Republican health care plan: the quick take
March 6, 2017 Leave a comment
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- All the Obamacare taxes on the rich are repealed…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.
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.