On Thursday the house will vote on the American Health Care Act (AHCA), a bill that has drawn criticism from all sides, especially after what was seen as a tough score from the Congressional Budget Office. The CBO estimated the law would lead to 14 million more uninsured in 2018, and 24 million by 2026, compared to the status quo. House Speaker Paul Ryan, however, pushed back by framing the AHCA as the first of a “three-pronged approach” for reform.
Speaker Ryan is right that Republicans reform efforts won’t be done in a single vote — or even this year.
In the wake of the CBO scoring, Ryan defended his bill. “It’s important to note,” Ryan wrote, “that (the CBO’s) report does not take into consideration additional steps Congress and the Trump administration are taking that will further lower costs and increase choices.”
Ryan’s point has merit. Should Republicans follow through on their three-stage reform and replace strategy — passing the AHCA through budget reconciliation, enacting regulatory reforms through Secretary Tom Price that give additional flexibility to states and insurers, and passing legislative reforms that allow insurers to sell plans that consumers actually want to buy — the ultimate impact on coverage could be much more positive than CBO’s analysis of standalone AHCA. (Of course, it’s not CBO’s job to score hypothetical policy reforms, so this is not a criticism of CBO.)
In addition, there are a few other pragmatic changes to the AHCA (or that could be passed in follow on legislation) that could significantly improve Republicans’ efforts, reassure wavering Senate Republicans, and (perhaps) even attract support from a few moderate Democrats. The key is to allow the market to offer coverage that meets the needs of different populations.
ObamaCare struggled with reforming the individual insurance market because it tried a one-size fits all approach to a market that’s far from homogenous. There are low-income and/or high cost patients with serious medical conditions, who simply can’t access affordable coverage without help, and price-sensitive uninsured who are basically healthy and looking for catastrophic coverage in the event of a serious illness or accident. One size doesn’t fit all.
ObamaCare’s combination of high-cost insurance with a weak mandate for buying coverage pushed price-sensitive middle income and younger enrollees out of the market. As a result, exchanges are heavily skewed towards poorer and sicker enrollees, insurers are dropping out, and premiums are skyrocketing (up an average 22 percent last year).
Insurers should have more flexibility to adjust prices for younger people (which the AHCA starts), but more has to be done. The good news is that the AHCA contains a $100 billion Patient and State Stability Fund that states can use to help stabilize the market through tools like high risk pools or reinsurance.
Both are essentially strategies for taking the highest cost patients out of the insurance pool, lowering premiums for everyone else. This is the right approach, although the stability fund probably has to be bigger to be most effective — and the need for reinsurance/risk pools in this market isn’t going away.
Adding means tested tax credits with HSAs would also provide low income patients with the help they need to really make the best use of insurance when they need it – addressing a serious criticism of Republicans’ current approach, which only allows tax credits to vary with age. The “Manager’s Amendment” released early this week nods in this direction through an expanded deduction for health expenses, but it is not means tested and won’t help individuals without tax liability. The issue will likely come up again in the Senate.
Finally, many Americans resent ObamaCare’s individual mandate. A different strategy is to simply allow everyone who buys and keeps it to avoid being re-risk rated in the future. Dropping coverage would allow insurers to price risk back in for a period — perhaps half the time the patient was uninsured, with a minimum penalty of at least 6 months or a year. This is a stronger guardrail than the AHCA, which currently only allows insurers to only charge a one year, 30 percent premium if enrollees drop coverage for more than 63 days.
If Republicans get the basic framework right, insurance costs for younger and healthier enrollees should fall closer to the pre-ACA market price. Remember: different prices aren’t a bug of the insurance market, they’re a feature. We want healthy people to buy in, get coverage, and keep it. The lower prices fall, the less money taxpayers will have to kick in.
Speaker Ryan is right that Republicans reform efforts won’t be done in a single vote — or even this year. Republicans should also focus on reforming medical education (dropping the time and cost it takes to become a primary care physician), promote provider competition (through reforms like competitive bidding and reference pricing for common procedures), and rigorous state and federal antitrust enforcement to prevent anti-competitive hospital and insurer mergers.
The pre-ObamaCare market wasn’t perfect, and going back isn’t an option. Republicans are committed to market-based reforms, and they have to follow through. This is just the first act in a three part drama.
This piece originally appeared at The Hill
Photo by Zach Gibson / Stringer