate, not the House, for Republicans’ failure to repeal Obamacare.

6) And last, should Republicans actually have a single proposal come to light, there is huge cost-shifting as compared to ACA.  Away from poorer people towards older people.  Kaiser Family Foundation captures this in some nice charts:

Figure 1: How House Republicans’ health reform plan might shift average health insurance tax credits, based on income and age, in 2020

And a final really, really important point.  Republican tax credits are all planned to grow significantly slower than medical inflation (which pretty much always outstrips regular inflation).  So, gradually, over time, the plan is to do less and less to see that Americans can have affordable health care.  Presumably, should an actual plan come out, Democrats will be smart enough to have a good and thorough message on that.  Oh, and also, note, that Republicans are really not fans of people being able to afford health care.

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