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How the GOP health-care bill would address one of Obamacare’s big problems — but could cause an even bigger one

Senate Minority Leader Charles E. Schumer (D-N.Y.) points to a sign during a news conference on the Senate health-care bill. (Andrew Caballero/Agence Fance-Presse via Getty Images)

Senate Republicans' health-care bill makes a change to the way the government subsidizes individual health insurance that, if it works, would address one of the major deficiencies of the current health-care system. But health experts are skeptical that, in practical terms, the change would have the desired effect.

The Senate bill would restructure the way the Affordable Care Act provides insurance subsidies. Currently, there's a maximum and a minimum level of income at which a person qualifies for federal help. The Senate bill would remove that minimum, meaning that everyone who makes less than 350 percent of the federal poverty level would qualify for insurance subsidies.

That change is aimed at one outcome of Obamacare that nobody — neither critics nor supporters — ever intended. As planned, everyone making less than the minimum required for subsidies would qualify for Medicaid, which the law sought to expand nationwide. But when the Supreme Court gave states more freedom to decide whether they would expand the program, many states didn't. That left a coverage gap in many states and left approximately 2.6 million people in a maddening paradox: They made too much money to qualify for Medicaid but too little money to qualify for insurance subsidies. Without federal help, most are unable to afford health insurance and go without.

The Senate bill would close that gap by making sure that low-income people who made too much for Medicaid would qualify for subsidies. Whether those subsidies will be enough to help those people get the care they need, however, is an open question, and many health experts are doubtful.

Senate Republicans’ claim of saving individual health insurance markets could prove hollow

When it comes time to buy health insurance, several health policy experts argued, the plans they buy will probably come with such high deductibles and out-of-pocket costs that people will decide not to buy it or be unpleasantly surprised at how little care it covers.

“Those are people who are really low income — 'I don't have two nickels to rub together, I'm barely paying my rent and feeding my kids,' " said Linda Blumberg, a senior fellow at the Urban Institute's Health Policy Center. If those people buy a plan and are told, " 'here, pay some premium and then your deductible is going to be $6,800 and then you have cost-sharing up above that,' let's be realistic. Is that coverage? For those people, there’s no way in the world that they have the money to pay that cost-sharing. I don’t call that coverage.”

And those subsidies may be important not only to poor people who don't qualify for Medicaid, but also for the millions of people who health policy experts believe will lose coverage over the next decade as states will probably shrink their Medicaid programs.

The bill also changes the benchmark off which subsidies are calculated, to a less generous level that will reduce the subsidies everyone receives by about 15 percent, according to Larry Levitt, a senior vice president at the Kaiser Family Foundation.

The change would be profound for many lower-income Americans. Consider what will happen to people who currently make between 100 and 250 percent of the federal poverty level. Under current law, those people get help in paying their premiums and additional assistance to defray their deductibles and out-of-pocket costs, via a federal subsidy called a cost-sharing reduction.

Thanks to those subsidies, a person who makes between 100 and 150 percent of the federal poverty level today is on the hook for only 6 percent of their health care costs, on average. Under the Senate plan, that person would be on the hook for 42 percent of their health care costs in 2020.

“Inevitably, that means lower-income people will have a much harder time buying insurance. The insurance will have even higher deductibles than we already saw on the exchanges, which will surely discourage the younger and healthier people from signing up,” said Joseph Antos, a resident scholar at the American Enterprise Institute.

Some people who currently get no Medicaid and no help paying for insurance could arguably benefit from new access to subsidies. But there's a big question over whether that care would truly be affordable, since the plans would cover only 58 percent of their health-care expenses.

“It raises the question: If you have such low income and if you're healthy, why would you buy it? Either why would you buy it because you can’t afford it, or the plan that’s available is so minimal you still wouldn’t buy it,” Antos said.

The Senate bill would also cut off the assistance that people currently receive at the top end of the income spectrum. Now, the subsidies help people who make up to 400 percent of the federal poverty level pay their monthly premiums, but the cutoff would change to 350 percent of the federal poverty level.

The people in that income bracket are thought to be a relatively small fraction of those who buy health insurance through the exchanges. But many of the complaints about rising premiums in the Affordable Care Act have come from politicians concerned about people who are directly affected by large premium increases, meaning people are too wealthy to qualify for subsidies.

That means the Senate bill would force a subset of new people to pay full price for their plans, suffering the brunt of premium increases. It would probably hit hardest for older Americans who live in areas of the country where insurance is expensive.

“If anything, the concerns about the ACA have been that it doesn’t provide enough help in providing insurance for the middle class,” Levitt said. “This bill moves in the opposite direction. This bill makes it worse.”