What the GOP’s New Health Care Act Really Means

Wendy Mariner argues the plan would shift costs from the affluent to the less well off in this opinion piece for BU Today.

The Congressional Budget Office (CBO) has spoken. The Republican American Health Care Act (AHCA) will cost 24 million Americans their health insurance by 2026. The CBO estimates that 52 million would have no insurance by 2026—compared with 49.9 million in 2010 before Obamacare (the Affordable Care Act, or ACA) took effect, and 26 million today—for four reasons. The AHCA repeals the individual mandate’s tax penalty, so people who do not want insurance would be “free” not to buy it. Employers would not have to offer health insurance. Many people who do want coverage could not afford it. And 14 million people would no longer be eligible for Medicaid.

When Republicans claim that the AHCA will reduce costs, they mean costs to the federal government, not costs to ordinary Americans. Middle- and low-income Americans will pay more for health care or go without. Here’s why.

The AHCA reduces costs to the federal government in two ways: first, by decreasing federal tax credit subsidies for individuals who buy health insurance in the marketplaces created by the ACA, and second, by ratcheting down federal spending for Medicaid by $883 billion over 10 years. The first approach eliminates Obamacare subsidies that are scaled according to income, so that individuals and families spend at most 9.5 percent of household income for marketplace health plans. The AHCA replaces those subsides with less generous tax credits in fixed dollar amounts (from $2,000 to 4,000) scaled according to age. Credits cannot be used to buy a policy that covers abortions. Since the AHCA allows insurers to charge older adults five times the premium for younger adults, the CBO estimates that single 21 year olds might save a few hundred dollars, but those over 40 could pay between 1.4 and 8.5 times what they paid out of pocket with Obamacare subsidies.

The AHCA creates a weak incentive for individuals to buy insurance: insurers can impose a one-year 30 percent surcharge on premiums for anyone who has been without health coverage for more than 63 days. Even that can impose hardship on people who lose or change jobs or take time off for childbirth or caring for sick family members. The bill allocates a total of $100 billion over 10 years that states can use to stabilize the private insurance market, but this is not likely to be close to the need. Moreover, it does nothing to reduce the price of medical care itself.

Medicaid spending is reduced an estimated 25 percent by decreasing the federal matching percentage for Medicaid expansion enrollees from 90 percent to a state’s regular Medicaid matching percentage (50 percent to 73 percent) in 2020, by making eligibility much harder to maintain, by shifting all federal funding to block grants that are unlikely to keep pace with inflation, and by ending payment for health services provided by Planned Parenthood. The majority of Medicaid costs cover the care of the elderly and disabled, so many states are likely to reduce or eliminate coverage for their larger population of needy, working enrollees. Low-income individuals may once again depend on safety net hospitals for their care, but the AHCA authorizes only a small fraction of the funding needed to care for all the newly uninsured. This not only leaves people without health care, but threatens the viability of safety net providers like Boston Medical Center.

When Republicans claim that insurance costs will go down, they mean only the premium price of an insurance policy. This does not include out-of-pocket cost-sharing like deductibles, coinsurance, and co-payments that patients pay. The ACA requires marketplace insurance plans to pay at least a minimum percentage of the cost of comprehensive medical care (“actuarial value”): bronze (60 percent), silver (70 percent), gold (80 percent), and platinum (90 percent). The AHCA eliminates these requirements and allows health insurers to offer catastrophic coverage plans with lower premiums, but large deductibles and co-pays. Such plans typically pay only about 25 percent to 50 percent of the price of medical care that patients receive. For example, if a patient needs a $200,000 cardiac bypass to stay alive, the patient would have to pay $100,000 to $150,000 of that amount. Americans’ average net worth ranges from about $60,000 in the South to $122,000 in the Northeast. Surveys report that only one third of Americans have enough cash on hand to pay for an emergency costing $1,000. …