CBO 24 GOP 0

If you carve a huge chunk of revenue out of Obamacare and shift more subsidies to the middle class it should not be a surprise that the lower income folks will pay the price

The Congressional Budget Office (CBO) has estimated that 14 million  people would lose coverage in 2018, 21 million in 2020, and 24 million in 2026 if the House Republican plan is allowed to significantly amend the Affordable Health Care Act (Obamacare).

In my last post, I called the House Republican bill “mind boggling” for the negative impact I believe it would have on the number of those uninsured and the viability of the individual insurance market. Guess the CBO agrees with me.

The CBO’s report came after the Brookings Institute estimated 15 million people would lose Medicaid and individual health insurance coverage at the end of ten years under the Republican plan. The arguably more business oriented S&P Global estimated between 6 million and 10 million people would lose coverage between 2020 and 2024.

Republicans are jumping on the CBO estimate reminding us that the CBO’s Obamacare projections haven’t been perfect in the past.

This is not the issue.

What Republicans are proposing, and how those proposals will impact how many people have insurance in this country, is the issue.

The House Republican bill is not a clean replacement of Obamacare. It is an amendment to it.

So, it is fair to take the number of people covered today under Obamacare and look at the impact each of the Republican changes will have.

The House Republican plan would either spend more money or take away certain sources of funding:

  • The House Republican plan would generally increase premium subsidies for the working and middle class (see chart below). Where Obamacare tended to dramatically increase people’s premiums and give working and middle class consumers comparatively little or no subsidy support to pay for them, the House Republican plan would provide subsidies for many more people—for individuals up to $75,000 a year and families up to $150,000, and slowly phasing down after these levels.
  • Republicans would spend $15 billion over five years creating a stabilization fund for consumers and insurers in the individual health insurance market and another $5 billion to support the uninsured in states that did not expand their Medicaid programs.
  • Republicans would eliminate the Obamacare cuts to hospitals for Disproportionate Share Hospital (DSH) payments.
  • Republicans would eliminate all of the many tax increases in the Obamacare law that went toward paying for it. Two of those taxes impacted higher income families––a Medicare tax surcharge and higher capital gains taxes. According to the non-partisan Congressional Joint Committee on Taxation, for individuals making annual incomes of more than $200,000 the elimination of Obamacare’s extra Medicare tax and the higher capital gains tax would provide $274 billion over ten years in relief.

But, the CBO estimates the Republican plan would spend $337 billion less on their amended program than Obamacare would have spent. So, with middle class subsidies up, with big new payments for consumers, insurers, and hospitals, and big tax cuts for a whole list of stakeholders, including for those making over $200,000, something has to give.

The Republicans offset these expenditures and tax cuts by doing at least three things:

  • They cap Medicaid enrollment beginning in 2020 and then begin to phase-out the Obamacare Medicaid expansion after that by not allowing any new enrollments.
  • They move the funding of the Medicaid program to a per capita allotment formula using 2016 as the base year for calculating a particular state’s payments and then increasing that in future years by the medical care component of the consumer price index. Currently, the states receive federal payments based upon their actual cost increases—a level almost always higher than the increase in the medical CPI—meaning there will almost certainly be less money for the states in future years.
  • They replace the Obamacare individual market premium subsidies, which favored lower income people, with flat age-based credits. At the lower income levels, these premium credits would generally be much less than the support Obamacare now provides:

Republicans argue that their less regulated individual health insurance market will provide cheaper plans than Obamacare currently provides meaning consumers won’t need the higher Obamacare subsidies.

It is not at all likely the House Republican proposal will provide cheaper plans:

  • Republicans are proposing the repeal of the individual mandate fines/taxes for those who don’t have coverage.
  • They are replacing the individual mandate with a paltry 30% surcharge for 12 months on anyone signing up for insurance after they become sick.

