Progress on Health Insurance Coverage Grinds to a Halt

November 4, 2018

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On the eve of the midterm elections, health insurance has emerged as a prime issue dividing Republicans and Democrats. While President Trump tries to mobilize the Republican base by appealing to fears of immigrants seeking asylum, Democrats present themselves as defenders of the Affordable Care Act, especially its protections for people with preexisting conditions. Alarmed by their vulnerability on this issue, Trump and some Republican candidates have tried to claim that they are more committed to providing such protections than Democrats are, a claim that has no basis in fact.

Back in 2017, I reported on the Republican bills to repeal and replace Obamacare, all of which failed to pass. According to the Congressional Budget Office, the bills would have increased the number of uninsured Americans by millions. Some of those would be uninsured by choice, because of the elimination of the individual mandate to buy insurance. Others would be priced out of the market because of reductions in Medicaid funding or eligibility, reductions in federal subsidies to pay premiums, or higher premiums charged by insurance companies. Insurance companies were expected to raise some premiums to compensate for lost customers as the repeal of the individual mandate allowed healthy people to go without insurance. Another predictable effect was that some people would be insured, but with plans that wouldn’t cover as much. Under some of the bills, states could get waivers from Obamacare’s strict standards of coverage (requiring ten “essential benefits” and prohibiting annual or lifetime caps on payouts). In at least one bill, states could even opt out of requiring insurers to cover people with preexisting conditions.

In short, if Congressional Republicans had had their way, the country’s health insurance system would be looking more like it was before Obamacare, with affordable coverage for the healthy and wealthy, but millions of uninsured or underinsured among the rest.

Although these attempts to destroy Obamacare failed, Republicans have continued their efforts to weaken it. Their tax “reform” included elimination of the tax penalties for failing to carry health insurance, effective in 2019. The Trump administration is already declining to enforce them in 2018. Although the penalties were unpopular, they did encourage healthy people to carry insurance, and that enabled insurers to spread the cost of covering the sick among more customers, helping to keep premiums down.

With the penalty for carrying approved coverage eliminated, the Trump administration has announced that insurers can now offer plans that fail to comply with Affordable Care Act standards, although the ACA is still the law of the land. These cheaper plans will be available to healthy people, but probably not to people with preexisting conditions. The administration will also stop making the “cost-sharing reduction payments” that helped insurers who complied with ACA standards hold premiums down. The Kaiser Family Foundation estimates that 2019 premiums for ACA-compliant plans will be 12% higher than they would have been without these changes. (Premiums might actually have fallen in 2019, since insurers raised premiums unnecessarily high for 2018 to cover themselves amidst the uncertainty surrounding the fate of the law.)

According to the Census Bureau’s Current Population Survey, the percentage of Americans who lack health insurance fell from 13.3 percent in 2013 to 8.8% in 2016, as the ACA took effect. No further progress occurred in 2017, however. One reason was that the Trump administration put an end to most federal efforts to sign people up. Another is that the states that were most receptive to expanding Medicaid—that is, blue states—had already done so.

Republican control of the federal government constitutes a threat to affordable health insurance for two reasons. First, the Republican leadership says it will try again to repeal the ACA or have it declared unconstitutional. (The attorneys-general of twenty states are suing for that purpose right now.) Second, even without repeal, Republicans are making it easier for healthy people to go without coverage or obtain cheaper, minimal coverage. That makes it harder for insurers to offer full, high-quality coverage at a price people can afford, especially for people with preexisting conditions. Republican control at the state level is also an obstacle to coverage, especially since it usually means no expansion of eligibility for Medicaid.

Progress toward universal health insurance, which many democratic countries have already achieved, is stalling out in the U.S. under Republican rule. And what progress has occurred could easily be reversed if Republicans remain in power.

Another Day, Another Deceptive Health Care Bill

September 26, 2017

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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.



Health Insurance Losses Remain High in Senate Bill

June 27, 2017

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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.

Health Insurance Less Affordable under Senate Bill

June 23, 2017

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Senate Republicans have finally unveiled legislation to repeal and replace the Affordable Care Act. Now they are in a great rush to pass it without the benefit of hearings or any reasonable time for debate and amendments. That’s a clue about how much public interest and reaction they welcome. Hopefully, we will have an analysis by the Congressional Budget Office at least a day or two before the vote, but we can’t afford to wait for that before informing as many people as possible about what’s in the bill.

What the legislation does, essentially, is deprive the government of the revenue needed to accomplish the law’s original aim. It eliminates most of the new taxes imposed by the Affordable Care Act to cover the cost of subsidizing health insurance. Those taxes primarily affected the wealthy since they targeted investment income and wages above $200,000. Repealing those taxes (except for the “Cadillac tax” on unusually expensive employer health plans) shifts much of the cost of health care from the government back to the buyers of insurance, whether they can afford it or not. Some of the law’s provisions designed to protect the quality of coverage remain–although they are weakened–but the central aim of the Affordable Care Act is seriously undermined.

