With a few modest fixes, it can represent real progress over the status quo
The American Health Care Act (AHCA) released by House Republicans on Monday is a step in the right direction for health care reform — but it is likely to be the first word, rather than the last.
The release of the House bill highlighted longstanding fissures on the right over the government’s fundamental role in health care. As such, it drew fire both from the right, via the Freedom Caucus, as well as from Democrats.
Nonetheless, it tries to address many core Republican objections to the Affordable Care Act: the deeply unpopular individual mandate; many of the law’s taxes on insurers, medical device makers, and drug companies; and the design of the law’s subsidies. It also maintains the ACA’s popular policies on pre-existing conditions, dependent coverage until the age of 26, and essential health benefits. Finally, it gives insurers some modest regulatory relief in the pricing of plans, making them somewhat more affordable for younger enrollees.
So how should we evaluate the law?
The provision getting the most attention is the Republican replacement for the ACA’s premium subsidies: a sliding scale of age-based tax credits, starting with $2,000 for individuals under 30, and moving up to $4,000 to people 60 and older. Tax credits would be offered to individuals making less than $75,000 and families making less than $150,000 annually. They are phased out above those thresholds.
Republicans are trying to make coverage more affordable for younger Americans, to draw them back into the market, and targeting federal support for middle income families. The problem is that it leaves lower-income Americans potentially exposed to higher costs, even if they can find high deductible plans for the same cost as the credit.
The solution is relatively simple, and could be found within the law itself: a state stabilization fund of $100 billion over nine years. The funds could be used for states to create high-risk pools, offset deductibles and co-pays for low income or chronically ill patients through fully funded health savings accounts, or offer reinsurance to insurers for high cost patients-all strategies that can bring down costs for patients and consumers. (In fact, the stabilization funds are used for reinsurance by default if the states don't propose alternative uses.)
It is likely, however, that this fund needs to be larger to fully allow states to experiment with a combination of approaches. Adjusting tax credits with based on age and income would also help to address the problem.
Another topline item is the mechanism Republicans chose to encourage younger, healthy people to buy and hold coverage. The broad idea is that because we’re requiring insurers cover people with pre-existing conditions (called guaranteed issue) and charge the same price to all comers (community rating), we need to require healthier folks to buy coverage when they’re healthy, rather than waiting until they’re sick. Otherwise the market will collapse since the only people buying pricey coverage will already be sick.
The ACA attempted to solve this problem with a largely ineffective individual mandate. The Republican alternative to it is a “continuous coverage” requirement.
Under this regulation, individuals who have a break in coverage for more than 63 days can be charged a 30% premium penalty when they ultimately sign up for coverage. However, this penalty is only in effect for a year.
This is probably too weak to incentivize younger applicants to keep and hold coverage, and will need to be strengthened. Having tighter open enrollment periods along with greater financial penalties for going without coverage is one approach. Ultimately, a better solution is to let insurers charge healthy people less, but to directly subsidize high cost, low income patients who can’t afford coverage without assistance.
Getting more healthy people into the market will bring down premiums for everyone, lowering the cost of subsidies required to support sicker and older patients.
Other parts of the law represent compromises, but still move in the right direction. The AHCA’s plan for Medicaid reform, for instance, would allow states that expanded Medicaid to continue receiving federal funds until 2020, and then begin to shift Medicaid to a per-capita cap system for discrete categories of enrollees, including able-bodied adults, the disabled and the elderly.
Well-designed per-capita caps can encourage states to focus on delivering services more efficiently to targeted groups of patients, and federal funding would also surge if enrollment increased, for instance in a recession.
Republicans made a further concession to state concerns, however, allowing caps to grow slightly faster than the rate of medical inflation.
More work needs to be done on the bill — and much more scrutiny will come to bear on the law’s structure as it is reviewed by House committees, including how Republicans propose to pay for it, which, at this point, is unclear.
The Congressional Budget Office, which scored multiple drafts of the Affordable Care Act, should release its analysis of the law’s cost and coverage provisions soon. As President Trump noted yesterday, the legislation is open for improvement and constructive criticism from both sides of the aisle.
The best approach is to view this law as more of an evolution rather than a revolution, one that will be constrained by Senate process and a prudential regard for Americans and states who have come to rely on the status quo.
It is possible to have a stronger, smarter and more affordable health care system that both Republicans and Democrats can live with. We’re not at that sweet spot yet, but if you squint you just might be able to see it on the horizon.
This piece originally appeared at the New York Daily News
Photo by Chip Somodevilla / Getty