I have long argued that if we could get more like 75% of those potentially eligible into the risk pool, it is only about 40% under Obamacare, premiums could come down 30% to 40%. The problem with this Republican proposal is that while the better middle class subsidies would likely improve participation among this group, the combination of worse low-income subsidies and the paltry late enrollment penalty would likely make the existing pool worse. There is little likelihood that these changes will, on a net basis, materially improve the overall risk pool’s viability and therefore bring premiums down.

Health plans would be able to offer skimpier plans. The Republican claim that many could buy a catastrophic plan for the cost of their flat age-based tax credit is likely credible.

But, it is hard to see how many low income people will see value in a “free plan” that still has a $2,000, or $3,000, or $4,000 deductible before they can use any benefits given that an individual at 100% of the federal poverty level makes $12,000 a year.

This weekend, HHS Secretary Price said, “I firmly believe that nobody will be worse off financially in the process that we’re going through, understanding that they’ll have choices that they can select the kind of coverage that they want for themselves and for their family, not [that] the government forces them to buy. So there’s cost that needs to come down, and we believe we’re going to be able to do that through this system. There’s coverage that’s going to go up.”

The CBO didn’t agree with the Secretary. And, neither can I.

The House Republican plan does a much better job than Obamacare in providing health insurance to the working and middle class. But it does a much worse job in affording access to affordable health insurance to those with low incomes.

Obamacare was a massive transfer of wealth from the better off to those with low incomes––and was very unpopular among the middle class because of that. The House Republican plan is just shifting much of that from the Democratic base back to the Republican base. If it becomes law, we’ll just have a different group of people upset.

It would be nice if we could have a health insurance reform plan a consensus of the people could appreciate.

Sounds like the Republicans––according to the CBO––will have $337 billion to make things better. And, they should.

Categories: Uncategorized

19 replies »

  1. Barry, you know better than that. I am not being defensive. You know how when the left lacks good arguments they demean and make conversations personal. Who you associate with tells something about you. However, you are definitely not a Peter. I welcome all your comments though I strongly disagree with many things you say even though you have shown a gradual change in direction which I stated earlier, elsewhere. I wanted to make sure my comments were totally clear to Peter and I provided him, in my reply to you, a bit of personal transparency, things that you have been aware of for a long time.

    I am more interested in dealing with principles that can be upheld from one year to the next, something you also are well aware of. Peter can’t defend his position and simply restates leftist talking points and adds hate and anger. Nothing wrong with debating those leftist points because there is some merit in them, but Peter is too frequently on empty after stating them.

    You have some interesting points that follow your initial comments. Those points are worth talking about, but not on this thread.

  2. Allan – Don’t be so defensive. There’s nothing wrong with getting Medicare once you meet the eligibility criteria and there’s nothing wrong with spending your own money on whatever you want to spend it on including healthcare. I don’t have any problem with that and never have.

    Healthcare costs are a separate issue from how best to provide health insurance to those who can’t afford it and / or can’t pass underwriting and need to be subsidized. There is considerable disagreement as to how best to accomplish that and how to pay for it.

    As for healthcare costs, Uwe Reinhardt and others have written a lot about the difference in medical prices in the U.S. as compared to other developed countries. Much less has been written about differences in practice patterns. At least I haven’t seen such articles or studies if they exist.

    My perception is that practice patterns as developed by the specialty societies that have evolved into the standard of care probably involve more testing than in other developed countries to reflect the difference in perceived litigation risk in the U.S. vs. elsewhere. This is why I think sensible tort reform could, at least over time, move practice patterns in a less intensive and less costly direction as physicians come to perceive the reforms as credible and fair to them. This is especially important with respect to the so-called failure to diagnose cases. Nobody is suggesting protecting doctors from egregious negligence like wrong site surgery. I think the tort reform issue is a big deal though lots of people disagree with me and I don’t think caps on non-economic damages cut the mustard.

