At Thetford Town Meeting yesterday, three different folks asked me about the Affordable Care Act. Will it remain in place? What happens if the plug gets pulled?
Someday soon a Republican in Washington might step to the podium to lay out a detailed plan on repealing and replacing the Affordable Care Act (“ACA” or “Obamacare”). Maybe it will be Paul Ryan. Maybe Tom Price. Possibly Mitch McConnell or even Sean Spicer. Candidate Trump and congressional Republicans spent 2016 pledging to repeal Obamacare on “Day 1” and replace it with “something that works.” The law is proving to be more difficult to topple now that the campaign season has passed and the governing season is upon us.
Repeal and replace, meet reality. Let’s rewind and examine how we got here.
Congress passed the ACA in March 2010. Four long years and one pivotal Supreme Court decision later, the law became operational nationally through a regulated health insurance marketplace and expanded Medicaid coverage. The primary goals of the ACA were to improve the affordability and quality of health insurance policies, reduce the number of uninsured Americans, and lower the growth rate of health care expenditures.
Some of the most important aspects of the law are:
Guaranteed issue: The ACA prohibits an insurance company from denying coverage based on pre-existing conditions. Insurance companies can no longer cherry pick only the healthiest customers to insure, nor can they drop coverage for customers who develop health problems.
Individual mandate: Under the ACA, everyone is required to have health insurance or pay a tax penalty. The individual mandate is necessary to expand the diversity and size of the insurance risk pool, spreading the costs of insuring less healthy citizens across a much broader population of healthy people. This mandate also requires that people purchase insurance during open enrollment periods. Open enrollment periods prevent people from only purchasing insurance policies when they get sick or anticipate major health care expenses. Without the individual mandate and open enrollment periods, insurance rates would increase dramatically as the insured population would shrink to include only the least healthy with the highest health care expenses.
Subsidies: The ACA provides tax subsidies for moderate income Americans to purchase private health insurance. Tax subsidies for purchasing insurance are provided to households with income between 138% and 400% of the federal poverty level (“FPL”). These subsidies cap the out-of-pocket expenses paid for health insurance at 3% of income for those with incomes at 138% of FPL ($33,465 for a family of 4) and slide up to a 9.5% out-of-pocket cap for those with incomes at 400% of FPL ($97,000).
Expanded Medicaid: The ACA expands eligibility for Medicaid to people with incomes below 138% of FPL. (Medicare is a totally different program which provides health insurance for people over 65-years old and is a 100% federal program.) Medicaid is a program whose costs are split between states and the federal government, though the cost of the ACA Medicaid expansion was almost entirely covered by the federal government. About one-third of states, mostly across the southern U.S., rejected this Medicaid expansion for their states. The expansion of Medicaid under Obamacare provided health insurance coverage to an additional 12 million people.
Insurance standards: Obamacare requires that insurance policies provide “essential health benefits” including preventative and wellness care, mental health and substance abuse treatment, maternity and newborn care, hospitalization and emergency room care, pharmaceutical coverage, and oral/vision care for children. In Vermont, colonoscopies, mammograms, and a wide range of contraceptives are considered essential health benefits and require no copayment as part of an insurance policy. The ACA also established the “metal levels” (bronze, silver, gold, and platinum) of coverage as indicators to consumers of a policy's costs (premiums, deductibles, co-pays, out-of-pocket max). After paying insurance premiums, bronze policy holders can expect to pay approximately 40% of health care costs out-of-pocket; silver 30%; gold 20%; and platinum 10%. Obamacare also did away with lifetime caps on insurance coverage and required that policies establish annual maximum out-of-pocket healthcare costs.
Reflecting on the first three and a half years of Obamacare, one can see the law is not perfect. We still have massive challenges in our health care system. The health insurance marketplace in Vermont – VT Health Connect – has been a big headache, though it has performed significantly better in the last six months. Health care (and insurance) costs are still rising too fast. The ACA hasn't solved the problem of affordability. What it has really addressed is access.
