New details are emerging that allow us to form a preliminary picture of what the GOP replacement for the Affordable Care Act may look like. Unsurprisingly, the big picture is that the law’s tax hikes on the rich will be repealed, even as the law’s spending on expanding coverage to lower-income Americans is going to be rolled back, perhaps dramatically.
The new details come courtesy of two new reports: one from The Post, the other from Politico. The Post reports that House Republicans are coalescing behind a plan that would revamp the Medicaid expansion by keeping federal money flowing to states that have opted into it — and making some available to states that haven’t.
But the rub of the new GOP plan for Medicaid, which is the work of the House Energy and Commerce Committee, is this:
The House committee…is moving forward with a plan to convert the rest of Medicaid to a system in which states would get a fixed sum of federal money for every resident who is enrolled. Such per-capita funding, outlined by the chamber’s Republican leaders earlier this month, would be more restrictive than the way Medicaid has functioned since its birth as part of the Great Society legislation of the 1960s.
This is known as a system of “per capita caps.” The idea is that Medicaid funding would be capped on a per capita basis. This is better than the “block grant” approach that Republicans had been considering, because the latter would allot a fixed total sum to states that would end up resulting in cuts over time as health care costs escalate.
But the “per capita” system would also probably result in cuts over time, if the capped sum per recipient did not keep pace with increases in health costs. To be clear, we don’t know if that will happen — the capped sum could theoretically be indexed in some way to keep up with such costs. But if it doesn’t, and it probably won’t, cuts will be the practical result.
It’s also not clear whether the total number of people who qualify in any given state for Medicaid would remain fixed. If so, if more people became eligible for Medicaid, in, say, an economic downturn, they might not qualify for it. The plan could theoretically also set a method for expanding the number who qualify; we simply don’t know yet what it will do. But the big picture is this: Republicans are likely to fundamentally do away with the Medicaid expansion as an entitlement, which probably means many people will end up not being eligible for it, when under the current system, they would be.
Politico, meanwhile, has obtained a draft version of the GOP’s repeal-and-replace bill. I’m told by several sources that the draft is old, but it probably represents a reasonable indication of the general direction Republicans are taking. Here’s what I’d like to highlight from Politico’s story:
The legislation would take down the foundation of Obamacare, including the unpopular individual mandate, subsidies based on people’s income, and all of the law’s taxes….The replacement would be paid for by limiting tax breaks on generous health plans people get at work — an idea that is similar to the Obamacare “Cadillac tax” that Republicans have fought to repeal….
In place of the Obamacare subsidies, the House bill starting in 2020 would give tax credits — based on age instead of income. For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, according to the proposal. A related document notes that HHS Secretary Tom Price wants the subsidies to be slightly less generous for most age groups.
To oversimplify, what this all means is that the GOP replacement would repeal the tax hikes on the wealthy that pay for Obamacare, and replace it with a version of the “Cadillac” tax, which is targeted towards very generous health insurance plans and would hit a mix of people of various incomes, including public employees with good coverage, but likely not nearly at the same level of those who are currently taxed to pay for the law.
Meanwhile, the new plan would eliminate the income-based tax credits given to people who can’t afford insurance on the individual market, to be replaced with tax credits by age. But the Post also reports that the emerging GOP subsidy scheme is getting pushback from budget analysts, who are telling Republicans on the Ways and Means Committee (which is working on the subsidy plan) that it will stint on subsidies to those who need them most, i.e., lower income people:
According to the several people familiar with House leadership’s approach, a central idea under consideration there — new health-care tax credits — hit a snag this week when congressional budget analysts reported privately to the committee that they would cost the government a lot of money and would enable relatively few additional Americans to get insurance.
Those tax credits would replace subsidies the ACA provides people with incomes of up to 400 percent of the poverty level to help them afford health plans through marketplaces created under the law. The credits would be available to everyone who buys coverage on their own, wealthy or poor. But the Congressional Budget Office has concluded that the credits, as conceived at the moment, would be too small to help low-income people afford health plans. They also wouldn’t make much difference to affluent people, according to the CBO, since most of them already are insured.
All of this adds up to one basic big story. Nicholas Bagley, a University of Michigan law professor and health policy expert, emails:
The emerging GOP replacement would repeal tax hikes on the very rich and, instead, impose a tax that would hit many more people, including lots of public employees like schoolteachers and police officers. At the same time, it would slash Medicaid for the poorest Americans, as well as subsidies that the near-poor rely on to buy private coverage.
A great deal of this will turn on the details, and much of it is up in the air right now. But if you are surprised by these basic emerging priorities, you weren’t paying attention.