Now that Republicans control the White House and Congress they’re poised to replace ObamaCare. But which Republican replacement plan is best? Today will begin a series of posts to answer that question.
The Patient CARE Act
The Patient Choice, Affordability, Responsibility, and Empowerment Act, better known as the Patient CARE Act, was introduced in 2015 by Senators Burr (R- NC) and Hatch (R-UT) and Rep. Upton (R-MI) repeals ObamaCare except for the changes to Medicare. Chris Conover, writing in Forbes, says it has three main parts:
- Medicaid is reformed by imposing a capped per-beneficiary allotment adjusted for inflation (a less stringent form of block-granting Medicaid insofar as it automatically adjusts for changes in the number of Medicaid eligibles);
- Obamacare’s income-related subsidies are replaced with less expensive tax credits that vary by age, family status and income (disappearing above 300 percent of federal poverty level).
- The long-standing tax exclusion for employer-provided health insurance coverage is retained, but the ACA’s Cadillac tax is replaced by a functionally-equivalent cap on the amount of the exclusion ($12,000 for single and $30,000 for family coverage); workers in firms with fewer than 100+ workers would be allowed to purchase non-group coverage with tax credits.
Although it repeals ObamaCare, it actually retains several popular provisions of the current law. These include:
- May not establish lifetime limits on the dollar value of insurance benefits to beneficiaries;
- Cannot deny nor terminate coverage for medical reasons
- Are required to offer coverage to dependents up to age 26.
- The 3:1 age rating restrictions under the ACA are repealed and replaced only with a one-to-five maximum age rating ratio (moreover, states may elect to opt out of this requirement).
It changes from a system of guaranteed issue to a system of guaranteed renewal. That means once you have insurance you can’t be denied future coverage as long as you maintain insurance – although you may change insurance companies. This provision is to prevent the “gaming of the system” currently in widespread practice that is dramatically increasing the cost of insurance for all companies and patients.
Scoring the Plan
Whenever a new plan is proposed in Congress it is “scored” by the Congressional Budget Office, which is supposed to be neutral, to measure its impact. This scoring is critical to the political process and the plan’s chances of passage through Congress.
Cost of Coverage
Since this plan has not been brought up for a vote yet it has not been scored by the CBO. But it was scored by the Center for Health and Economics (H&E). Their analysis projects lowering of the cost of private non-group health insurance (-21% for singles, -11% for families) and catastrophic coverage plans (-16% for singles, -6% for families). That’s an average reduction of $364 per person or an estimated savings of over $16 Billion in 2018 alone.
The bad news is this plan will gradually lead to fewer covered individuals, estimate to reach about 4 million by 2025. This amounts to about 1.4% of the population under age 65. The decrease in coverage is the net effect of increased enrollment in the individual market and lower enrollment through employer sponsored insurance and Medicaid.
The H & E analysis measures the impact on access to providers, an important determinant of the actual usefulness of insurance coverage. According to the H&E Provider Access Index, access will increase by 5 percent for the insured population by 2025, but this masks huge variations across types of coverage. For example, access is projected to increase by 22% in the non-group market by 2025.
The H&E Medical Productivity Index (MPI) is calculated in a parallel fashion by taking into account varying incentives across plans that promote or discourage efficient resource use. The Patient CARE Act is expected to lead to greater productivity than under current law. According to the H&E Medical Productivity Index, productivity is projected to increase by 2 percent by 2025 principally due to much larger gains (6%) in the non-group market.
Federal Budget Impact
Compared to current law, the insurance coverage provisions of the plan will decrease the federal deficit by $534 billion between 2016 and 2025.
So the cost of reducing the number of covered Americans by 1.4% is a savings of over half a trillion dollars over ten years. Or look at it this way: Is it worth over half a trillion dollars to insure 1.4% of the population?
These are the hard questions Congress must answer when considering the alternatives to ObamaCare. Next post we will discuss another Republican replacement plan.