Medicine or poison?
Amending Obamacare could break parts of the health-insurance market
It is far from clear that the Republican plan will work
http://www.economist.com/news/unite...plan-will-work-amending-obamacare-could-break
FOR such an important bill, it has an unusually simple name. On March 6th Republicans in the House unveiled?and President Donald Trump endorsed?the American Health Care Act (AHCA). The bill would overhaul Obamacare, which Republicans have decried since its passage in 2010. Its nickname is ?Ryancare? after Paul Ryan, the Speaker of the House.
Obamacare had two main ingredients: an expansion of Medicaid (health insurance for the poor); and a reform of the so-called ?individual? health-insurance market, which serves those who are not covered through an employer. Republicans say both bits are failing. Their proposed fixes may not fare much better.
First, Medicaid. In compliant states, Obamacare expanded eligibility for the programme to all those earning less than 138% of the federal poverty line, or $16,400 for an individual in 2017. So far, this has boosted Medicaid?s rolls by 12m, which accounts for nearly three-fifths of the improvement in health-insurance coverage since 2010. (Then, 16% of Americans went uninsured; today, only 8.8% do.)
The new bill would, in stages, remove federal funding for Medicaid?s expansion after 2020. At the same time, it would change how the federal government funds health care for those left in the programme. Currently, Washington helps pick up the tab for the medical expenses of those enrolled, chipping in a little more than half the total bill. The AHCA would instead give states a fixed payment for each person, and link it to medical inflation. States could choose how to spend the money.
Republicans say these changes are necessary because Medicaid is inefficient and provides nearly worthless coverage. States have little incentive to control costs. Amazingly, several studies have found that Medicaid does not improve the health of those enrolled in it. Republicans also reckon that letting states decide how to run the programme will unleash innovation and experimentation, and hence better coverage.
Critics scoff at that. In most states that did not go along with the Obamacare expansion, Medicaid is a bare-bones programme. In only one, Wisconsin, are childless adults eligible, according to the Kaiser Family Foundation, a think-tank. In Texas and Alabama parents cease to qualify at just 18% of the poverty line (an annual income of about $3,600 for a family of three). The left worries that states like these have no interest in experimenting with the best ways to help the poor.
In any case, states that did expand Medicaid would gradually lose the extra cash Obamacare gives them. This will alienate some Republican governors. House Republicans probably hoped the slow pace of change would ease worries. But on March 7th John Kasich, governor of Ohio, called the plan ?counter-productive?.
Medicaid reform, then, is stoking internal opposition among moderates in the party. Proposed changes to the individual market are causing ire on the right.
Obamacare established exchanges, government-run marketplaces where people can buy insurance. Those earning less than 400% of the poverty line, or $47,550 in 2017 for an individual, get tax credits to help pay the premiums. These are more generous at lower incomes. They are also pegged to the cost of insurance, which varies widely by age and place. To stop insurers designing plans so as to attract only healthy people, a thicket of regulations guarantees minimum standards. To ensure healthy people buy the pricier plans that result, the ?individual mandate? fines all those who do not buy insurance.
Republicans have spent years promising to tear down most of this edifice. But without 60 votes in the Senate, they can get at only bits of it. The AHCA would change the tax credits so that they vary with age, but not income or geography (although they would taper out at high incomes?see chart). Previously, Republicans had argued that insurance would remain affordable because deregulation would bring down costs. But under the AHCA, most of Obamacare?s rules would remain.
In many places, the funding cuts would be dramatic. In Alaska the average tax credit would fall by over 70%, according to Kaiser. The bill?s right-wing critics, however, want to abolish the subsidies entirely. Campaign groups like the Club for Growth have joined the House ?freedom caucus? and Senator Rand Paul in slamming a ?new entitlement programme?.
The bill does scrap one crucial regulation: the individual mandate. In its stead, anyone who goes without insurance would have to pay 30% more in premiums, for one year, if they change their mind. Some worry this is not a sharp enough stick to keep healthy people in the market. Mario Molina, chief executive of one insurer, told the Wall Street Journal that premiums could rise by 30% next year as a result. Because the tax credits do not rise along with premiums, big price increases would force people out of the market, increasing the risk of a so-called ?death spiral?.
The AHCA?s total likely effect on coverage, and on the budget, is uncertain. Analysts have not yet scored the proposal (other than its $594bn in tax cuts over a decade). Republicans think their short, simple-sounding bill is clearing up a mess. But in insurance markets, even the smallest changes can have huge effects.
