Another Day, Another Deceptive Health Care Bill

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Senate Republicans continue to wrestle with their health care dilemma. Having failed for years to develop an alternative to Obamacare, they remain under great political pressure to repeal it anyway, while somehow pretending they will leave people at least as well insured as they are now. The majority of Americans remain to be convinced.

The latest edition of “repeal and replace” uses block grants to the states as a kind of miracle supplement to compensate for all the nutritional deficiencies of the legislation. The Graham-Cassidy bill would repeal almost all of the specific provisions that have made health insurance affordable for millions of people (while admittedly making it more expensive for some). The bill would also cut health insurance spending at the federal level, giving what’s left to the states in the hope that they can devise something better.

As with previous Republican proposals, Graham-Cassidy would immediately repeal the mandates that require individuals to carry health insurance and large employers to offer group coverage. The year 2020 would see the end of federal tax credits to help offset the costs of premiums, subsidies for out-of-pocket costs, and the expanded Medicaid coverage in which thirty states are participating.

In addition, provisions of the Affordable Care Act that were retained in the last two Senate proposals would now be left up to the states. States could decide whether they wanted to require coverage of medical benefits previously designated as essential, to prohibit lifetime caps on benefits, to require equal treatment of people with pre-existing conditions, or to limit the rates charged to older policyholders.

The Congressional Budget Office, which issued a preliminary analysis yesterday, found all this difficult to evaluate. They said that it would take them several weeks to come up with better estimates of federal expenses and insurance coverage rates. But Senate Republicans are determined to pass the bill this week–although that now looks unlikely–before the deadline for passing it under “reconciliation.” After that, they would need more than 51 votes to avoid a filibuster, and that would require some cooperation from Democrats. As of now, most Republicans are determined to avoid any bipartisan process that might improve Obamacare rather than gut it.

Fiscal implications

The CBO’s preliminary estimate is that the bill would reduce federal deficits by $133 billion over ten years. That’s mainly because the government would give the states less in block grants than it is projected to spend on tax credits, subsidies and expanded Medicaid payments under the current law.

Although the average state would lose federal spending under the proposal, spending would rise in some and fall in others. “By 2026, under the legislation, states that have already expanded Medicaid under the ACA would receive about 30 percent less funding…, and other states would receive about 30 percent more….” This shift would occur gradually over ten years, as allocations came to be based less on what states are spending now and more on the demographic characteristics of their populations (“…their share of residents with income between 50 percent and 138 percent of the federal poverty level (FPL), with adjustments for factors related to the health of those residents and for other factors affecting states’ health care costs”). States would be free to spend their block grants in a variety of ways, such as subsidizing insurance for people with high health care costs, arranging with insurers to reduce premiums, paying health care providers, helping pay out-of-pocket costs, or arranging with private insurers to offer coverage previously provided by Medicaid expansion.

New legislation would be required to continue the block grants beyond ten years.

Insurance implications

As President Trump recently learned to his chagrin, health care is hard. Under this plan, every state would now face the same dilemmas that the architects of the Affordable Care Plan faced. How would the states insure the poor and the sick without placing unreasonable burdens on the affluent and the healthy?

With no federal mandates or tax breaks, what would motivate the healthy to buy insurance so that their premiums could help support health care for the sick? Insurers might avoid insuring the sick, charge them more than they can afford, cover fewer conditions, or leave the market altogether. State-run systems would be vulnerable to the same kind of downward spiral that Republicans have predicted for Obamacare–not enough people in the individual market, insurers raising rates, still more people leaving the market. Each state would have to devise its own system of carrots and sticks to make health insurance affordable, but with a little less money for carrots than we spend now.

The thirty states that expanded Medicaid would have the most acute problem, since they would ultimately lose 30% of their funding. They would either have to dramatically reduce support for the near-poor, or else skimp on the subsidies that keep the healthy in the market and keep coverage affordable for the sick. In either case, the number of uninsured would almost certainly rise.

The CBO predicts that millions now covered by Medicaid would lose coverage, and so would millions in the individual insurance market. The analysis did not try to estimate how many millions in each group. Some of the losses could be offset by voluntary expansion of group coverage, although employers would no longer have a federal mandate to offer it.

The CBO was also concerned about the time it would take for states to develop their own health insurance systems and the confusion that might prevail in the meantime. For example:

To establish its own system of subsidies for coverage in the nongroup market related to people’s income, a state would have to enact legislation and create
a new administrative infrastructure. A state would not be able to rely on any existing system for verifying eligibility or making payments. It would need to establish a new system for enrolling people in nongroup insurance, verify
eligibility for tax credits or other subsidies, certify insurance as eligible for subsidies, and ultimately ensure that the payments were correct. Those steps would be challenging, particularly if the state chose to simultaneously
change insurance market regulations. Insurers would also need time to develop plans under the new system.

Many insurers might leave the market for several years while state policy was up in the air.

In short, the Graham-Cassidy bill is Obamacare overkill. It throws away the system we have and trusts that the states can do better–but with less money. President Trump and his friends could then declare victory and move on to their main agenda–tricking us into another tax cut for the wealthy.

 

 

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