Because of the ACA, an additional 22 to 24 million Americans now have access to health insurance and health care. About half that number buy insurance through the exchanges, and many can afford that coverage because of the federal tax credits they receive. About half get coverage through Medicaid thanks to the expansion of that program.
A final, but not unimportant, point about the Affordable Care Act: it is progressively financed. While poor and middle income folks are the primary beneficiaries of the ACA, it is mostly financed through a 3.8% tax on household income in excess of $250,000, new taxes on pharmaceutical and medical device manufacturers, and penalties paid by those who choose not to get insurance. In an era of massively growing income inequality and tax policy that has disproportionately benefited wealthy Americans, the ACA stands out as a policy that taxes the affluent to the benefit of the middle class and those who have slipped into poverty.
With that as a backdrop, let’s get back to the repeal/replace ideas of the Trump administration and Congressional Republicans.
“Nobody knew health care could be so complicated.” That’s what our President said last week before he called on Congress “to repeal and replace Obamacare.” President Trump asked Congress to: (1) insure people with pre-existing conditions continue to have access to coverage, (2) use tax credits and health savings accounts to help people purchase coverage, (3) give states the resources they need with Medicaid to “make sure no one is left out,” (4) cap malpractice insurance premiums and payouts, and (5) allow the sale of health insurance across state lines. Ironically, items 1, 2, 3, and 5 are part of Obamacare. (Item 4, the cost of doctor’s malpractice insurance, is a favorite whipping post of conservatives, though no serious health care economist references it as a driver of health care inflation.) So what's all the fuss about?
Importantly, the President did not mention jettisoning the individual mandate. The challenge that the R&R crowd faces in overturning Obamacare is how to get rid of the individual mandate (they hate it even though it was the brainchild of the conservative Heritage Foundation back in the 1980s), while keeping the politically popular guaranteed issue clause. Axing the individual mandate while keeping guaranteed issue would likely send health insurance premiums soaring as insurers price in the risk that they will be left with only older and less healthy customers.
Rolling back the Medicaid program and reducing benefits to the poorest Americans is catnip to Congressional Republicans. Under the guise of empowering states and encouraging innovation, an R&R plan will likely incorporate a freeze on federal Medicaid spending while "giving states the resources they need" in the form of a “block grant.” With block grant funding subject to the federal budget process, forget about Medicaid funding keeping up with the pace of health care inflation or the pace at which the Medicaid population is aging and requires health care services. Simply cutting federal spending on Medicaid and reducing supports for people buying private insurance is the highly disruptive equivalent of “let the market decide.” Indeed, denying people health care will reduce federal spending, but it won’t be pretty.
Oh, and those progressive taxes that pay for Obamacare? Repealed and replaced with a tax on the cost of your health insurance plan. In the R&R hall of mirrors, Americans making over $250,000 will get a tax cut while employers and modest income citizens incur a tax on the cost of their gold and platinum insurance plans.
The Affordable Care Act is not a perfect law. While it has slowed the growth of health care expenditures from their trajectory a decade ago, health care inflation and per capita spending is still unacceptably high. The ACA has cut the uninsured rate in the U.S. in half, but over 20 million Americans still lack health insurance. In recent years, Congressional Republicans have successfully disabled parts of the ACA. Their intent was to destabilize insurance markets in several states, which has happened, to undermine Obamacare. So, yes, the ACA needs some work. But not what Repeal & Replace will offer.
Health care is complicated. That is, unless you’re over the age of 65. I don’t hear too many elderly Americans complaining about their Medicare coverage. Let’s simplify things. How about Medicare for everyone? It seems to work for the rest of the industrialized world.
Here's a photo of Mary Chin, Wendy MacNeil and her son Caleb. They were in the Cedar Creek Room at the State House for a rally supporting the work of Gun Sense VT, a grassroots organization working for universal background checks on gun purchases.