Vox

The new Senate health bill is terrible for anyone who is sick, has been sick, or will be sick

The revised Senate bill turns Obamacare into a high-risk pool.

by Ezra Klein       July 13, 2017

The revised Better Care Reconciliation Act was released today, and here’s the bottom line: It returns individual insurance markets to the bad old days when insurers competed on insuring the healthy and finding ways to avoid covering the sick.

There are a host of changes in the new BCRA, most of which leave the fundamental thrust of the legislation intact. But there’s one addition that genuinely changes everything.

Included in the new bill is a version of Ted Cruz’s amendment allowing insurers to offer plans that don’t comply with Obamacare’s insurance regulations so long as they also offer plans that do comply with Obamacare’s insurance regulations.

So imagine you’re an insurer. As long as you offer some Obamacare compliant plans, you can also offer plans that deny people coverage for preexisting conditions, that don’t cover mental health benefits or pregnancy.

What will happen here is clear: The plans that have to offer decent coverage to anyone who wants it, no matter their health care history, will become a magnet for the old and the sick or the soon-to-be-sick, as they can’t afford, or perhaps can’t even buy, the other plans. That will drive premiums in those plans up, pulling younger, healthier people into the non-compliant plans.

The Senate bill thinks it has a fix: a roughly $200 billion fund to offset the costs of sick enrollees. So, in short, what the GOP bill attempts to do is to rebrand high-risk pools as Obamacare plans and make them subsidized dumping grounds for the sick and the old, while everyone else buys insurance in a basically unregulated market.

This is a very bad idea for anyone who is sick, has been sick, or is likely to get sick. It attacks the core changes Obamacare made to build insurance markets that serve the sick, the well, and, crucially, everyone in between.

Prior to the Affordable Care Act, insurers in the individual market worked to sign up healthier people and avoid sicker people. They did this in ways that were crude, like simply refusing to insure people with preexisting conditions, and ways that were subtler, like designing plans that made sense for the healthy but didn’t cover key services needed by the sick.

The Affordable Care Act ended all that. It standardized the benefits insurers had to offer, so they couldn’t design plans that didn’t work for the sick, and barred them from turning the sick away, or charging them more.

The BCRA reverts individual health insurance markets to their pre-Obamacare days. Under this legislation, an insurer who had some Obamacare-compliant plans could also craft plans that were, say, great for 30-year-olds with a low risk of cardiovascular disease, but terrible for 53-year-olds with high blood pressure and cholesterol, or that simply denied coverage to anyone over age 60 with a history of health problems.

The GOP’s answer to this problem is to try to quarantine sicker people off to the side in subsidized plans. But sickness is not a binary state. Yes, the sickest people, the ones who need health insurance most, will do whatever is necessary to get insurance, and the high-risk plans might work for them. But what about young women who insurers consider demographically likely to be pregnant in a few years? They’re not sick enough to be willing to pay the exorbitant premiums of the high-risk plans, but they’re also going to be up-charged by insurers scared of their future costs.

Or how about the 42-year-olds who aren’t sick now, but had health scares in the past? To insurers, they might be basically uninsurable outside a high-risk pool. But to the healthy-feeling 42-year-old, the cost of the high-risk pool may be exorbitant. And so they go uninsured, and then disaster hits.

Nor is there any detail in the bill of how these high-risk pools will work. There are funds states can use to subsidize them, but will they use them? And how will they use them? And will the subsidies make the insurance worthwhile for people who are hard to insure but not yet truly ill?

And what kinds of insurance will actually be subsidized? Will people with serious illnesses and low enough incomes to qualify for Medicaid now be looking at plans with $5,000 deductibles?

Back in May, President Donald Trump said protections for “preexisting conditions are in the bill. And I mandate it. I said, ‘Has to be.’”

Well, now the protections for preexisting conditions are gone. The GOP vision is of health markets where the very sick can buy unaffordable Obamacare-compliant plans that are, maybe, made affordable by subsidies, but most people are back in an insurance market where past allergies or future pregnancy or a history of knee problems will leave you basically uninsurable.

