The House GOP's puzzling ObamaCare replacement
© Getty

On reading the House Republicans’ new American Healthcare Act, it is difficult to understand what the proposal is designed to accomplish, either substantively or politically.  On the one hand, it contains enough provisions with superficial resemblances to those in the Affordable Care Act (ACA) that it seems sure to inflame the “Repeal Only” faction.  Yet on the other hand, it fails to prevent millions of people from losing coverage; as soon as that becomes known, swing-district members will again be facing outrage in constituent meetings.  

First, the basics.  The legislation would repeal ACA’s individual and employer coverage mandates retroactive to the beginning of 2016.  Instead, it would mandate a surcharge on those newly enrolling in health insurance who could not prove near-continuous coverage for the prior 12 months.  

ADVERTISEMENT
The bill would start phasing out ACA’s system of premium tax credits at the beginning of next year and eliminate them entirely effective Jan. 1, 2020.  In place of those credits, it would provide a new system of tax credits that varied by age. These credits would phase out fairly rapidly once an individual’s income exceeded $75,000. Their amount would fall far short of what would be required to purchase coverage comparable to that provided under ACA.  

 

The legislation also would subject Medicaid to a per-capita cap beginning in fiscal year 2019.  This cap would likely be inadequate to keep pace with Medicaid costs, resulting in a steady decline in the share of Medicaid costs borne by the federal government.  This, in turn, would cause states to narrow eligibility and covered services while reducing already-austere provider reimbursements.  It would terminate ACA’s Medicaid expansion after 2019 with a provision for continuing coverage to particular individuals who remain continuously enrolled after the repeal.

This certainly bears no resemblance to the “more coverage for less money” that President Trump promised his voters.  But more broadly, on each of the major fronts where Republicans have criticized ACA, these changes would make things worse.  

Republicans have attacked the premium increases under ACA and argued that the increases result from younger, healthier patients eschewing coverage and paying ACA’s penalty.  Yet this legislation would weaken incentives to obtain insurance, likely causing more “young invincibles” to stay uninsured and risk pools to deteriorate further.  

To be sure, they would pay a penalty if they later became sick and needed to buy health insurance, but the whole point of being a “young invincible” is being sure that you will never get sick.  Reductions in Medicaid eligibility and premium tax credits will compound that problem. Encouraging those comprehensively insured now to switch to catastrophic plans will further undermine insurers’ ability to spread risks among enough healthy people to prevent sharp premium rises.  And the combination of those premium increases and shrunken tax credits likely will drive more relatively healthy people into catastrophic plans.  

Republicans have criticized Medicaid for having insufficient provider participation.  Yet the per-capita cap will put steadily rising fiscal pressure on states, whose reimbursement rates are likely to deteriorate further as a result.

Much has been made of the difference between a Medicaid block grant and a per-capita cap.  In fact, the two are largely the same in every respect save one.  Both fail to allow federal reimbursements of states to rise apace with program costs, forcing states to make steadily greater cuts year after year.  

To be sure, the per-capita cap would not intensify pressure on states when a recession swells the ranks of the uninsured.  But the proposed per-capita cap, like earlier block grant proposals, would not adjust as the composition of the elderly beneficiary group changes as the baby-boomers move from modestly expensive “young elderly” into age categories requiring greater amounts of extremely costly care.  

Republicans decried having decisions made in Washington about what coverage people will have.  Yet if Washington passes this legislation, people across the country will have to drop coverage that they wish to retain or else to dip deeply into their own wallets to avoid doing so.  That seems difficult to explain as a victory for personal autonomy.

For legislation repeatedly touted as “fiscally responsible,” this proposal appeared surprisingly shorn of any estimates from the Congressional Budget Office (CBO) of its effects on the deficit or the number of people lacking health insurance.  Experience suggests that CBO would long ago have constructed an analytical model for estimating the effects of various permutations on draft health care legislation it has been shown and likely has generated the missing tables.

The legislation does repeal the revenue measures that financed ACA, from various surcharges targeting upper-income people to the ever-popular “tanning tax.”  Lobbyists for the industries most affected no doubt will breathe sighs of relief.  Beyond them, however, it is difficult to see much of a constituency for this legislation.  

David A. Super is a professor of law at Georgetown Law. He also served for several years as the general counsel for the Center on Budget and Policy Priorities.


The views of contributors are their own and not the views of The Hill.