Looking at the GOP ACA Replacement Plan

Image courtesy of smokedsalmon at FreeDigitalPhotos.net

Image courtesy of smokedsalmon at FreeDigitalPhotos.net

A number of articles came out this week discussing what the GOP put out as their replacement plan for the Affordable Care Act (ACA). The plan is in the early stages (which is honestly shocking considering they have had 7 years to work on a viable alternative), but there are several talking points they have mapped out for GOP members of Congress.

According to PBS News, the following points were part of the GOP replacement plan, and I am quoting their policy brief:

  • Modernize Medicaid
  • Utilize state innovation grants
  • Enhance Health Savings Accounts (HSAs)
  • Provide portable monthly tax credits

I was more familiar with some of these concepts than others. For example, what are these “portable monthly tax credits” and how do they work? According to the same policy brief:

 Republicans want to repeal Obamacare’s expensive and rigid system of subsidies and replace them with a simple and flexible, advanceable and refundable tax credit to help Americans who do not receive insurance through their employer or a government program…

The credit is:
• Universal for all citizens or qualifed aliens not offered other qualifying insurance
• Age-rated
• Available for dependent children up to age 26
• Portable
• Grows Over Time

…The credit can be used to purchase any eligible plan approved by a State and sold in their individual insurance market, including catastrophic coverage. Additionally, if an employer does not subsidize COBRA coverage, the individual can use the credit to help pay unsubsidized COBRA premiums while he or she is between jobs. If the individual does not use the full value of the credit, he or she can deposit the excess amount into a health savings account.

The credit is not available to be used for plans that cover abortion [emphasis added].

This raises questions of whether the tax credits will really benefit all categories of individuals in the same way and at the same rate as the ACA subsidies. NPR news noted:

The elements of the plan include replacing the subsidies that help people buy insurance through Obamacare exchanges with fixed tax credits to buy coverage on the open market.

The major difference between the two is that the Obamacare subsidies increase as premiums rise so that consumers are responsible for the same premium amount, which is tied to their income. The tax credits proposed by Ryan are not tied to income but rise as a person ages and insurance rates increase.

“The important thing on the tax credits is that they’re not income adjusted and we don’t know how big they are,” Pearson [senior vice president at Avalere, a health care consulting group] says.

She says it’s unlikely they’ll be as generous as the Obamacare subsidies.

“This likely means that low-income people will have difficulty affording individual insurance,” she says.

Then there’s the point about being able to put additional money into health savings accounts. This line of reasoning has always bothered me because it feels like something that was thought up by individuals who have never had to live paycheck-to-paycheck. In order to put funds into an HSA (or an FSA, for that matter) you have to have enough income to do so. Said another way, you have to be making enough money that taking a portion of your check to set aside for potential health costs is not going to cause you financial hardship. For low-income families, that money may be needed to pay rent or put food on the table. There may not be any extra money in their paychecks to put aside in an HSA. The GOP plan would allow individual, self contributions in an HSA to jump from $3,400 to $6,550 and family contributions to jump from $6,750 to $13,100, but again, you have to have money you can easily set aside in the first place for this plan to be beneficial to you.

On modernizing Medicaid and creating state innovation grants, the NPR article noted:

The Republicans’ plan also calls for a major restructuring of the Medicaid health care program for the poor. It would repeal the Medicaid expansion that most states adopted under the Affordable Care Act, which allowed able-bodied people with incomes just above the poverty line to become eligible for Medicaid coverage.

It also noted that under the GOP plan the federal government would only pay a certain amount per person per year to the state, meaning that the state would have to come up with the remainder of the cost. This immediately begs the question as to where additional funds will come from to cover state subsidies.

This is all at a time when, as PBS News notes, “Treatment gaps persist between low- and high-income workers, even with insurance“. Low-income workers are more likely, right now, to end up in the emergency room and hospitals for treatment rather than getting preventative treatment. Part of that is likely a need for greater education on health literacy but it also has to do with the fact that low-income individuals don’t get preventative treatment because they know if a problem is found they’ll have to pay for it and the cost of getting it taken care of (such as paying for their deductibles) is something they cannot afford.

Finally, I also caught this article by NPR about the GOP wanting to return to high-risk insurance pools. As the article mentions:

The argument in favor of high-risk pools goes like this: Separate the healthy people, who don’t cost very much to insure, from people who have pre-existing medical conditions, such as a past serious illness or a chronic condition. Under GOP proposals, this second group, which insurers fear might be expected to use more medical care, would be encouraged to buy health insurance through high-risk insurance pools that are subsidized by states and the federal government.

Something like this used to exist in Minnesota, which had a high-risk pool called the Minnesota Comprehensive Health Association (MCHA). The problem is that returning to a system like the one that existed in MN could likely mean high monthly premium costs, exactly what the GOP says it’s trying to fix.

MCHA’s monthly premiums cost policy holders 25 percent more than conventional coverage, Gildemeister [an economist with Minnesota’s health department] points out, and that left many people uninsured in Minnesota.

“There were people out there who had a chronic disease or had a pre-existing condition who couldn’t get a policy,” Gildemeister says.

…And for the MCHA, even the higher premiums fell far short of covering the full cost of care for the roughly 25,000 people who were insured by the program. It needed more than $173 million in subsidies in its final year of normal operation.

That money came from fees collected from private insurance plans –- which essentially shifted a big chunk of the cost of insuring people in MCHA program to people who get their health insurance through work.

So the high-risk pools can be very costly, both to the individuals who buy into them and to the state that runs them (which means to tax-payers).

“The rub is, where that funding is going to come from?” she says. “And is the federal government or the state government willing to put up the funding needed to make some of these fixes?”

The national plan Ryan proposes would subsidize high-risk pools with $25 billion of federal money over 10 years. The nonpartisan Commonwealth Fund estimates the approach could cost U.S. taxpayers much more than that — almost $178 billion a year.

And my question is, if it’s going to cost us taxpayers so much more annually, how does that work when the GOP wants to cut taxes? How will the increased costs be sustained over time? Is this actually an economically viable option when applied on the national scale? The MN story leaves me with a lot of reason to doubt.

I’ll be following the GOP repeal-and-replacement stories closely in the future, but I must express that I have serious concerns about what they have put out initially. It seems that no matter how I look at current plans, many individuals, particularly some of the must financially vulnerable, will lose insurance due to unaffordability.


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