Holy Pre-existing Conditions, Batman! It’s Obamacare-lite!

Last updated on: June 22, 2017 at 11:31 am by Jane the Actuary

Holy Pre-existing Conditions, Batman! It’s Obamacare-lite! 2017-06-22T11:31:07-06:00 Jane the Actuary

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The Senate healthcare proposal is finally out, and here’s my first, lunchtime assessment.

Republicans have promised up and down that they’ll end Obamacare for one reason: that it’s not working. Does the typical consumer care about the taxes on high earners? No, not really. They care about how it impacts them, or about how they fear it’ll impact them in the future.

Why is Obamacare failing?

The bottom line: Insurers are withdrawing from some Obamacare markets, and raising premiums erratically and narrowing networks in others, because they themselves cannot price policies reliably, due to the regulatory conditions in which they must operate. In particular, the young and healthy folk that Obamacare policies had relied on to subsidize the old and sick, have done the math, and see that their premiums would be higher than it’s worth to them. And the required benefits, while all well and good, increase costs without any apparent pay-off. And the risk corridors and other goodies that were supposed to provide government subsidies to the insurers were a matter of executive order that Congress has eliminated.

But is the Senate proposal going to fix these problems? Not likely. At this point I’m going off of the Vox summary, which seems credible and without hysteria.

The biggest impact of the Senate proposal is to pare back Medicaid, or, rather, restructure it from a blank check into a fixed sum of money from the feds, and they pare back the 95% cost-share for the Medicaid expansion population. Now, how the Medicaid system should be structured is, as they say, beyond the scope of this blog post. Are there efficiency gains to be found, or not? To what degree do Medicaid participants abuse the no-cost ER for sniffles? What about the fact that American retirees tend to think of Medicaid as long-term care insurance, with advisors consulting on how to best shelter assets to meet the asset test? How will this impact patients, vs. requiring states to pitch in more?

The proposal also keeps the fundamental concept of means-tested subsidies; it just reduces the cut-off for those subsidies and reduces the amount of the subsidies by tying them to a bronze rather than a silver plan. One plus is that it provides those subsidies to everyone, rather than leaving the below-poverty folk in non-Medicaid expansion states floundering, as is the case now.

But the proposal keeps the guarantee of coverage for people with pre-existing conditions, and at the same time, eliminates the mandate that was supposed to prevent people from gaming the system. All that’s left now is the fear that you’ll be diagnosed with something outside the open enrollment period and be unable to come up with a special exemption to enroll as a status change.

Now the new bill does have some other tweaks: according to a summary in The Hill, similar to the House bill, it raises the permitted differential between premiums for young and old (you might think it’s noble and socially-responsible for young people to pay more than their actuarially-fair share, but it doesn’t work in practice), and it eliminates the employer mandate (which had its own set of unintended consequences, as employers cut away at 40 hour jobs). And the proposal only indirectly addresses the question of Essential Health Benefits, by permitting state waivers. Does it address Obamacare’s preventive care mandates? I don’t know yet.

When it comes down to it, there are two basic considerations at play here: how much money should individuals, vs. the government, be paying for healthcare? And what’s the most effective way to deliver this?

At first glance, this Obamacare-lite proposal needs a heck of a lot of improvement before it can address these two questions successfully.

Image: https://commons.wikimedia.org/wiki/File%3ADoctor_examines_patient_(1).jpg; By Unknown photographer [Public domain], via Wikimedia Commons

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