Examining Republican Proposals for Reform & Repealment to the Affordable Care Act
October 29, 2015
The Patient Protection Affordable Care Act (ACA) has faced partisan backlash since its enactment in 2010. There have been many calls to reform the law’s provisions, and there have also been actions made to eliminate its key provisions in the hopes of repealing the bill entirely. The Health, Education, and Welfare Branch took the time this week to examine the impacts that proposed reforms to the ACA’s provisions would have, including 1) private & employer-sponsored health insurance, 2) Medicaid, and 3) Medicare.
Private & Employer-Sponsored Health Insurance
Private health insurance consists of two main markets – employer-sponsored insurance and the individual private health insurance market. Policies either bought in the individual market or provided and subsidized via the employer-sponsored insurance pool can vary widely, from catastrophic coverage, cheap medical coverage that only covers emergency medical care, to so-called “Cadillac plans” that include coverage for gym memberships, designer glasses, and dental care. The enactment of the ACA brought a great deal of changes to these two specific markets.
Currently, ACA provisions in the individual market ensure that: 1) plans cannot exclude individuals for pre-existing conditions or revoke health insurance; 2) requires that plans provide a minimum level of standard benefits (including preventive care); 3) establishes an adjusted community-rating system for pan premiums on the individual market, meaning that plans cannot charge sicker people more for insurance and can only adjust rates based on age and smoking status. The law also allows states to create individual “exchanges” – online websites where people can enter income and personal information, shop for coverage, and enroll in plans. Only a dozen or so states have established these exchanges, and the federal government has stepped in to provide a national exchange for the other states. On the exchanges, federal subsidies are provided to people under 400% of the federal poverty line so that they are able to afford coverage. Possibly the most important part of the changes made to individual coverage, however, was the individual mandate. In order to prevent insurance markets from collapsing due to the increased enrollment of too many high-cost beneficiaries (e.g. sicker patients), the ACA required that every individual hold a health insurance policy meeting minimum federal standards or pay a penalty. Mandating enrollment prevents the onset of a “death spiral”, where the healthiest patients leave a risk pool, resulting in higher premiums, which causes more relatively healthy people to leave the risk pool, and eventually resulting in a pool that is unsustainable for the insurer and the sickest patients.
Kaiser Family Foundation
The ACA extended a mandate to employer-sponsored insurance as well. Each employer with 51 or more full-time employees must provide health insurance that meets the federal standards, or pay a penalty. Small employers are excluded from this mandate because purchasing coverage would be especially costly for them. Any large employer that has an employee receiving a subsidy on the exchange to buy individual coverage must pay $2000 per employee (after the first 30 employees) as a penalty for not providing health care coverage. This mandate is intended to ensure that employers do not cut their health insurance plans after the individual exchanges become active (about 94% of large employers offered coverage before the passage of ACA)
The most immediate effect of a total repeal of the ACA would be lost coverage. Without premium subsidies, many people (especially the poor and near-elderly) would not be able to afford the cost of their coverage and would drop their plans. In addition, without the individual mandate, many young, healthy people would drop their health insurance coverage even if they can afford it, simply to avoid the added expense. This would result in a death spiral- the loss of “young invincibles” in health insurance pools would cause coverage to become even more expensive for the older, sicker enrollees, some of whom may even get their coverage revoked due to health status. Coverage under the individual exchanges would likely revert back to its position prior to ACA, when about 11 million people were covered under the individual market plans available; this represents a loss in coverage for almost 10 million people in the individual market alone. Since almost all large employers provided insurance prior to the ACA, shifts in that market would be relatively minimal (although the repeal of the looming Cadillac Tax might cause employers to continue providing over-generous health coverage, driving up costs).
Republican plans to replace ACA typically remove most of the ACA’s reform to the individual market, including the individual mandate, coverage for individuals with pre-existing conditions, and the adjusted community rating system. The loss of these provisions would result in a significant loss of coverage as described above, unless they were paired with another way of maintaining coverage for those with pre-existing conditions and low incomes. Many Republican plans replace the health insurance premium subsidies with tax credits of some kind, but many of these plans are not means-tested. These tax credits would be helpful for those attempting to afford coverage, but would be somewhat regressive depending on how large they were and how they were written into the tax code.
Medicaid provides health coverage to millions of Americans, specifically low-income adults (those with incomes 138% below the federal poverty line), children, pregnant women, elderly adults and people with disabilities . Medicaid is administered by states, however, it is funded jointly by states and the federal government. The federal government pays states for a specified percentage of program expenditures determined by the Federal Medical Assistance Program (FMAP), which varies by state based on criteria such as per capita income. The regular average state FMAP is 57%, but ranges from 50% in wealthier states to 75% in states with lower per capita incomes (the maximum regular FMAP is 82%). In order for the ACA to achieve its goal of offering everyone access to affordable healthcare, it focused its efforts to expand Medicaid. In doing so, the ACA has a provision that says it will provide full federal funding for individuals that were made newly eligible for Medicaid under its expansion, where eventually this rate will phase down to 90% in 2020 and beyond . However, in 2012 this provision of the bill hit a major roadblock.