Benefits continue, but with a catch

Obamacare required all health insurance policies to include ten essential health benefits: Ambulatory (outpatient) care, emergency services, hospitalization, maternity care, mental health and substance abuse services, prescription drugs, rehabilitative and habilitative services, laboratory services, preventive and chronic disease management services, and pediatric services. These requirements would continue, except that states would now be able to apply for waivers of the rules. The same is true for the rule prohibiting annual or lifetime limits on what insurers must pay. Comprehensive coverage will probably be available to most people, but it’s no longer a sure thing.

Dependents could still remain on their parents’ insurance until age 26. Insurers would still have to accept patients with pre-existing conditions and charge them no more than other customers. But as the New York Times noted, “Patients with serious illnesses may find that their coverage is less valuable if they live in a state that eliminates benefit requirements or allows limits on coverage.”

Mandates are repealed

Large employers would no longer be required to offer insurance plans to their employees. I’ll have to leave it to the CBO to estimate how many workers would lose their insurance as a result of that change. Those who did would probably face higher costs in the individual market.

The Senate bill would also eliminate penalties for individuals who choose not to carry health insurance at all. The winners here would be healthy and wealthy people who can afford to pay their health costs out-of-pocket. The bill increases the amounts that people can put into Health Savings Accounts to save for future expenses. That’s a good deal for those who can afford it, since any returns on the investment are tax-free.

Medicaid is slashed

The biggest losers in the Senate bill are the 69 million Medicaid recipients, especially the 14 million who signed up under Obamacare’s new rules. Thirty states chose to participate in the Medicaid expansion, which raised the threshold for eligibility to 138% of the federal poverty level. Funding for that expansion would be reduced starting in 2021, with drastic reductions in 2024. That’s where the bill creates the biggest potential for lost insurance.

In addition, the bill would put a per-capita cap on future payments for all Medicaid recipients. Here is how Drew Altman of the Kaiser Family Foundation describes it:

The Senate plan imposes a harsher formula for its cap than the House plan, which already cuts Medicaid spending by $834 billion over 10 years. Because states have to balance their budgets every year, unlike the federal government, many will struggle to compensate for reductions in federal aid caused by a spending cap. Many states will be forced to choose between Medicaid and other priorities, like education, law enforcement and prisons. The inevitable result will be a reduction in health care spending on low-income people. And you cannot cut over $800 billion from Medicaid without adversely affecting health services for the poor.

Because the Senate bill not only rolls back the Medicaid expansion, but takes a good whack at Medicaid as a whole, the poor could wind up worse off than they were before health care reform was passed in the first place.

I suppose it’s a good thing that much of the damage will be postponed for a few years, giving the political winds time to blow in a different direction. On the other hand, maybe the motivation for dragging it out is to postpone the political fallout, so that the perpetrators of the crime can remain in office as long as possible.

Premiums and credits

The effect of all the changes on insurance premiums could be complicated, and I’ll be interested to see how the CBO sorts it out. Some of what I wrote about the House bill would presumably still apply:

Premiums would be expected to rise for older people and fall for younger people, since the law allows insurers to use a 5-to-1 rather than a 3-to-1 ratio between the two. Average premiums would probably rise for the first few years, since the elimination of the individual mandate would allow younger, healthier people to drop out of the market, forcing insurers to raise premiums on the older, less healthy people who remained. In later years, insurers might lower premiums, as older people who cannot afford the high cost are the ones to drop out.

For states that obtain waivers to weaken the quality of coverage–by declining to cover certain benefits, for example–premiums could fall, but only because policies aren’t worth as much.

What is more certain is that the tax credits that offset the cost of insurance would be less generous under the Senate plan. Ezra Klein has provided a good analysis. Under the Affordable Care Act, the credit is based on the cost of a “benchmark plan,” a plan available in your geographic area that covers 70% of expected health costs. Then, depending on your income, you are only expected to spend a certain percentage of that income on the premium, while the government picks up the rest. The credits phase out entirely for incomes over 400% of the poverty threshold.

The Senate plan cuts the credits in three ways: requiring the benchmark plan to cover only 58% of expected costs instead of 70%, raising the percentage of income that you have to spend on premiums, and phasing out the credit at 350% of the poverty threshold. Credit recipients would have to pay a larger share of premiums, plus pay higher deductibles when they need to file a claim.

Obamacare also includes additional subsidies to defray out-of-pocket costs–deductibles and copayments–for low-income people. The Senate bill eliminates these entirely after 2019, although people might need them more than ever.

Klein summarizes:

The new world created by the Senate health care bill will be based around higher-deductible plans that cover fewer health benefits and cost people more. The plan degrades Obamacare’s insurance regulations, and cuts insurance subsidies so that Americans won’t be able to afford plans as generous as the ones they purchase now. If the Medicaid expansion really does die out in 2024, then the poorest of the poor will be pushed from comprehensive, low-cost health insurance to extremely high-deductible plans.

