When Donald Trump won the presidential election, the clock on the Affordable Care Act (ACA) began ticking and its repeal was all but a given in the minds of most Americans. Yet, nearly eight months after Trump took office, Obamacare, as the ACA is more commonly known, remains the health law of the land, and may remain so for some time to come.
Why the GOP has struggled to pass a healthcare reform bill
House and Senate Republicans have come up with multiple iterations of what healthcare reform should look like, but in each instance, with one exception, the GOP's bills have ended in failure. That exception was the narrow passage of the American Health Care Act, which passed by a vote of 217 to 213 in the House, but wound up dead on arrival in the Senate. The real irony here is that the House motioned to pass a repeal of Obamacare 60 times under the Obama presidency, but now that the GOP has a majority in the legislative branches of Congress, they can't secure its repeal.
While there are numerous issues at hand, there are two key problems for the GOP. First, there are factions within the Republican Party with differing stances on healthcare reform. Some members of Congress (the Freedom Caucus) want to see Obamacare rolled back in its entirety. More moderate Republicans want modest changes made to the program, and fear that anything more will cost them their constituents. Getting the Freedom Caucus and moderate Republicans on the same page has proven to be challenging.
The other issue is that the Congressional Budget Office's (CBO's) analyses of the GOP's various plans have estimated an increase in the total number of uninsured of between 22 million and 24 million, depending on the plan, over the next decade. It's exceptionally hard to drum up support for a healthcare bill that's going to dramatically increase the uninsured rate and negatively impact seniors and low-income folks.
Surprise! The GOP has a new healthcare bill
But don't think for one moment that Republicans have thrown in the towel on repealing of repairing Obamacare. This past week, Senators Lindsey Graham (R-SC) and Bill Cassidy (R-La.) unveiled a 23-page healthcare bill designed to repeal and replace core portions of Obamacare.
Like many of the plans that came before it, the Graham-Cassidy plan would repeal a number of taxes and subsidies associated with the ACA. It would repeal the Advance Premium Tax Credit, which helps lower the premium costs for people earning between 100% and 400% of the federal poverty level by Jan. 1, 2020, and stops cost-sharing reductions (CSRs) by the end of 2019. Cost-sharing reductions are given to individuals and families who purchase a silver-level plan and earn between 100% and 250% of the federal poverty level. CSRs are responsible for lowering co-pays, coinsurance, and deductible expenses, making a visit to the doctor more affordable.
Additionally, the medical device excise tax and tax on over-the-counter medications would be repealed, along with the individual mandate and employer mandates; contribution limits for health savings accounts would be hiked; and Medicaid expansion would be phased out by the end of 2019.
Sounds like the rest of the GOP plans, right? Well, there are three pretty major differences.
The Graham-Cassidy bill comes with three brand-new proposals
The Graham-Cassidy bill would create a Medicaid Flexibility Program, beginning in 2020, that would allow states that opt in to receive block-grant funding from the federal government instead of per capita funding. Per capita funding provides a certain amount of federal funding to a state based on the number of people enrolled in Medicaid, while block-granting would involve a fixed amount being doled out to states regardless of Medicaid enrollment (it could be increased on an annual basis).
The allure of block grants is that states would have more say in deciding what expenses qualify for reimbursement. What's more, states have a better idea of where Medicaid funding should go, thus eliminating presumed waste caused by having the federal government disburse Medicaid dollars. The downside is that block grants don't take into account the ebbs and flows of the U.S. economy that could affect Medicaid enrollment within a given year, thus leaving some states short on cash, or perhaps overflowing in Medicaid dollars, some years.
The second change is Graham-Cassidy would create a market-based grant program, for all states interested, that would dole out federal funds between 2018 and 2026 to help stabilize markets. Interestingly, these funds would allow states to craft healthcare laws as they saw fit, even outside the traditional parameters established by the ACA. In other words, it would give states and insurers more freedom to price their plans to account for sicker individuals, which would presumably make individual healthcare markets more sustainable for insurance companies. The funding would therefore go to support people impacted by more dynamic premium pricing.
The third big change is that the newly introduced bill would allow individuals the option to enroll in a catastrophic plan beginning in 2019. It would also allow folks who are eligible for tax credits to apply their credit to a catastrophic plan. Catastrophic plans have very low premium costs and are typically targeted at younger, healthy adults. However, if you do get sick and need care, the deductibles can be exceptionally high.
Much ado about nothing
Unfortunately for Lindsey Graham and Bill Cassidy, their bill doesn't seem to be getting a lot of attention on Capitol Hill. A number of Republicans have suggested that it may not even be put to vote, meaning the likelihood of Obamacare sticking around for another year is growing. Furthermore, it's still likely to lead to millions of people losing their coverage, but we'll need to wait for official word from the CBO to confirm that.
The real concern is that nothing has been done to shore up the ACA as we head into 2018, should it indeed stick around for another year. In fact, the GOP scaled back outreach funding by 90%, to $10 million from $100 million, in 2018, and also cut navigator funding -- navigators assist consumers in answering questions and guiding them to health coverage options -- by 41%. This alone is a recipe for weaker year-over-year enrollment in 2018.
In addition, there is uncertainty over whether or not Trump will drop an appeal to a case the GOP won in 2016 regarding CSRs. If Trump were to drop the ongoing appeal to a federal judge's decision, $9 billion to $11 billion in CSR funding would not get dispensed, leaving around 7 million low-income enrollees with little way to pay their co-pays and deductibles if they head to the doctor.
But it gets worse.
This year we witnessed the largest health insurer in the country, UnitedHealth Group (NYSE: UNH), slash its coverage by more than 90% to just three states from 34 in 2016. Similarly, Aetna (NYSE: AET) and Humana (NYSE: HUM), which had their merger blocked by U.S. lawmakers, reduced their 2017 county-based coverage by almost 70% and nearly 90%, respectively. As we head into 2018, Aetna and Humana have announced that they're leaving the Obamacare individual market completely, and even Anthem (NYSE: ANTM), which has arguably been one of the biggest beneficiaries of Obamacare, has cut its coverage in key states heading into next year. Having fewer choices is only going to lift premium prices for consumers.
If Obamacare wasn't spiraling toward disaster before the Trump presidency, it certainly appears to be now, which is going to make for a trying year for consumers and insurers in 2018.
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