  3. Barry of course I get Medicare, I am over 65 and retired which I think is pretty well known. The ones that created the law made sure that nothing private could compete with Medicare. I also pay cash for things that Medicare covers and sometimes those bills are very high. I guess now the attack will be that I am rich. I don’t know what rich really means, but, yes I have money I saved and am willing to spend it for healthcare. That may or may not offend your redistributionist feelings in the healthcare sector, but I don’t care.

    In the past I have had private insurance and group insurance. I have had high deductible and low deductible and I paid for my employees insurance. I did what was good for my business and myself. There is nothing wrong with that. But, the question, other than the lame attempt of Peter to try to entrap and attack the person instead of the issue, is how to lower costs while maintaining access and quality. If you wish to go down the road with Peter and all his Peterisms go ahead. Alternatively you can continue to question as hard as you can one’s ideas and policy suggestions as much as you are able.

  4. “How do you think that helped the one’s already on Medicaid?”

    If you’re trying to say there’s not enough doctors willing to accept Medicaid payments for the extra people covered you’d probably be right. Why do we put the poor into a sub-class of those needing medical care?

    You still haven’t said where you get your health subsidy.

  5. Did you ever look at the Oregon study? Have you not noted that the poorest of the poor and most needy are on Medicaid where 14 million more patients were dumped? How do you think that helped the one’s already on Medicaid? You must really hate the people that need Medicaid the most.

    The tens of millions of people hurt by the ACA are the taxpayers paying for a foolish program that almost everyone recognizes is failing. Those that lost their insurance in the exchanges, those whose premiums were supposed to fall by $2,500 and those who couldn’t keep their doctor are still another group. The list of unintended consequences goes on and on, but you can’t see that.

    The ACA hasn’t improved sustainable healthcare. It’s a failure. When you throw an anchor off a boat don’t attach your leg to it.

  6. “You mean the millions placed on Medicaid”

    Medicaid is coverage for people who did not have any before. You got something against health coverage for the poor?

    Who are the millions hurt by ACA? Are they hurt because they don’t qualify for subsidy? Well I’d agree, health care in America depends on subsidies from someone – most get it from their employer. Where do you get your subsidy Allan?

    Where were the non-covered individual market citizens before ACA, especially the ones with pre-exist.

  7. “Tell the millions”

    You mean the millions placed on Medicaid diluting the service to those already there and to the most needy? Alternatively do you mean the far lower number that are getting subsidies. Did you forget about the tens of millions that have been hurt by Obamacare? Did you forget about the taxpayer? Did you forget how Obamacare is self destructing and without major changes will potentially leave people that had insurance before the ACA without any insurance. Did you forget about the Oregon study involving Medicaid and how it didn’t seem to offer benefit to a random sample of patients over its stated period of time?

  8. “Obamacare as predicted has failed and unless changed will lead to less and less people being insured while premiums skyrocket and the number of competing insurers tend toward zero.”

    Tell the millions of insured with subsidies that it is a failure – even Repugs realize that. What the ACA fails to do, is what the entire rest of the system is failing to do – Obamacare coverage can not be gotten cheaper anywhere else, and the ACA did not set premiums, only coverage minimums. Yes Obamacare needs to be changed, but that’s not what Trump and Repugs said. They said “repeal, repeal, repeal”, and Tump said he would give better coverage at lower prices – come on Donald what’s the problem, lead us to the promised land.

    Medicare for all, that’s a much better way, but it’s hard to get Repug heads out of the sand.

  9. “The House Republican bill is not a clean replacement of Obamacare. It is an amendment to it. So, it is fair to take the number of people covered today under Obamacare and look at the impact each of the Republican changes will have.”

    Your suggestion is only fair if we compare what will happen if Obamacare remains unchanged. It is obvious what is happening. Obamacare as predicted has failed and unless changed will lead to less and less people being insured while premiums skyrocket and the number of competing insurers tend toward zero.