To put it most simply: Obamacare was a transfer of wealth mainly from high-income taxpayers to lower-income health insurees. The Republican bill transfers it back again, inevitably making comprehensive coverage less affordable. And as Klein notes, “In a particularly Orwellian flourish, the name of this bill dedicated to diminishing the quality of the insurance coverage Americans can afford is “The Better Care Act.” (You know it’s Trumpcare if the name of the act itself is a shameless falsehood.) It would more accurately be called “The Less Affordable Care Act.”

Underlying this tragedy is the assumption that we as a nation cannot afford to provide the universal health coverage that other developed countries have achieved. Instead we have a wealthy class who resist being taxed, a government too weak to control health care costs–the bill specifically prohibits the government from negotiating drug prices with pharmaceutical companies–and private companies that must have their big profits.

CBO Evaluates Amended Health Care Bill

May 25, 2017

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In an earlier post, I summarized the Congressional Budget Office’s “scoring” of the American Health Care Act proposed by House Republicans. After that analysis revealed how many people would lose their insurance under the House plan, House Republicans amended the bill and quickly passed it, without waiting for the CBO to evaluate the new version. Yesterday, the CBO released its revised report, which for the most part reinforces the objections that made the bill so unpopular in the first place.

The amended bill differs from the original mainly in allowing the states to obtain waivers releasing them from certain provisions of the law. According to the CBO,

One type of waiver would allow states to modify the requirements governing essential health benefits (EHBs), which set minimum standards for the benefits that insurance in the nongroup and small-group markets must cover. A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had no demonstrated continuous coverage.

In other words, people would still be entitled to health insurance, but it might not provide the benefits previously regarded as essential. In particular, “out-of-pocket spending on maternity care and mental health and substance abuse services could increase by thousands of dollars in a given year….” In addition, even insurers who did provide such benefits would now be allowed to put a lifetime cap on how much they would pay out for them. The second type of waiver would allow insurers to charge much higher premiums for people with preexisting conditions, unless they were already covered for them and never experienced a break in coverage.

Effects on insurance coverage

The previous CBO estimate was that the number of uninsured Americans would rise by 24 million over ten years if the House bill became law. For the amended version, the estimate is now 23 million. Some of the uninsured would be healthy people who voluntarily gave up health insurance because the law eliminated the penalties for not carrying it. Others would be forced out of the market because they found insurance less affordable. That could be because policies became too expensive for people with a certain health condition or need, or because they lost more in Obamacare subsidies than they gained from the new law’s tax credits.

The biggest reason the law would insure fewer people is because it dramatically cuts spending on Medicaid. That accounts for 14 billion of the 23 billion who would no longer be covered. Cutting Medicaid or Medicare is something that candidate Trump promised not to do, but he has enthusiastically embraced the House bill anyway.

Effects on premiums

The effects of the legislation on insurance premiums is now harder to project, since it depends on whether states seek and are granted the waivers described above. For states that do not, the effects would remain essentially as the CBO described them before. Premiums would be expected to rise for older people and fall for younger people, since the law allows insurers to use a 5-to-1 rather than a 3-to-1 ratio between the two. Average premiums would probably rise for the first few years, since the elimination of the individual mandate would allow younger, healthier people to drop out of the market, forcing insurers to raise premiums on the older, less healthy people who remained. In later years, insurers might lower premiums, as older people who cannot afford the high cost are the ones to drop out. Average premiums could also fall because policies are no longer required to cover 60% or more of health care costs. Advocates of the bill like to talk about how premiums could fall, but not how out-of-pocket expenses could rise.

In states that take the waivers, opting out of the mandatory coverage for preexisting conditions and/or the essential health benefits, the effects would be more dramatic. Average premiums could fall more, since the policies cover less. But premiums and benefits would vary widely, since people with particular health needs could face much higher premiums and/or out-of-pocket costs. If large numbers of people with health problems were priced out of the market, insurers could lower premiums for the healthy who remained. But low premiums would be achieved at the cost of excluding from health insurance the people who need it most.

Giving states the “flexibility” to go their own way really means letting them return to something like the situation before Obamacare, when good health insurance was much less affordable for the poor and the sick.

Effects on the federal budget

The CBO’s previous estimate was that the American Health Care Act would cut health care spending by $1.2 trillion dollars, but that would be offset by $883 billion in lost revenue, due to elimination of Obamacare taxes and penalties. The result was a $337 billion reduction in federal deficits over the next ten years. The Republicans wanted that reduction not just because they would like to move toward a balanced budget, but because they would like to justify additional tax cuts later.

The CBO’s new estimate is that the legislation would cut spending by $1.1 trillion dollars, and revenue by $992 billion, resulting in only a $119 billion saving.

In either case, the Republican repeal and replacement of Obamacare represents a big gain for the rich and a big loss for the poor. The Obamacare taxes fell heavily on the wealthy, but the Republican cuts in health care spending will fall heavily on the poor, since they are the ones who depend on Obamacare to make insurance affordable. So the bill as amended remains consistent with the Republican agenda of reducing taxes on the wealthy while reducing benefits for the needy.