It's been four months since Donald Trump was elected as the 45th president of the United States, but it took until this past week to get a Republican replacement bill for the Affordable Care Act (ACA), better known as Obamacare, introduced into Congress. Considering that Republicans maintained control of both houses of Congress, and Trump won the presidency, a quicker response to a replacement plan was expected.
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Nonetheless, the ACA repeal-and-replace plan has been made public, and it was met, as you might expect, with a fair amount of cheering and jeering in Congress and around America.
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A quick look at Trumpcare's key changes
The Obamacare replacement plan, which some have dubbed "Trumpcare," would remove a number of the key components of Obamacare, while also surprisingly keeping a few of its regulations intact. I'd encourage you to look over the more encompassing step-by-step review of the changes when you have an opportunity, but here's a quick summary of what Trumpcare entails.
- Obamacare's individual and employer mandates, the tax penalties for not purchasing health insurance, and all subsidies (the Advanced Premium Tax Credit and cost-sharing reductions) will disappear.
- Trumpcare will base tax credits on a person's age, not income. There will be tax-credit phase-outs based on income, but an estimated 98% of Americans will still qualify for at least some tax credits.
- Medicaid expansion will cease by 2020, and Medicaid funds will be doled out to states on a per-capita basis.
- Insurers will be allowed to charge a 30% premium to people who weren't continuously insured in the previous year. This surcharge disappears after a year of full coverage.
- Older adults will be allowed to be charged up to five times as much for monthly premiums as younger adults, up from the current 3-to-1 ratio under Obamacare.
- Health savings accounts will see their annual contribution limit nearly double by 2018.
- A $100 billion risk pool will be established between 2018 and 2026 for states to help treat high-cost patients and stabilize the individual market.
- Two of the most popular ACA mandates will be retained: requiring insurers to accept consumers with pre-existing conditions, and allowing dependents to stay on their parents' health plan until age 26.
This plan hits on a number of elements Republicans in Congress have been angling for over many years. Namely, it reduces the amount of spending the federal government directs toward Medicaid, which could give lawmakers a greater opportunity to lower the federal budget deficit. It also removes the direct penalties associated with not purchasing health insurance (the Shared Responsibility Payment), and it potentially provides more market stability by allowing insurers to charge older (and likely sicker) customers more. Finally, it divvies out ample tax credits to younger, healthier individuals who may now be more likely to enroll. Insufficient young-adult enrollment was one of Obamacare's shortfalls.
However, not everyone is on board with the Obamacare replacement plan.
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The list of Trumpcare opponents is growing
As you might have rightly surmised, most Democrats in Congress have denounced Trumpcare as being bad news. In particular, there's concern that moving from an income-based subsidy to an age-based credit will mean that lower-income folks and sicker people will be pushed out of the healthcare system altogether. Democrats in Congress have expressed their concern that millions of Americans will lose their ability to afford health insurance under this ACA replacement plan.
But it's far more than just Democrats who have objected.
Some of the most conservative Republicans have also come out against Trumpcare, suggesting that it's too much like Obamacare. In particular, the clause that would allow insurers to charge a 30% premium to consumers who weren't insured in the previous year is very similar to the Shared Responsibility Payment that assessed a tax penalty on people and families who didn't buy health insurance.
Beyond the political spectrum, a growing number of health organizations have also voiced their opposition. The American Medical Association (AMA) doctors' group expressed concern about the bill's attempt to drastically alter Medicaid payments. By 2020, states will no longer be allowed to expand their Medicaid programs, essentially grandfathering in whoever is already enrolled, but requiring states to make up the difference in funding. Since most states won't have the funding available, most consumers earning between 100% and 138% of the federal poverty level in the 31 states that chose to expand Medicaid will probably lose their coverage.
The AMA is also clearly worried about replacing income-based subsidies with tax credits based on age. The AMA believes this will make coverage more expensive, if not downright unaffordable, for lower-income Americans.
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Medicaid financing -- or, shall we say, the move to go to a per-capita funding system -- is also a worry of America's Health Insurance Plans, which represents Anthem (NYSE: ANTM) and other insurance agencies. For those who may not recall, Anthem acquired the Medicaid-focused Amerigroup before the implementation of Obamacare. This means scaling back Medicaid funding would be particularly painful for Anthem, which counts on government-sponsored ACA enrollees to currently pad its top-line results.
In addition, seven hospital groups voiced their opposition to Trumpcare. The list includes the American Hospital Association, America's Essential Hospitals, and the Catholic Health Association, to name a few. Like the AMA and Democrats, the worry among hospital groups is that there will be instability for lower-income folks, as well as children, the elderly, and the disabled, when it comes to seeking affordable medical coverage.
Long story short, with clear opposition to Trumpcare, the current bill is not guaranteed to pass both houses of Congress and wind up on President Trump's desk. It's not uncommon to see a bill modified as both parties attempt to come together and find a common ground, meaning there may be some wiggle room yet on Medicaid funding. But only time will tell.
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