Repeal and Replace?

Last updated on: November 11, 2016 at 8:48 am by Jane the Actuary

Repeal and Replace? 2016-11-11T08:48:31-06:00 Jane the Actuary

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So that’s what Trump and Congress claim they’re going to do. What do they mean? What could they mean?

Remember the three-legged stool: mandates, subsidies, and the pre-existing condition exclusion prohibition. And Obamacare is more than that: the requirement that the differential between old and young cannot exceed a specified ratio, far less than the actual difference in claims, the requirement that a government-defined list of “preventative health benefits” (including contraceptive drugs and devices) be covered, the prohibition of lifetime maximums and the addition of a maximum out-of-pocket limit, the requirement that employers and insurers cover under-26 year old adults on the same basis as they would younger dependents (with no extra charges for “family” rates), the imposition of any number of other regulations, and, of course, the expansion of Medicaid to everyone below 133% of the poverty line, rather than just for mothers and children. Oh, and that’s not to mention the various existing regulations around required benefits at the state level, and the mountain of special programs that Obamacare established.

What stays? What goes?

Trump promises, “we’ll keep pre-existing conditions” — or, rather, I distinctly remember him saying something at one of the debates that was pretty much the opposite of what he meant, a promise to keep the prohibition on differentiated treatment of those with pre-existing conditions. But you can’t do that in isolation. He also promises, “we’re going to take care of everyone,” which left everyone scratching their heads as to what he could possibly mean by that.

And the anger the Trump tapped into was not, for the most part, anger at the government spending on subsidies and Medicaid (the tax hikes were largely invisible), but at the massive premium hikes. And why were those hikes so high — or, rather, why is post-Obamacare insurance turning out to be so much more expensive than prior individual coverage people had? Multiple reasons: it’s more expensive for the young because they’re subsidizing the old. Everyone’s subsidizing the sick, who are turning out to be a larger proportion of the individual insurance population than expected because fewer healthy folks are signing up than expected, and who are turning out to be using more health care services than expected. The various plan design regulations are all adding to the cost: those “free” doctors’ visits and breastpumps and IUDs are not free, after all, and the lifetime maximum prohibition and out-of-pocket restriction also play a role.

But Obamacare has also created a very real constituency of people who get their healthcare through Medicaid or through an Obamacare-subsidized plan. Now, I don’t have the numbers at hand on how it splits out between these two groups, though I know that the largest number of newly-insured folk are Medicaid recipients who hadn’t qualified when it as offered only to the disabled, mothers and children (for the most part), and some time ago, I read an article about the very (un)surprising fact that the newly-insured who received regular Obamacare plans, not Medicaid, were unable to pay their pre-deductible healthcare costs, and were stuck unable to use the sliding-scale health clinics they were previously accustomed to, because of existing policies that they were only for the uninsured (whether those clinics have changed their policies since then, I don’t know). Beyond this, there’s a larger consistency of people who enjoy the “perks” — parents’ health insurance to age 25, and the “free” services — without really caring about how it fits into a larger whole.

And most of the “Replace” plans proffered by Republicans include some sort of tax credit towards the purchase of healthcare. Of the various proposals, I wasn’t too thrilled with most of them, but thought that there were some promising ideas. Scott Walker’s plan, for instance (the link is to my prior comments, as the plan itself not appears to be offline), proposed to continue coverage for low-income adults through a reformed Medicaid, and proposed for others a tax credit. Now, the tax credit concept was not as fully developed as it should have been: any such credit, to be a meaningful alternative to the Obamacare subsidies, simply must sensibly reflect differences in cost for age and family size, and the Walker credit only had a small number of brackets, which at least was an improvement on plans which only had a flat amount, great for young singles, not so much for older families.

Now, the Republicans have the majority in the House and Senate, as well as the presidency — but they don’t have a filibuster-proof majority as the Democrats had when they passed Obamacare. And a full-on repeal hardly seems the sort of legislation that’s worth the end of the filibuster. A better alternative: an extended repair process.

Create tax credits, or, better yet, full-on vouchers, applicable to everyone, based on individual ages of policyholders and their dependents, sufficient to buy a high-deductible plan. (Employer-provided health insurance pricing would adjust for this.) Eliminate the employer and employee mandate. Integrate Medicaid and standard health insurance, perhaps by modifying Medicaid to a sliding-scale set of fees for treatments up to the deductible. Allow insurers to price policies higher for folks with pre-existing conditions, with additional credits as needed, and/or limit the ability of people to move into a more comprehensive policy when they become sick. Then modify or eliminate the various other regulations as needed, piecemeal.

But a single piece of legislation, that simply says, “the Affordable Care Act is hereby repealed”? That would be tremendously destructive, both to the healthcare industry and to civil society.

Image: V0050236 A fist-fight between Lord Brougham and Lord Melbourne as Pea
Credit: Wellcome Library, London. Wellcome Images
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http://wellcomeimages.org
A fist-fight between Lord Brougham and Lord Melbourne as Peachum and Lockit. Coloured lithograph by H.B. (John Doyle), 1837.
1837 By: John DoylePublished: 22 October 1836
Copyrighted work available under Creative Commons Attribution only licence CC BY 4.0 http://creativecommons.org/licenses/by/4.0/

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