Eliminating health insurance mandates:
Conservatives have long argued that the Affordable Care Act’s requirement to buy health insurance is an affront to freedom — both for individuals and employers. They plan to replace these mandates with a penalty — paid to insurance companies, not the government — for people who buy insurance after a lapse in coverage of more than 63 days.
Here’s Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office: “The [GOP bill] places trust in the decisions of individuals and families by making greater use of health savings accounts (which hone the market incentives for higher-value care) and respecting their ability to follow incentives to be continuously insured.”
Critics are not convinced. The mandates exist to encourage healthy and younger people to buy into the insurance system. Without them, people would only buy insurance as soon as they are sick, and no one would pay the premiums that keep insurance profitable — causing an insurance market “death spiral.”
Here’s Timothy Jost of Washington and Lee University School of Law: “Paradoxically, this [insurance] penalty may discourage a healthy uninsured person from applying after a coverage lapse, but not someone in ill health who really needs insurance — and who will cost the system more.”
Age-adjusted tax credits:
To attract young people into insurance markets, the Republicans scrap subsidies and tax credits targeted toward low- and middle-income people. Instead, they want age-based systems that give older people larger tax credits than younger people. But the bill also lets insurance companies charge older people at a higher rate (five times more than younger enrollees, up from three times more under the ACA).
The CBO projects that this change would attract a sufficient number of younger, healthy people into individual health-care markets to lower premiums in the long run. But it does so by “substantially raising premiums for older people.”
Premiums better reflecting risk constitute a major restoration of rationality. Under Obamacare, the young were unwilling to be swindled and refused to sign up. Without their support, the whole system is thus headed into a death spiral of looming insolvency. Rationality, however, has a price. … GOP hard-liners must accept that Americans have become accustomed to some new health-care benefits.
Andy Slavitt, former acting administrator of the Centers for Medicare and Medicaid Services, argued that this structure would inherently destabilize markets:
The ACA pegs tax credits to income levels and, when premiums rise, those tax credits rise along with them, protecting consumers against regional differences and sudden increases in medical costs. But take those protections away, as the new bill would, and something perverse but entirely predictable happens: Sicker people keep paying (if they can), healthy people do not, and costs go up. That’s not partisanship but simple math.
Conservative critics worry that placing so much of a burden on the elderly would become toxic for Republicans, given older Americans’ voting power. Hugh Hewitt suggests fixing this by tying tax credits to both income and age:
Think of a square divided into four boxes: People are either poor or not poor, old or not old. Under the current bill, the credits are weighted too much toward the “young and not poor.” Instead, the tax credits should be disproportionately aimed at the “poor and old” box and after that the “poor and young” box. Then perhaps some small slice of the credits can be for “the old and not poor” with none for “the young and not poor.”
This is perhaps the most important part of the GOP plan for conservatives. Overall, the CBO projects that the bill would cut Medicaid spending by $880 billion over 10 years, resulting in 14 million fewer enrollees.
This is why supporters of the bill regularly characterize it as the first major repudiation of a government entitlement program in history. Avik Roy, president of the Foundation for Research on Equal Opportunity, describes the plan as “akin to the 1996 welfare reform bill times 10.”
Other supporters see this as a chance to keep Medicaid spending from growing out of control. The program has long been seen as a looming budgetary disaster, especially for states. Robert Samuelson covers this issue:
Slowly, Medicaid is usurping state priorities. Medicaid now claims nearly one-fifth of states’ general revenues, reports Robin Rudowitz of the Kaiser Family Foundation. Under present law, the squeeze will worsen.
Medicaid costs are split between federal and state governments — with the federal government agreeing to pay a certain percentage of the cost (varying by state). Republicans propose changing that structure by capping the amount of federal spending based on the number of people in the state. This, they hope, will prevent states from expanding the program.
In my time overseeing the government agency that runs [Medicaid], we dealt with many unexpected shocks — Zika, high-cost drugs and the national opioid epidemic, to name a few. Under the changes sought by Republicans, states would no longer have the resources to manage these crises.
Republicans often argue that the bill would only prevent Medicaid from growing further, protecting coverage for people who gained coverage under the ACA’s Medicaid expansion, so long as they have no lapse in coverage greater than 63 days.
But Benjamin Sommers explains that the legislation is designed to silently undo the Medicaid expansion:
People frequently move in and out of coverage, a phenomenon often called “churning.” Eligibility for Medicaid fluctuates with job losses or new employment, seasonal work or overtime, changes in family circumstances such as marriage or divorce and other factors.
So, for better or worse, this is where the rubber hits the road ideologically. Do we support government intervention in the market for low-income Americans, or not?
