House Speaker Paul Ryan and his lead colleagues have generated even more news about the Republicans’ plans to repeal the Affordable Care Act.
Still no legislation. Still spare details. And still, it seems, no genuine consensus, though a large majority now understand that simply repealing the ACA would be a disaster politically, as well as for the 20 million or so Americans who’ve gained health insurance coverage since the law kicked in.
Ryan, however, has released a policy brief that purports to set out the major elements of the House Republicans’ repeal-replace plan.
Needless to say, it aims to radically cut federal spending on health care. Beyond that, a New York Times headline captures the major thrust: “Republican Health Care Proposal Would Redirect Money From Poor to Rich.”
Here briefly are the major changes and how they’d make the shift. Long post, but on one of the biggest immediate threats to the well-being of low and moderate-income people in this country and our common — though obviously not universal — concept of equity.
End of Medicaid As We Know It
Many concerned parties, including yours truly, have animadverted before about Ryan’s plans to convert Medicaid to a block grant.
Basically, states would no longer receive partial reimbursements for the costs they incur in providing health care to the poor and near-poor people they’ve enrolled. They’d instead receive a fixed sum of money, coupled with even fewer requirements and restrictions on what they can do.
We can predict from the fate of other block grants that the fixed sum will either remain the same, regardless of increases in the number of very low-income people in need — or grow somewhat, but not enough to not enough to benefit everyone eligible or who would have been had the block grant not been created.
Ryan’s new plan includes this option, but leans toward a variation — per capita grants. These too use a formula to set states’ funding, but it’s based on the regular federal match that each received in a base year for people in specific categories, e.g., children, people with disabilities.
The grants would increase, based on the inflation rate. But the rate, as commonly measured, reflects the prices of goods and services consumers commonly pay for, e.g., food, fuel, housing, with medical expenses merely folded in.
As we all know, health care costs rise more. And they’re projected to rise considerably higher, boosted by aging baby boomers, new, high-priced drugs and other drivers.
In short, same basic result, achieved by something with less tarnished name — and with a further, predicable cost-shift to all the states and the District of Columbia that have expanded their Medicaid programs.
Specifically, the plan would fold in repeal of the higher federal government match for newly-eligible people enrolled in Medicaid programs. States would continue to have the it for some unspecified time so as “not to pull the rug out from” them or beneficiaries.
The rug would, however, be immediately pulled out from under adults deemed able to work, regardless of whether they do, but at a very low wage — or have any reasonable prospects of landing a non-poverty wage job.
Redirected Tax Credits
Under the current law, people who buy health insurance on an exchange get a tax credit that serves as a subsidy if their annual income is less than 400% of the federal poverty line — currently $97,400 for a four-person family. The subsidy goes directly to the company that provides the insurance the beneficiary chooses.
It’s greatest for those in the lowest income bracket and diminishes till it reaches the highest. So it ensures that very low-income people can afford comprehensive health insurance, while not spending federal money on people in upper-income brackets.
The Ryan plan would instead award tax credits directly to people who have no employer-sponsored health insurance or coverage under a government program.
They’d would be based only on age, with larger (unspecified) credits to older people. As the Times column suggests, this would seem to make some sense, since older people tend to need more medical care.
But it means is that some very wealthy people would get a larger benefit than many of the very poor, who not only need more help in affording health insurance, but often have more health care problems.
Expanded Health Savings Accounts
Our current system already offers people opportunities to sock money away tax-free for specific medical and dental needs by putting it into a Health Savings Account.
As with the better-known Individual Retirement Accounts, you can save only up to a maximum in any given year, but the cap is based on age, when you become eligible and the type of insurance you have (see below), rather than age and taxable earnings.
You’re not required to withdraw any money during a given year. So what you’ve invested continues to grow, assuming it’s invested well and that administrative costs don’t offset real-dollar gains.
And you don’t have to pay income taxes when you withdraw, if you spend the money for approved healthcare purposes — another difference from an IRA.
The biggest difference, however, is that you have to expose yourself and your family to budget and/or health risks because you can’t have an HSA unless your insurance plan is a high deductible, i.e., covers only what are sometimes referred to as catastrophic costs.
Current federal rules, for example, allow insurance companies to require high-deductible customers to pay as much as $7,850 for an individual or $15,700 for a family before they start covering costs.
HSAs are thus obviously beneficial to some people who can afford what they and any dependent family members need and still have money left over because they’ll owe less at tax time. But only those who can stash enough to cover thousands of dollars of healthcare costs.
The Ryan plan would allow people to contribute their maximum out-of-pockets to their HSAs. Another provision would allow spouses to contribute all or part of so-called catch-up contributions, i.e. those made in a given year to compensate for lower than maximum contributions previously.
Conservatives, including lead Congressional Republicans have long argued that healthcare costs would drop if people had “more skin in the game,” i.e., more to save or lose depending on whether they choose to seek health care and, if so, what sort and from whom.
This, as I think everybody knows, is profoundly unrealistic. We’ve neither the knowledge nor, in many cases, the time to choose healthcare services the way we choose, for example, large-screen TVs.
It’s nevertheless the theory underpinning the HSA expansion, with its inherent push toward high-deductible plans. And again, it’s effectively spending more on well-off people — in this case, by forfeiting tax revenues.
Undermining the ACA Before Full Repeal
Long as this post is, I haven’t covered all parts of the plan — most notably, the full repeal part.
Sufficeth it to say that it would roil the insurance market — by immediately eliminating the penalty for having no insurance, for example, and the penalty imposed on larger employers that don’t cover most of their full-time workers.
So if Obamacare isn’t failing now — as the policy brief misleadingly says it is — it surely would during the transition period the brief promises.
NOTE: Last Friday, two insider news sources posted a leaked draft of the House Republicans’ legislation. It generally tracks the measures I’ve summarized.