The House of Representatives approved their version of the AHCA bill this week. The next step is consideration in the Senate. There has already been a great deal of discussion about the bill and the assertions underpinning it. Politifact offers a consolidated look at some claims made by opponents of the PPACA, which largely don’t hold up to scrutiny. The law as largely successful in getting more people insured. It was not as successful in cost reduction – thought it did significantly reduce the rate of increase as compared to PPACA annual rate increases – and not as successful in terms of types of coverage, as it required insurers to provide minimum packages that not all people actually needed. Some major insurers have decided to opt out of participation, but this is not indicative of a failure within the law. The PPACA did not nationalize healthcare; it is still a competitive, profit-driven market.
The PPACA was not perfect, but it has done quite a bit of good in terms of getting more people covered. It does have its shortfalls. How does the proposed AHCA work to address these issues?
If you have the time to go through 822 pages of text, there is the Report from the Committee on the Budget (H. Rept. 115-52) , which provides arguments both for and against the bill (majority and minority positions, respectively). Regardless of your political affiliation, it is worth reading both positions. Since the majority position leads with claims that are either unsubstantiated or false with respect to the performance of the PPACA I am immediately inclined to read them with skepticism. Short of reading the entire bill, the CBO report (included in pages 47-84 of 115-52 and available separately here) provides a good overview of the economic and access impacts, as well as the drivers behind the impacts. Here’s some of what the CBO report tells us:
MAJOR PROVISIONS OF THE LEGISLATION
Budgetary effects related to health insurance coverage would stem primarily from the following provisions:
- Eliminating penalties associated with the requirements that most people obtain health insurance coverage and that large employers offer their employees coverage that meets specified standards.
- Reducing the federal matching rate for adults made eligible for Medicaid by the ACA to equal the rate for other enrollees in the state, beginning in 2020.
- Capping the growth in per-enrollee payments for most Medicaid beneficiaries to no more than the medical care component of the consumer price index starting in 2020.
- Repealing current-law subsidies for health insurance coverage obtained through the nongroup market—which include refundable tax credits for premium assistance and subsidies to reduce cost-sharing payments—as well as the Basic Health Program, beginning in 2020.
- Creating a new refundable tax credit for health insurance coverage purchased through the nongroup market beginning in 2020.
- Appropriating funding for grants to states through the Patient and State Stability Fund beginning in 2018.
- Relaxing the current-law requirement that prevents insurers from charging older people premiums that are more than three times larger than the premiums charged to younger people in the nongroup and small-group markets. Unless a state sets a different limit, the legislation would allow insurers to charge older people five times more than younger ones, beginning in 2018.
- Removing the requirement, beginning in 2020, that insurers who offer plans in the nongroup and small-group markets generally must offer plans that cover at least 60 percent of the cost of covered benefits.
- Requiring insurers to apply a 30 percent surcharge on premiums for people who enroll in insurance in the nongroup or small-group markets if they have been uninsured for more than 63 days within the past year.
Other parts of the legislation would repeal or delay many of the changes the ACA made to the Internal Revenue Code that were not directly related to the law’s insurance coverage provisions. Those with the largest budgetary effects include:
- Repealing the surtax on certain high-income taxpayers’ net investment income;
- Repealing the increase in the Hospital Insurance payroll tax rate for certain high-income taxpayers;
- Repealing the annual fee on health insurance providers; and
- Delaying when the excise tax imposed on some health insurance plans with high premiums would go into effect.
Provision Affecting Planned Parenthood. For a one-year period following enactment, the legislation would prevent federal funds from being made available to an entity (including its affiliates, subsidiaries, successors, and clinics) if it is:
- A nonprofit organization described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) of the code;
- An essential community provider that is primarily engaged in providing family planning and reproductive health services and related medical care;
- An entity that provides abortions—except in instances in which the pregnancy is the result of an act of rape or incest or the woman’s life is in danger; and
- An entity that had expenditures under the Medicaid program that exceeded $350 million in fiscal year 2014.
The CBO estimates a reduction of $880 billion in outlays to Medicare and additional savings due to eliminations of certain subsidies and repeal of a small-employer tax credits. There are additional outlays to a new tax credit, a Patient and State Stability Fund grant program, and additional payments to hospitals serving disproportionate numbers of uninsured or low-income patients. The CBO estimates an overall reduction of $337 billion to the federal deficit.
Repeal of the individual mandate and the mandate requiring large employers to provide coverage will result in fewer people insured. Some will opt out now that they do not have to be concerned about a penalty (mostly young and healthy individuals). Some will lose employer-provided coverage.
CBO estimates that the Medicaid changes will result in about 14 million people losing Medicaid coverage initially.
Changes to subsidies and tax credits will on the result in generally lower premiums for younger participants and generally higher premiums for older participants.
The continuous coverage rule would mandate a 30% surcharge for anyone that was uninsured for 63 days in the previous year. This rule may provide a disincentive for the young and healthy to purchase insurance, and put a burden on those whose conditions cause them to cycle on and off of coverage. (The American Cancer Society asserts that cancer patients often have lapses in coverage, which would cause them to be disproportionately affected by this provision, for example.)
The provision targeting Planned Parenthood would impact a number of service unrelated to abortion, including contraceptive care. The CBO estimates that the provision will lead to an increased number of births covered under Medicaid, and a significant number of these children may then be eligible for Medicaid benefits. The CBO estimates that there will still be a net savings in Medicaid expenditures. (However, since abortion services are not covered by Medicaid and are paid out of pocket by patients, this provision may have little impact on Planned Parenthood’s abortion services, the nominal justification for this provision.)
The CBO estimates a near doubling of the percentage of uninsured by 2026 if the law is enacted. There will also be a short-term (through 2020) increase in premiums, and a long-term overall reduction in premiums beyond 2020 as compared to projections under the PPACA. The long-term reductions would be a result of the availability of lower-cost plans that provide minimal coverage, which would be most appealing to the young and healthy. Premiums for the elderly would continue to rise, as insurers would be allowed to charge more to these groups under the proposed law.
There are far more details to look through if one desires. It is quite a bit of reading, which is probably why many Representatives admit to not having read the bill in its entirety. Whether this is an improvement over the PPACA depends on the criteria. This will cost the government less, and will allow insurers to offer a wider variety of products, which will undoubtedly better suit certain groups. It will also allow insurers to charge elderly patients more, and require a surcharge for gaps in coverage. There will be a significant reduction in the number of people with insurance.
I suggest that there might be better alternatives to correcting the PPACA shortfalls. One of the principle goals of the PPACA was to allow healthcare access to more people. On that count it has been successful. While costs have increased, the rate of increase has slowed. The biggest problem has been with coverage requirements; insurers must provide a basic level of coverage that not every individual needs or wants. In the short term, the variety of coverage might be the best portion to address, instead of a major overhaul that leaves tens of millions uninsured and targets vulnerable populations for higher premiums and mandatory surcharges.