Health Insurance Losses Remain High in Senate Bill

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Today I will interrupt my discussion of Viking Economics in order to report on the Congressional Budget Office’s analysis of the “Better Care Reconciliation Act” proposed by Senate Republicans. Although the bill differs from the House Republican bill in many of its details, its effect on health care spending and insurance coverage is projected to be similar.

According to the CBO, the Senate proposal would reduce the number of people with health insurance by 22 million over ten years, compared to 23 million for the House bill. It would reduce Medicaid spending by $772 billion, compared to $834 billion for the House bill. It would reduce tax credits and subsidies for purchasing health insurance on the individual market by $408 billion, vs. $276 billion for the House bill. It would eliminate most of the Affordable Care Act’s taxes, which were aimed primarily at medical corporations and the wealthiest taxpayers.

At first, fewer people would have health insurance primarily because penalties for not having it would be eliminated. Some individuals would choose not to carry insurance, and some large employers would choose not to offer group plans. Although young and healthy individuals would be less inclined to obtain coverage, CBO expects that enough of them would do so to keep most insurance markets stable and generate the revenue insurers need to cover the sick. In a few sparsely populated areas, insurers would not have enough customers to keep them in the market.

As other provisions of the Senate bill took effect, more of the uninsured would be people who found insurance less available or affordable than it was under Obamacare.  That could be for a number of reasons.

Reversing the Medicaid expansion and spending less on Medicaid in general would result in an expected drop of 15 million in enrollment over ten years. (That would be an especially big blow to nursing home residents, the majority of whom rely on Medicaid because they have exhausted their savings.)

Many people who are not on Medicaid would be priced out of the market because of higher premiums. Insurers might have to raise rates in order to compensate for the loss of premiums from healthy people who elect to go without insurance. Older buyers would also face higher premiums because insurers would be allowed to charge them up to five times as much as younger buyers; that limit was three times as much under Obamacare.

For many people, the problem would not be higher premiums but less government help in paying for them. Tax credits would offset a smaller percentage of the premiums than under Obamacare, and they would phase out at a somewhat lower income level, 350% of the poverty level instead of 400%.

The CBO analysis talks about premium declines as well as premium increases. In the short run, insurers might have to raise premiums on the sick because fewer healthy people were signing up. But in the long run, the premium on a “benchmark policy” could drop 20-30%. The “benchmark policy” is a standard policy that is the basis for calculating your tax credit. You are expected to pay a certain percentage of the premium, and the government reimburses the rest. The main reason why the benchmark policy would be cheaper is that the bill allows it to cover less of expected health care costs. It only has to cover 58% of the cost instead of Obamacare’s 70%. So the premium is lower, but that is offset in two ways: your share of the premium is a little higher, and your deductible will be higher when you need care. The drop in premiums is a somewhat illusory benefit, since your out-of-pocket cost is higher. Obamacare has some additional subsidies to help with out-of-pocket costs, but the Senate bill eliminates them.

Inexpensive policies would also be available because states can obtain waivers from Obamacare’s strict rules on benefits (requiring “essential benefits” and prohibiting annual or lifetime caps on payouts). That might work for someone who wants a policy without maternity benefits. For people who need a comprehensive policy with no caps, the cheaper policy is very risky.

Low-income people not covered by Medicaid would often face a choice between having to pay too high a premium for a good plan, or having to pay too much out-of-pocket because their cheaper plan doesn’t cover very much. As a result, the CBO predicts that “few low-income people would purchase any plan.” For the 43% of the population with incomes below 200% of the poverty threshold, CBO predicts that the percentage who lack insurance would rise from 17.6% to 34.8% in the 19-29 age group, from 19.8% to 36.7% in the 30-49 age group, and from 11.2% to 25.6% in the 50-64 age group. For the entire population under 65 (all income levels), the percentage uninsured would rise from 10% to 18%. The CBO is too non-partisan to say so, but that sounds like regress, not progress.

Although President Trump initially endorsed the House Republican bill, he later acknowledged that it was too “mean”.  Now he is endorsing the Senate bill, which is about equally mean. One wonders whether the President even understands what he is supporting, since it is so far from what he originally promised. Most Republicans do not seem to care very much what’s in the bill either, as long as it pleases the Republican base by repealing Obamacare and cutting taxes for the wealthy.

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