Words have meaning and that meaning matters. As Republicans roll out their plan for the repeal and replacement of ObamaCare, it is clear that many critics on both sides of the debate are promoting misinformation.
The House Republicans have just released the initial draft of a bill called The American Health Care Act (AHCA) that is intended to repeal and replace ObamaCare. This bill will surely be amended many times in committees before it ever receives a vote from either the House or the Senate. But it represents a starting point in the process and the debate.
Even before the process begins, however, there are vocal critics on both the right and the left. As I listened to the arguments being presented by both Democrats and Republicans, I was struck by the number of times I heard misleading information. Today I want to discuss how both sides are confusing the debate.
Democrats who continue to defend ObamaCare don’t seem to understand the reality of those who purchase their own insurance. They fail to acknowledge that one of every three counties in America offers only one choice on the ObamaCare exchanges – and some have no choice at all! Recent declarations by insurance executives promises 2018 will be even worse.
Everyone agrees that insurance premiums are rising fast. Even the Obama White House acknowledged that 2017 premiums have risen an average of 25%. In some states, like Arizona, they have seen premium increases as high as 116%!
What they fail to understand is the impact of rising deductibles. The average deductible in 2017 for an individual policy is $6000 and for a family policy is $12,000. When confronted with these figures, I have heard many Democratic defenders of ObamaCare dismiss this information by saying that “most of these people are receiving government subsidies.”
But government subsidies do not pay deductibles. What good is a nearly free premium policy if you still have to put up $6000 to $12,000 of your own money before the insurance kicks in? For many low income Americans this means they have insurance coverage in name only. They still don’t have access to healthcare.
ObamaCare created a system of new government subsidies to assist low-income Americans (not eligible for Medicaid) to purchase individual healthcare insurance policies if they did not receive employer-provided insurance. This is widely known and understood. Not well understood, however, are the other subsidies built into the framework of ObamaCare.
Holman W. Jenkins, Jr., writing in the Wall Street Journal, calls these hidden subsidies. They include the subsidies paid by the young and healthy to keep the cost of insurance lower for the old and sick. There are also subsidies paid by men to keep the cost of insurance lower for women. There are subsidies paid by those who only go to the doctor when sick that pay for those who consume lots of elective or preventive care. There are subsidies paid by those who use primary care providers for their needs that cover the cost of those who use emergency rooms (that cost a lot more) instead of going to their primary care provider.
So the whole ObamaCare system is one of subsidies – to redistribute income.
The AHCA calls for maintaining the popular coverage of pre-existing conditions. But for those who do not maintain continuous coverage there will be a 30% premium added to the cost of their policy. This 30% will not completely cover the additional cost of insuring those with expensive pre-existing conditions but it will incentivize some to maintain continuous coverage – which will lower the price of everyone’s premium. (ObamaCare had no such penalty.)
Entitlement in the healthcare discussion means the government promises to provide some form of financial support for a given population. Fiscal conservatives abhor any sort of entitlement because they weaken the financial stability of the nation and add to the national debt.
Some Republican conservatives like Senator Rand Paul (R-KY) and Senator Mike Lee (R-UT) have already objected to the AHCA because they believe it creates a new entitlement. This argument is flawed in two ways:
- Tax treatment of healthcare insurance – All Americans who receive their healthcare insurance through their employer have enjoyed an entitlement for nearly seventy years due to the unequal tax treatment of healthcare insurance. Those who pay for their own individual healthcare insurance must use after-tax dollars. Those who receive it through their employer are not taxed at all. According to the Tax Policy Center, this costs the federal government $260 Billion in 2017.
The AHCA calls for refundable tax credits, adjusted by age and income, for those individuals who purchase their healthcare insurance on their own. This simply levels the playing field for the 7% of Americans in this situation to give them the same tax treatment that the 56% of Americans with employer-provided insurance already receive.
- ObamaCare subsidies – ObamaCare has already established the precedent that the government will provide subsidies for those who purchase their insurance on the individual market. ObamaCare subsidized those Americans earning up to 400% of the Federal Poverty Level (FPL). The AHCA subsidies for these same individual policies will be both age and income adjusted and phase out at $75,000 (less than the $96,000 of ObamaCare). To remove all government subsidy of these individual policies would be political suicide.
In other words, objecting to any entitlement in the new AHCA as a new entitlement denies history, fair treatment of the tax code, and political reality.
Supporters of ObamaCare love to talk about the impact of ObamaCare on increasing the rolls of the insured. In 2010 when ObamaCare was passed, there were about 50 million Americans without healthcare insurance. Today there are about 30 million still uninsured. ObamaCare has increased the rolls of the insured by about 20 million – but about 15 million of these are on Medicaid. The graph below shows the limited impact of the Affordable Care Act (ACA) known as ObamaCare.
The real impact on the rolls of the uninsured is the expansion of Medicaid and the forced participation in the insurance market as a result of the Individual Mandate. For the first time in our history, Americans were taxed for failure to purchase a product. (The Supreme Court called it a tax to make it constitutional. The Obama administration called it a penalty.)
Aren’t people better off on Medicaid and with healthcare insurance?
Supporters of ObamaCare would argue those 20 million Americans are better off, even if they are on Medicaid. This assumes that Medicaid is better than nothing – no insurance at all. This is an erroneous assumption.
Numerous studies have shown that being on Medicaid may be worse than having no insurance at all. The Oregon Health Insurance Experiment, an ongoing study comparing those on Medicaid with the uninsured, has repeatedly found no difference in measured outcomes such as control of blood sugar, blood pressure and blood cholesterol. Medicaid reduced observed rates of depression 30% but increased the probability of being diagnosed with depression.
Furthermore, Medicaid patients were 40% more likely to use emergency rooms than even the uninsured. This is due to the reduced access to primary care providers for Medicaid patients who cannot negotiate with doctors to pay cash. The uninsured, however, can always pay cash and usually receive deep discounts.
For those individuals newly insured on the ObamaCare exchanges with government subsidized premiums, they still must pay the high deductibles that for most are unaffordable. They may have insurance – but they can’t afford to use it!
All of this is to say that when ObamaCare supporters brag about the increased coverage that ObamaCare provided they are being disingenuous. This increased coverage is mostly “on paper only” and doesn’t represent significant increased access to healthcare. Therefore, the AHCA should not be judged by comparisons to the number of insured by ObamaCare.
The details of the AHCA are just being released and it will undoubtedly be modified in committee. It has not yet been scored by the Congressional Budget Office, which carries significant political clout. I will review the details of the plan as they become clearer. But keep these key terms, deductibles, government subsidies, entitlements, and insurance coverage in mind as you listen to the healthcare debate.