When their party took control of the White House in January, Republicans on Capitol Hill quickly powered forward on amending Obamacare. In March, Republican leaders introduced the American Health Care Act, the first part of a three-part plan to change the law. But the GOP effort collapsed: Enough Republicans in the House were divided on the effects of the legislation — from both the middle and the far right — that the bill never received a vote.
This week a compromise, the MacArthur Amendment — named after Rep. Tom MacArthur, the moderate New Jersey Republican who sat down with the conservative House Freedom Caucus to figure out how the AHCA might be passed — may have resuscitate the GOP bill.
Or perhaps not. The politics are still unfolding.
What we can do, though, is explain what each of these laws and amendments does or would do, so at the very least you know whether you’d want your elected officials to support them.
As is only appropriate, we begin at the beginning.
The main goals of the Affordable Care Act were to expand health-care coverage while ensuring that people could still afford it.
Those two goals are not necessarily mutually achievable, by the very nature of health insurance. Consider how insurance works: You pay in regularly so that, should you need help in covering large, unexpected bills, your insurer will foot the costs. The system works for the insurer as long as the amount coming in each month from people who don’t have huge medical bills is around enough to pay for the bills of those who do. For years, insurers would deny coverage to people who they knew would consistently have big medical bills — people with serious diseases, for example — because such customers would necessarily be a drain on the bottom line, requiring more in payments each month than they put in. (This is the group with “preexisting conditions” — expensive health issues that existed before enrolling in coverage.) The insurers could jack up the rates on such patients, reducing the likelihood that the patient would sign up.
What Obamacare did was try to bring a lot more people into the pool. The individual mandate, the requirement that Americans have some form of health coverage, was an attempt to get more healthy people to enroll in coverage, thereby expanding the amount of money coming in for insurers and enabling them to enroll more patients with preexisting conditions.
In addition to preexisting conditions, Obamacare required that insurers have a consistent rate structure regardless of consideration of demographic traits like gender — the “community rating.” (In contrast with having, say, women of childbearing age charged more than men given the possibility of cost spikes because of pregnancy.) It also mandated the inclusion of certain coverage, like emergency room visits. And, of course, the program subsidizes insurance coverage, meaning that the government picks up a certain proportion of the cost of insurance for lower-income Americans.
Most notably, the Affordable Care Act also expanded Medicaid to cover more people. That expansion, mostly funded by the federal government, is responsible for much of the drop in the number of uninsured Americans following the passage of the law. That decline can be seen in this chart from Gallup.
The precise number of people who gained insurance is a bit gauzy. Charles Gaba, who has tracked Obamacare’s effects since the law’s inception, estimates that some 12.3 million people are covered directly under the Medicaid expansion and another 12 million are covered through the individual mandate. Several million others pay a tax penalty for not having insurance coverage — meaning that they’re still generating some revenue for the system.
The American Health Care Act
Democrats expected that Obamacare would be a political winner for them, providing a group of millions of people who would come to the polls in defense of the legislation that was giving them affordable health care. That didn’t prove to be the case in either 2010 or 2014, when the party was blown out in midterm elections. However, once Donald Trump won the presidency last November and the prospect of repealing the law became real, Obamacare’s popularity spiked.
That instantly made things trickier for Republicans as they tried to figure out how to revamp it. In early March, congressional Republicans introduced the American Health Care Act, step one in a three-part process of overhauling the Affordable Care Act. The AHCA would revamp the Affordable Care Act as much as possible while still avoiding a filibuster in the Senate. (More on this in a second.) In part two, the new secretary of health and human services, Tom Price, would make administrative changes to health-care policy. Part three is a slew of other reforms (which haven’t yet been fleshed out) that could overhaul the law in other ways.
As proposed, the AHCA would change the subsidy system so that, instead of a reduction in the cost of your insurance based on your income, everyone would get the same flat maximum of $4,000 a year. It would also eliminate the tax penalty for not having insurance coverage, meaning that the individual mandate is no longer really a mandate. Instead, insurers would be able to increase rates for those enrolling in coverage after lacking insurance for at least 12 months. The bill would also reduce Medicaid spending from the federal government.
That much of the focus is on reducing spending isn’t only a function of this being a proposal driven by Republicans. For the bill to be able to be considered by the Senate under the rules of “reconciliation” — a process created to expedite budget considerations without subjecting them to the 60-vote filibuster-proof majority of other bills — the legislation has to offer a net reduction in the federal deficit.
The Congressional Budget Office assessed the American Health Care Act, finding that it would indeed reduce federal spending, by about $337 billion. At the same time, though, coverage would drop over the next decade so that 24 million people who would be covered under Obamacare wouldn’t be under the AHCA.
In part, that would be because coverage costs would spike for some groups. The flat $4,000 credit means that less of the annual cost of coverage for lower-income, older Americans would be covered, reducing the number of them who would continue to carry insurance. Such individuals would stop buying insurance, the CBO estimated, and the number — and cost — of insurance would decrease.
The reason the legislation didn’t pass in March, though, is because of politics. Conservative Republicans in the House Freedom Caucus didn’t think that the bill went far enough to actually replace Obamacare. Moderate Republicans were concerned about those CBO estimates. Republicans couldn’t get a majority from their own party, and the bill was tabled.
The MacArthur Amendment
Which brings us to this week.
One way in which the Freedom Caucus members wanted to overhaul Obamacare was to revisit the question of coverage for preexisting conditions. MacArthur’s proposed amendment would allow states to apply for waivers to federal rules, allowing insurers to charge those with certain preexisting conditions differently than the rest of the pool.
Those with preexisting conditions still must be covered, and states would have to take steps to contain costs for those people with particularly high medical costs. But the amendment leaves open the door for insurers to potentially charge them more — perhaps a lot more.
This is threading a particularly tricky needle. Most Americans — including Trump’s base of support — think that preexisting conditions should be set at the federal level rather than determined by the states.
Under the amendment, states would also be allowed to get a waiver to define their own essential benefits, potentially meaning that insurers could then be allowed to drop certain components of insurance packages, reducing costs — and reducing coverage.
There’s a catch to these state waivers: If the government doesn’t deny the waiver within 60 days, a state’s exceptions automatically go into effect. In Internet terms, it’s an opt-out policy; by default, the waivers are granted unless the federal government intervenes to reject them.
What the effects would be
It’s important to remember that most Americans aren’t part of the Obamacare/AHCA system, thanks to being covered by their employers or through Medicare. (The New York Times estimated earlier this year that only about 3 percent of Americans were affected by increases in Obamacare premium increases, for example.)
The number of people with preexisting conditions who might be affected, for example, requires quite a bit of math to determine. The Kaiser Family Foundation estimated last December that some 52 million Americans — a quarter of those under the age of 65 — would be considered to have some condition that might be considered preexisting. Much (or even most) of that group probably has employer coverage. The foundation notes, though, that a gap in employment would mean they might at some point seek individual coverage on an insurance exchange.
Over the short term, the broader question is whether an amended AHCA could even pass the House, much less the Senate. The answer to that depends on the extent to which Republicans on Capitol Hill are convinced that they will not pay a political price for supporting the amendment to the bill that will, for the second time in five years, completely overhaul the American health-care system.
How that plays out is somewhat harder to predict.