Vox

The new Senate health care bill — and the return of preexisting conditions — explained

by Sarah Kliff       July 13, 2017

Senate Republicans introduced a revised version of their bill to repeal and replace the Affordable Care Act on Thursday, one that would allow insurers to once again deny coverage based on preexisting conditions, and to charge higher rates to sick people.

The bill would keep most of the Affordable Care Act’s tax increases but repeal one aimed specifically at medical device manufacturers. It would deeply cut the Medicaid program, making few changes to the bill’s first draft.

Even with these new changes, the general structure of the bill stays the same from its original draft, which was itself largely similar to the bill that passed the House in the spring.

Healthier and higher-income Americans would benefit from the changes in the new Republican plan, while low-income and sick Americans would be disadvantaged. It would create a two-track system for health coverage on the individual market. One would offer cheaper, deregulated health plans, which healthy people would likely flock to. The other would include comprehensive plans governed by Obamacare’s regulations, which would cost more and mostly be used by less healthy people and those with preexisting conditions — a system experts expect would function like a poorly funded high-risk pool.

Deductibles would almost certainly rise under the Republican plan, as would overall costs for low- and middle-income Americans. Individual market participants would have more options to purchase catastrophic coverage, an option likely to appeal to those with few health care costs.

Experts expect the changes will do little to change the Congressional Budget Office’s estimates that 22 million Americans would lose coverage under the proposal.

You can see a full explainer on the Senate bill here, which will be updated shortly with the latest information. This post focuses on the changes made in the July 13 revision.

Health insurers could bring back preexisting conditions, offer skimpy health plans

Perhaps the biggest policy change in this revision is an amendment to allow health insurers to deny coverage based on preexisting conditions and cover few benefits, so long as they offer a comprehensive plan that covers the Affordable Care Act’s mandated benefits.

These deregulated health plans would be allowed to charge sick people higher premiums or simply deny them coverage. They would not have to pay by the rules of the preexisting condition ban that the Affordable Care Act sets up (Phil Klein at the Washington Examiner has a summary of the rules they’d be exempted from here). Instead, they would operate much like health plans in the pre-Affordable Care Act market, offering cheap rates to consumers they believe would have low medical bills.

Health policy experts know exactly how this would play out: Healthy people would pick the skimpier plan, while the comprehensive plan would essentially become a high-risk pool for sicker Americans.

Individual market enrollees would likely game the system too. A couple expecting a baby, for example, would be expected to upgrade to the plan that covers maternity care for one year before returning to the cheaper plan they had before.

“Someone with chronic illness, they’re going to end up wanting to buy the more comprehensive coverage,” says Joe Antos, a health policy expert with the conservative American Enterprise Institute. “This means that people with those kinds of illnesses will end up paying more. Even if they receive a federal subsidy, they will likely see higher cost sharing.”

As Antos notes, individuals who want to buy the comprehensive plan would receive federal tax credits to do so. They could not use the tax credits for the deregulated plans.

But even after that financial help, these people would still face significant out-of-pocket costs, including high deductibles and premiums. The Congressional Budget Office estimates, for example, that a 64-year-old individual earning $11,500 and receiving tax credits would still need to pay $4,800 to purchase that plan.

The updated Senate bill also allows individuals to use tax credits to purchase catastrophic coverage

There is a quieter way the Senate bill lets people buy skimpier plans: by using their tax credits to purchase catastrophic plans.

This is a practice the Affordable Care Act barred, as the law’s drafters wanted to encourage enrollment in more generous options. But the Senate bill would allow the tax credits to be used for these high-deductible plans. These plans would only include three primary care visits before individuals hit their deductibles and have to pay their medical bills out of pocket. The plans could cover a wide array of health benefits, including maternity and mental health, but, again, coverage would only kick in after paying a large deductible.

The updated bill would let individuals use pre-tax dollars to pay for their premiums

An estimated 29 percent of American workers are enrolled in tax-advantaged health savings accounts (HSA), that allow them to use pre-tax dollars to cover things like co-payments and coinsurance.

