Initial Glimpses Into Trump’s “Repeal & Replace”

Last week, the House and Senate committees that oversee health policy and GOP leadership released a white paper detailing initial structure of the replacement of large sections of the Affordable Care Act (“ACA” or “Obamacare”). Importantly politically, the plan allows its most critical provisions to be passed through a special budget process that requires only 50 Senate votes. These procedural mechanisms will allow fulfillment of Trump’s promise that repeal and replacement would occur “simultaneously.”

Currently, it appears that the major changes will be to expand the number of Americans who could benefit from federal assistance in buying health insurance coverage. But, the plan will change who benefits most from that federal assistance.

The ACA extended health coverage to 20 million Americans by expanding Medicaid for low income and needy in participating states, and by offering income-based tax credits for middle-income people so they could buy their own insurance. Effectively, Obamacare redistributed wealth from the rich to the poor.

This new GOP plan would alter both those two existing mechanisms. First, it will drastically cut funding for states in providing free insurance through Medicaid to the low income and needy. Secondly, it will change how tax credits are distributed by giving all American not covered through their employment a flat credit. But there’s the sticker: the credit will be determined by age, not income levels, the latter being entirely disregarded in the calculus.

So, the larges financial benefits will go to older Americans. For example, Warren Buffett will get the same amount of financial assistance as someone his age, living in poverty. Likewise, a Trump Cabinet member, 64 year-old multi-millionaire Secretary of State Rex Tillerson, if he didn’t have access to government coverage, will get substantially more money than a poor, young person, but the same amount of financial assistance as any given 64 year-old American living in poverty.

To be sure, older people tend to have higher medical bills and so are charged more by insurers even under the ACA. So, matching tax credits to age has a rational basis–to a degree. And the new plan would simplify the current system in that verification of applicant income to optimize just the right amount of financial assistance would be eliminated. And, it would also eliminate incentives for low-income people to avoid earning more to avoid facing a reduction in benefits. But the GOP plan will result in more low-income people losing coverage if they can’t find the money to pay the difference between their tax credit and the actual cost of their health insurance. The ACA is set up to ensure low and middle-income Americans can afford the premiums charged for healthcare insurance.

Moreover, older people without employer-based insurance typically earn more than young people starting out their careers. Independent estimates of similar tax credit plans from Speaker Paul Ryan and Secretary of HHS Tom Price show changes based on tax credits will result in millions losing coverage.

Now, in moving resources from the poor to the rich, limits to deposits in Health Savings Accounts (“HSAs”) will increase. Generally, those with higher incomes paying more in taxes tend to benefit more from HSAs and recent studies show that HSAs are disproportionately held by families with higher earnings. The new program will also eliminate a number of taxes on the health care industry at large.

Curiously, the new plan omits changes to any of the Obamacare regulations the GOP have argued drive up costs of health insurance: the rules including mandates that every plan cover a standard package of benefits, and those requiring companies to charge the same prices to healthy and sick Americans (removal of pre-existing condition penalties). These rules can’t be changed through the budget process and so will require 60 votes in the Senate. It is yet unclear how these proposals will affect Aged, Blind & Disabled Medicaid assistance programs, if at all.

The new plan will undoubtedly change as it moves through committee hearings. But the above seems to set forth the outline of the discussion. So, against this backdrop essentially approved by every major committee working on health care in Congress, it seems that President Trump’s promises to provide a beautiful plan of health insurance for “everybody” are truly speculative.

Medicaid Ranks Highly Among Americans in Poll

A New York Times article from October 9, 2014 reports high satisfaction level from low-income people in three Southern states who use Medicaid.  Respondents preferred Medicaid over private insurance.  The study of residents of Arkansas, Kentucky, and Texas, found those surveyed preferred Medicaid compared with private coverage as the former offered better “quality of health care” and made them better able to “afford the health care” they needed.  This is the same result reached by repeated surveys showing the program, much maligned as a political target as being substandard, is quite popular among the people who use it.    A 2011 survey from the Kaiser Family Foundation found that 86 percent of people who had received Medicaid benefits described the experience as somewhat or very positive. A slightly more recent Kaiser survey showed that 69 percent of Americans earning less than $40,000 a year rated the program important to them or their families. Medicaid’s political opponents would have you believe that its restricted list of doctors and additional red tape make it worse than being uninsured.  But, other pollsters and surveys find Medicaid ranks higher on consumer satisfaction levels than private insurance.

Kaiser’s top pollster says the Medicaid is “surprisingly popular” and has seen the program get high marks from the public for more than 10 years.  The public at large rates Medicaid highly as well, saying that Medicaid is important to them and their families.  Now covering some 67 million Americans, Medicaid is not the country’s largest health insurance program.  Moreover, a Majority of Americans support Medicaid expansion as part of the Affordable Care Act.  In fact, it’s only when compared to Medicare that Medicaid looks unimpressive, stated Robert Blendon, a public health professor at Harvard University who studies public opinion on health care issues and was a co-author on the subject recent study.

The Harvard researchers said those surveyed gave private coverage the edge when it came to seeing “doctors you want, without having to wait too long” and “to have doctors treat you with care and respect.”  But Medicaid surpassed private insurance on whether the available programs enabled respondents to “be able to afford the health care you need,” and on the overall question of “quality of health care.”