How Good is the GOP Healthcare Plan?

 

Democratic responses to the new healthcare bill (AHCA) have ranged from strongly opposed to over the top predictions that millions will die if the bill passes the Senate. Strangely, none of these same opponents of the bill make the same claim about ObamaCare , which is imploding fast and will soon leave the same millions without health insurance.

In recent posts I have tried to give you information about the bill, direct from the government website House.gov and from local Congressman Dan Webster (Webster.house.gov). These sources allow you to make your own judgments.

Today, I’ll discuss the strengths and weaknesses of the bill. While there is much to like about the bill, and it is a huge improvement over ObamaCare, there are ways in which the Senate could improve it.

Things to Like

The AHCA goes a long way toward correcting all of the government regulations that have made ObamaCare so onerous for millions of Americans. It eliminates most of the mandates that have driven up the price of health insurance without providing better healthcare. These regulations are eliminated:

  • Age based community rating ­– This took the pre-ObamaCare insurance standard of 5:1 or 6:1 pricing based on age and medical conditions and changed it to 3:1. That means the young and healthy had to pay much more than the cost of their coverage while the old and sick paid much less than the actual expense. While the old and sick liked this, the young and healthy refused to enroll for such poor value insurance – resulting in everyone’s premiums skyrocketing. The AHCA will go back to a 5:1 ratio, which is fairer and should encourage more young and healthy people to enroll – which lowers the prices for everyone.
  • Actuarial Value – ObamaCare established actuarial value mandates which force everyone to buy coverage with generous financial payouts, raising premiums and driving out the healthy. These are eliminated.
  • Essential Health Benefits – ObamaCare forced insurers to sell policies with coverage not everyone needed – like maternity care for men and prostate exams for women. This artificially drove up the price of premiums. The AHCA allows states to request waivers of these mandates if they can show it will lower premiums. There’s no doubt it will.
  • Preserve guaranteed issue and 1:1 gender rating – The AHCA preserves guaranteed issue meaning no one can be refused coverage. It also preserves 1:1 gender rating, which means men and women must be charged the same prices. Those with pre-existing conditions that would drive up their insurance premiums will get subsidized insurance through state-run high risk pools. These are generously funded with $138 billion.
  • Eliminate the Individual Mandate and Employer Mandate – No longer can the government tax you for failure to purchase something – in this case health insurance. No longer will employers have to stop hiring lest they have to pay benefits they can’t afford. No longer will employers force people into part-time hours because they can’t afford to give full-time hours that will mean they must pay for health insurance. This should get the economy going.

 

Things That Could Be Better

The AHCA provides a flat tax credit to purchase health insurance. That means it is not means-tested – does not vary with income. There are pros and cons to this approach. The pro is that it greatly simplifies enrollment since income does not need to be verified. (This was the main reason the ObamaCare exchanges had such a difficult time during the initial enrollment.)

The con of this approach is that low-income Americans do not get as much help as they need and higher-income Americans get help they don’t need. Those just above the federal poverty line who don’t qualify for Medicaid will be most adversely affected.

To solve this problem, Avik Roy, healthcare economist writing in Forbes, recommends means-tested tax credits instead. This will provide more help for lower-income people and less for those with higher-incomes. It will complicate the enrollment process but is more politically popular.

Roy also criticizes the AHCA because it does not reform the unlimited tax break for employer-provided coverage that drives the cost of coverage up for everyone. ObamaCare tried to fix this problem with the so-called “Cadillac Tax” but the AHCA pushes implementation of this back to 2023.

Medicaid Reform

Medicaid is certainly in need of reform. There are now 72 million Americans on Medicaid, thanks to the addition of about 15 million since ObamaCare. Rather than improve healthcare for these newly insured, a strong argument can be made that they are worse off than they were when they were uninsured. Numerous studies have shown healthcare outcomes are worse for those on Medicaid than those who are uninsured.

The AHCA seeks to reform Medicaid by repealing the expansion of Medicaid, which puts the program on a more sustainable future trajectory. It gives states the option to take federal Medicaid funds in the form of block grants and then allows them to develop their own state programs to better address the needs of their population.

Roy applauds these reforms but believes they don’t go far enough. He says, “By repealing ObamaCare’s Medicaid expansion and replacing it with a flat tax credit that doesn’t provide enough assistance to the working poor, millions with incomes above the poverty line are going to lose their insurance.” Once again, he says the solution is a means-tested tax credit that will smooth the transition from Medicaid to purchasing private insurance.

In summary, the AHCA goes a long way toward solving the problems of ObamaCare but there are still some issues that may need improvement before it can pass the Senate. A means-tested tax credit rather than a flat-tax credit is probably the most important change that is needed. I don’t expect Senate Democrats to approve of anything the Republicans propose but the political argument will be strengthened by such changes.

 

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