The Senate bill would allow HSA dollars to go toward premiums as well, meaning someone in the individual market could use pre-tax dollars to pay their monthly bill. This practice was not allowed under the Affordable Care Act.

Liberals have typically opposed this provision, which they argue would mainly benefit wealthy Americans who have the money to contribute to an HSA in the first place. This provision would have fewer benefits for low-income Americans, who rely on tax credits to finance the lion’s share of their premium.

The Senate bill gets rid of most Obamacare tax cuts — but keeps two on high earners in place

 

The Senate’s revised health care bill still includes an estimated $657 billion in tax cuts by eliminating the health law’s taxes on the medical industry and its individual mandate penalty for not carrying coverage, among other changes.

It does continue two taxes aimed at wealthy Americans: a 0.9 percent investment tax and a 3.8 percent Medicare payroll surtax. Keeping these two taxes in place would net the government an estimated $231 billion in revenue over the next decade, and eliminate some of the benefits high-income Americans would have received under the first draft.

These new taxes, however, do not seem to be fully spent on enhancing the law’s benefits. The new bill includes a $45 billion program to combat opioid abuse as well as $70 billion to offset the costs of expensive patients (this is in addition to the $112 billion already appropriated for that purpose in the first version of the bill). The inclusion of these taxes does not appear to lead to any additional funding of the Medicaid program or offset any of the cuts to the tax credits in the individual market.

The Senate bill still makes very deep cuts to Medicaid

The Senate bill is notable in what it doesn’t change: namely, significant cuts to the Medicaid program. While moderate senators have protested these cuts (particularly those who represent Medicaid expansion states), these provisions of the Senate bill remain largely intact.

One of the main ways Obamacare increased insurance coverage was by expanding the Medicaid program to cover millions more low-income Americans. Prior to the health law, the entitlement was restricted to specific groups of low-income Americans (pregnant women, for example, and the blind and disabled).

Obamacare opened up the program to anyone below 138 percent of the poverty line (about $15,000 for an individual) in the 31 states (plus the District of Columbia) that opted to participate.

The Medicaid expansion gave states generous funding to cover this particular population. Typically, the federal government picks up about half the cost of the Medicaid program and states cover the rest.

For Medicaid expansion, however, the federal government currently pays 95 percent of the costs — an especially good deal for states meant to assuage their budget concerns during the original Obamacare debate.

The Senate bill would begin ratcheting down that Medicaid expansion funding in 2021. By 2024, states would get that same match rate they typically get to cover other populations. In 2021, for example, the match rate would fall to 90 percent, then decline in steps to 75 percent by 2023.

The Congressional Budget Office has projected in a separate analysis that this policy change would mean no additional states expand Medicaid — and that some current expansion states would drop out of the program, resulting in millions losing coverage.

“CBO anticipates some states that have already expanded their Medicaid programs would no longer offer that coverage,” the agency wrote in its analysis of the House bill, which makes a similar change.

The Senate bill would cut the rest of the Medicaid program too

There are significant changes to Medicaid in the Senate bill outside of the expansion too. This bill would convert Medicaid to a “per capita cap” system, where states would get a lump sum from the federal government for each enrollee. Or states would have the opportunity of a block grant — a sum of money untethered from the number of people involved.

This is very different from current Medicaid funding. Right now the federal government has an open-ended commitment to paying all of a Medicaid enrollee’s bills, regardless of how high they go.

The Senate bill would set different amounts for different groups of people. It envisions, for example, higher payments to cover Medicaid enrollees who are disabled (and tend to have higher costs) than for Medicaid enrollees who are kids (generally healthy with lower costs).

The rate at which these payments grow is also important. The Senate bill would have the funding growth tethered to the Medical Consumer Price Index plus 1 percentage point through 2025, and then switch to the urban Consumer Price Index. Analysis of this type of proposal suggests this change would amount to funding cuts for Medicaid, as the program’s spending typically goes up faster than these growth rates.