  10. Matthew — To me the biggest weaknesses of the ACA are that the penalty for not buying health insurance is woefully inadequate, the abrupt income cutoff for subsidies at 400% of the FPL is grossly unfair, and the essential benefits package is more comprehensive than it needs to be. I think the 3 R’s for insurers should be a permanent part of the reform package as well.

    I would be fine with establishing high risk pools for the unhealthy and already sick so healthy people could buy coverage much more cheaply but it would be very expensive to fund them to ensure that they actually work for the people who need them. The history of high risk pools is abysmal but they are doable at least in theory if politicians were willing to vote to fund them and raise taxes on the broad middle class and upper income people to pay for them.

    At the end of the day, health insurance reform has to work for the people who need it most which are the unhealthy and already sick and lower income folks who can’t afford the premium on their own but earn too much to qualify for Medicaid. Personally, I don’t think anyone should have to pay more than 10% of pretax income for health insurance. The ACA can be fixed but the cost will be pretty high.

  11. So Barry, basically none of the bill is acceptable to you other than charging the few rich old men like you (and unfortunately me) WHO DONT HAVE THE GOVERNMENT OR EMPLOYERS PAYING FOR THEIR PREMIUMS more than they pay now. Not exactly wholesale reform, is it?

  12. I think there are a number of problems with the House Republican bill. First, it isn’t close to adequate in terms of paying for high risk pools or subsidizing people with have a low income but make too much to qualify for Medicaid. Second, while I agree with the actuarial logic of charging older folks five times more for health insurance than younger people, it makes no sense to give them an age-based tax credit that’s only worth twice as much. Maybe people younger than 30 should get a $1,000 credit instead of $2,000 and people 60 and older should get $5,000 instead of $4,000. Maybe people between 30 and 39 should get $2,000 instead of $3,000, those between 40 and 49 should get $3,000 as planned and people between 50 and 59 should get $4,000 instead of $3,000.

    As for freedom to choose a plan with skimpier benefits, I suspect that healthy males will choose to decline maternity benefits and healthy people of both genders may believe they can get along without mental health and alcohol and drug treatment benefits. They may also opt for a lifetime benefit limit in the $1 million or so range.

    The 30% premium surcharge for one year applied to those who wait until they get sick to sign up for health insurance is way too lenient. I think a 50% surcharge for five years would be a more reasonable and powerful deterrent to minimize gaming of the system.

    To help pay for the subsidies, we should keep the ACA taxes on high income individuals which includes myself but eliminate them on drug companies, device manufacturers and insurers because they just pass them along to customers in the form of higher prices. It’s better if taxes needed to pay for subsidies are transparent and impactful so people can see and understand how much they are being asked to pay for health insurance reform.

    If this bill passes the House, it will need a huge (yuge) amount of work in the Senate and if Republicans want a reform effort that will stand the test of time, it needs to be bipartisan. Sustaining Medicaid expansion probably needs to be part of the final product as well.

  13. The article mentioned that credits could be lower due to less expensive plans
    Could mini med plans be available offering $25,000-$250,000 in benefits?

  14. Unfortunately both the “middle” and “working” class want what the poor sort of now have under Medicaid. A health plan with no premiums, no deductibles and no copays. innumerable complaints about the ACA, not to mention tons of articles and focus groups show that’s true. So ANY premium support/tax credit model for the minority of people who are unlucky enough to not have someone else (government/employer) paying the bills is going to be unpopular. After all they’re the only people who actually have to pay for health care premiums out of what most people think of as income (whatever economists tell us about overall employment costs). As Bob knows but never will admit, the ACA was the best we could get given the dead set opposition to any bill from the Republicans in 2009, while Obama let the conservative Democrats create a bill that kept the votes of the Leibermans and Nelsons, not to mention the AMA, AHA & PhrMA on board.

    But the point is that a tax funded first dollar coverage system is what the vast majority of middle/working class & poor Americans want in practice. And anyone who loses cushy employment based health care wants it too.