Freedom Caucus Republicans already shepherded an amendment allowing states to implement work requirements for Medicaid benefits. They would also give states the option to accept a lump sum of federal funds instead of the per-capita payments. This might be the closest they get to block grants for Medicaid.
Some of the fiercest criticism highlights how much high-income earners benefit from the bill. The GOP plan would repeal taxes on the wealthy imposed by the ACA to fund increased coverage, including a 3.8 percent tax on investment income and a 0.9 percent tax on people in the highest income brackets.
According to the CBO, the bill takes $1.2 trillion out of helping people get health care (including $880 billion from Medicaid) and then hands out about $600 billion of that in tax cuts, mostly for the well-to-do and various interest groups, the beleaguered tanning industry being my favorite. This could also be called the Make Inequality Worse Act of 2017.
And here’s Catherine Rampell on why these tax cuts are essential to the Republican’s plan:
The presence of expensive tax cuts in a bill purportedly about health-care reform is not a side effect; it’s the entire point. They make it easier for Republicans’ (much bigger) individual and corporate tax cuts to sail through the Senate with minimal Democratic obstruction in a few months’ time. Why? … Republicans can take the filibuster option away by using the “reconciliation” process, which is an option if, and only if, the tax bill doesn’t increase government deficits in the long term, relative to existing law.
Of course, these tax cuts are funded primarily by cutting Medicaid spending, so it’s an easy target for liberals to make the case that Republicans are filling the coffers of the rich off the backs of the poor (a.k.a., a reverse Robin Hood tax).
The GOP plan does preserve one particular tax that mostly affects the wealthy, and that’s the one on so-called Cadillac insurance plans — or expensive plans often available to high-income employees. The ACA was originally supposed to tax these plans at 40 percent starting in 2018 but delayed implementation until 2020. The GOP plan pushes that date back again to 2025.
Still, preserving the “Cadillac tax” attracted criticism from Republicans such as Sen. Rand Paul (Ky.), who characterizes the bill as “Obamacare Lite.” Avik Roy defends the GOP bill:
Rhetorically, GOP hard-liners such as Paul claim that they are implacably opposed to federal subsidies for health insurance, that they’re taking a brave stand against big government. Operationally, however, they support subsidies for the rich, and only oppose subsidies for the poor and the sick. That comes across not as a principled stand against statism, but as a political stand against Americans whose votes they don’t need.
The essential benefits package:
This is a policy item that got some last-minute attention to woo votes from conservatives opposing the bill. When the ACA was passed, it required insurers to provide “essential benefits” in 10 areas — such as mental health, dental and vision care for kids and maternity care.
For procedural reasons, the original bill preserved these requirements — Greg Sargent explains in depth here — but that didn’t sit well with Freedom Caucus members. So GOP leadership changed its view.
What would stripping out these benefits mean? Free market-minded people say that it would remove “paternalistic” government overreach. But others are concerned that health insurance wouldn’t do any good if it doesn’t cover basic needs.
What’s the GOP’s end game?
The goal of this bill is clearly to reduce the footprint of the federal government in health — pulling back Medicaid and adding market-based reforms.
But it’s hard to identify a fully formed Republican strategy since so many people within the party’s own ranks dislike the bill, as Dana Milbank notes. Plenty of critics argue that this entire episode illustrates how the Republicans never had a fully formed replacement plan in mind. Here’s Charles Lane:
After vilifying that set of interlocking policy compromises as a budget-busting, freedom-destroying ticket to second-rate medical care, the leaders of the GOP House have now declared, in writing, that they don’t have a fundamentally different idea, much less a better one.
Of course, Republicans aren’t able to draft their ideal plan because they’re trying to pass this plan through reconciliation — which means that this is technically a budget bill and can avoid a filibuster. That severely limits what they can put in the bill, such as a provision allowing consumers to buy insurance across state lines.
But more cynical critics believe that hard-line Republicans opposing the bill simply want the ACA to fail on its own without repealing it, even if that means actively taking steps to weaken President Barack Obama’s signature achievement. Here’s Greg Sargent’s analysis:
[It’s] not crazy to imagine that conservatives might prefer for the current repeal effort to fail, at least in its current form. … And needless to say, if it does fail, and the ACA lives on, conservatives can continue to say it’s a horrific failure — no matter what actually happens — thus proving them right about the folly of government efforts to expand coverage.
Conservative pundits such as Hugh Hewitt warn that such a failure to pass a health-care bill would mean the death of Republican majorities. But others, such as Jennifer Rubin, argue that it would be more disastrous for the GOP to put out a bill that would ultimately damage health-care coverage gains. Who is right is anyone’s guess.