As laid out in the Medicaid expansion provision of the ACA, States must make Medicaid available to a greater number of low-income Americans by expanding the program, and if States did not comply with this requirement they risked losing all of federal funding for Medicaid . Thus, some States felt that these funds had too many “strings attached” and believed that Congress was acting unconstitutionally by making States expand the program under the threat that they could potentially lose federal funds if they did not accomplish what Congress wanted them to do . Consequently, on June 28, 2012, the Supreme Court found that the Medicaid expansion provision in the ACA was “unconstitutionally coercive of States” and, therefore, gave States the option to expand the Medicaid program if they wished. In response, the Obama administration agreed to still fund nearly all of the costs of the expansion (100% for the first three years, phasing down to 90% in 2020 and all subsequent years), so it would not place an added burden to those States that agreed to expand . However, only 28 states and D.C. have currently expanded the program, leaving about a total of 4 million people who are eligible for health insurance still uninsured
Kaiser Family Foundation
This was one such way members of the Republican party sought to do away with the ACA. If Medicaid expansion did not go through at all then a large majority of the country would still be uninsured, risking a death spiral in the insurance market, and ultimately bringing the ACA to its end. However, since the Supreme Court’s decision did not end the Medicaid expansion component of the ACA entirely, Republicans are still developing ways in which they can either alter or remove the provisions set up for Medicaid insurance. There has been one proposal headed by House Budget Committee Chairman and Representative of Georgia’s sixth district, Tom Price, which calls to cut federal funding from Medicaid and replace the program with block grants.
Block granting is a financial aid package that grants federal money to state and local government for use in social welfare programs in order to maintain accountability on the federal government for their portion of Medicaid funding. However, if Medicaid were to be funded under a block grant it would not be as responsive to the program’s changing needs in situations like recessions, health care inflation, natural disasters, etc . Furthermore, it would be difficult to allocate these funds equitably across states, and because of this adequate healthcare coverage would not be guaranteed . Under Price’s plan, according to the Center on Budget and Policy Priorities, the federal government would no longer pay a fixed share of states’ Medicaid costs, starting in 2017 . Instead, states would get a fixed dollar amount of federal funding known as “State Flexibility Funds” (in addition to cutting federal funding to Medicaid by $913 billion over the next decade). However, the proposed block grant fund will not be able to provide the funds states need each year because the annual increase in the block grant funding average to about 4.7% less than Medicaid’s current projected decade growth rate . Further, in order to make these federal funding cuts, states would likely use the expansive additional flexibility that this alternative plan would give them. For example, the plan would likely “let states cap Medicaid enrollment and turn eligible people away from the program. It also would likely let states drop certain benefits that people with disabilities or other special health problems need”. If this proposal were to pass, a number of states that have expanded Medicaid would probably reverse their expansion, or at least impose work requirements, premium or cost-sharing obligations, and other barriers that would dramatically reduce coverage. In doing so, the combined Medicaid cut would reach about $1.8 trillion over ten years, which adds tens of millions of Americans to the ranks of the underinsured and uninsured. Lastly, according to notable health law expert Timothy Jost, block granting Medicaid “would [also] certainly mean that states that have not [expanded Medicaid] so far [will not] do so in the future.” This means that those 4 million people will likely not have access to affordable healthcare
Thus, Republican proposals for immediate and drastic reforms to the ACA, specifically those calling for changes in Medicaid funding, carry a high risk of millions of Americans, especially those from vulnerable socioeconomic populations, becoming underinsured or uninsured .
The Commonwealth Fund
The ACA has benefitted Medicare in a few major ways, including holding down the growth of Medicare rates and addressing gaps in preventative and prescription drug benefit. The ACA has also improved Medicare by strengthening chronic care management and slowing the growth of spending. Since the ACA was passed, roughly 37 million Medicare beneficiaries received preventative services, while 8 million beneficiaries saved over $11.5 billion and projected program spending by the Congressional Budget Office from 2011 to 2020 dropped by $1.07 trillion.
However, Republicans seek to fully repeal the ACA, and have voted over fifty times on repealing or undermining the health care reform act. Repealing the ACA would hold a unique challenge to Republican candidates, as ACA provisions currently make up a huge part of Medicare law . In the past, Republicans proposed ending Medicare by replacing guaranteed benefits with a limited payment that goes directly to health insurance companies. Under this proposed plan, an average 40 year old would need $350,000 more to pay for healthcare, while out-of-pocket costs for seniors would rise by $6,000 a year and the enrollment age would increase by two years. The Republican’s 2016 budget proposal opens by calling for reform to Medicare, stating that it is unsustainable and that modifications would offer additional payment and coverage options in the future to increase coverage flexibility and a traditional fee-for-service payment option. The budget also includes changes to liability laws to prevent unnecessary lawsuits against doctors, which would keep costs down.
None of the 2016 Republican presidential candidates have alternative plans if the ACA were to be repealed, but those who have spoken about reforms to Medicare believe it to be unsound. Some of the candidates have supported Paul Ryan’s premium-support plan, and many want Medicare’s rules to change to restrict access of Medicare from younger workers and people who may be subverting the system. During the recent debate, Jeb Bush proposed ending Medicare completely, while Marco Rubio suggested privatizing the system and George Pataki expressed an interested in shifting Medicare costs to seniors and the disabled
One of the major benefits of the ACA has been the improvement of future funding of Medicare, whereby its Hospital Insurance trust fund will remain funded through 2030 . This date does not apply to coverage for physician and outpatient costs though, nor does it apply to Medicare prescription drug benefits, as the trust funds that provide funding for these sections of Medicare cannot go bankrupt.As the population of the US ages and baby boomers enter retirement, Medicare will only be used more.
Thus, Medicare relies heavily on the provisions of the ACA, and repealing it would lead to unaffordable prescriptions, along with fewer wellness exams and screening services offered to those eligible for Medicare Repealment of the bill would also mean that Medicare’s financial long term sustainability would be in jeopardy, placing the future health care of many elderly citizens at risk.
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 Larry Levitt et al., “Data Note: How Has the Individual Insurance Market Grown Under the Affordable Care Act?”, Kaiser Family Foundation. May 12th, 2015.
 Timothy Jost, “If The ACA Were Repealed, Just What Would Replace It?”, Health Affairs Blog. April 14th, 2015.
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