• The Republicans’ “American Health Care Act” in a few words as I can manage

    The repeal and replace bill is here: The American Health Care Act. There will be a gazillion explainers, and that’s not my goal here. I’m trying to describe the bill in a few words as I can manage, to make a Healthcare Triage script. So here is my attempt. I’m going to leave comments open, and I encourage you to tell me where I’m wrong or missed something. I don’t tape until tomorrow. You can also tweet me suggested changes. Text of the bill here.

    Medicaid

    Medicaid is complicated. First of all, the bill leaves the expansion intact – for now. Everyone who signs up by 2020 gets to keep their Medicaid. But in that year, entry into the expansion is frozen, and people will only remain eligible if they don’t have a lapse in coverage of more than a month.

    In some ways, this bill incentivizes states to sign up as many people as possible in the next three years, so that they qualify for a higher match amount when that goes into effect in 2020.

    In 2020, we change Medicaid to a per capita block grant program. The cap rises by medical CPI plus 1%. The initial rate will be set by looking at 2016, and then increasing spending to 2019 based on that formula. That could lead to a drop in relative funding in 2020 if health care spending increases faster than inflation from now until 2020.

    The amount allocated per person is based on five groups: (1) kids, (2) the elderly, (3) blind and disabled people, (4) previously eligible adults (pregnant women, parents), and (5) expansion eligible (working adults).

    Lottery winners are not eligible for Medicaid. They spent a full six pages of the bill discussing this. I have no idea why.

    The essential health benefits requirement for some Medicaid benchmark plans goes away. This seems to include the requirement that mental health services be covered the same as other health benefits.

    Retroactivity changed. As of now, you can get Medicaid today and get it cover your spending for up to three months ago. This is important, because people could get coverage for things that occurred for some time before they signed up. That’s now reduced to the month in which they apply. Huge deal.

    Additionally, now states have to re-determine eligibility for people on Medicaid at least every six months. This will lead to many people losing coverage, cause that’s much more of a pain than you think.

    Other Payments

    Disproportionate hospital payments are restored immediately to states that didn’t expand Medicaid, and to all states in 2020.

    In 2018 and 2019, $15 billion is allocated for states to do with what they want. They could make high-risk pools. Or they could increase the size of the subsidies/tax credits. Or they could reinsure insurers to protect them from really high-cost patients.

    From 2020 through 2026, that amount is reduced to $10 billion a year. To claim that money, states have to match in in increasing amounts, from 7% in 2020 to 50% in 2026.

    Subsidies

    Anyone who maintains continuous coverage will keep their community ratings – they can’t be charged more than others. If, however, they let their coverage lapse for 63 days in a year, they can be charged 30% more for 12 months.

    The subsidies change, too. Now. They’re called tax credits. (Here’s a secret – they were tax credits before). But now they’re not based on how much you earn; they’re based on how old you are.

    They also start to phase out when you earn $75,000 a year ($150,000 for joint tax filers).

    As you can see from this handy chart from the KFF, a 27-year-old will get $2000, a 40-year-old will get $3000, and a 60-year-old will get $4000. That’s true if they make $20,000 or $75,000. Under the ACA, they got more money if they were poorer, and less if they were richer. Those making $75,000 get nothing now, for instance.

    This means that poorer people, especially non-young poorer people, are going to have a much harder time affording insurance. People making more, ironically, are potentially in for a windfall.

    Cost sharing subsidies are not appropriated for 2017, 2018, or 2019 – and they’re eliminated in 2020. Your subsidies also can’t be used to purchase any insurance that covers abortion.

    The exchange market

    There’s no more individual mandate or employer penalty – retroactive to 2016. Insurance companies will hate that. This will likely lead to adverse selection. That’s made worse ironically by the 30% penalty for late enrollment. Healthy people, once they’re out, simply won’t buy coverage until they’re sick – cause you’ll get the same penalty no matter what. Death spirals seem much more likely with this plan.

    Age bands (the difference between what you can charge young and older people for insurance) are increased from 3:1 to 5:1 starting in 2018. This will make insurance cheaper for younger people and more expensive for older people.

    Taxes

    For 2017, all the taxes remain in effect. In 2018, though, they’re gone. This includes the Cadillac tax (delayed until 2025, which is the same thing), the medical device tax, the tax on high salaries of insurance executives, the Medicare tax on higher earners, taxes on insurance companies, pharma, and tanning salons, etc.

    Misc.

    The bill defunds Planned Parenthood, bur increases funding for community health centers.

    People could now put even more money into their health savings accounts. The limit increases to at least $6,550 for an individual and $13,100 for a family in 2018.

    What’s untouched?

    Young adults can are still covered by family plans until they are 26.

    Guaranteed issue and community ratings still exist (subject to continuous coverage).

    Essential health benefits remain intact in the exchange market, including preventive services and maternity care.

    Annual and lifetime limits are still banned.

    My thoughts

    There’s no CBO score yet, and it’s hard to know exactly what they find. But here are my thoughts: it’s hard to see how this won’t lead to a reduction in insurance coverage. Many people will find the subsidies insufficient to buy care.

    It’s also hard to see how it will lead to much of a deficit reduction in the long term. There’s still a decent amount of spending in there and a declaration that many of the taxes/sources of revenue will end. That’s unless they plan deep, deep cuts to Medicaid in the future – which will come with its own issues.

    I’m actually worried that their continuous coverage plan could actually make adverse selection worse. Why wouldn’t a healthy person go without insurance for a couple years if all they’re gonna see is a one year 30% increase in premiums as a penalty?

    There’s a fair argument to be made that this is Obamacare Lite. There’s still a fair amount of regulation, the expansion is left intact until 2020, subsidies still exist – even the taxes don’t go away yet. But this is still a big difference from the ACA. The subsidies shift away from the poor to others. And Medicaid undergoes a huge sea change in 2020.

    It’s a bill. It desperately needs a CBO score.

    @aaronecarroll

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    • I don’t know if anyone is talking about this but one group that may be impacted by limiting retro medicaid are nursing facilities. Many NF patients come in with Medicare as their only payer as SNF patients with 100 days of coverage under Part A. The facility has reason to believe these members won’t discharge so they take the admit knowing they have time to get the Medicaid application in an that retro coverage will close the gap. This puts much more pressure on nursing facilities and much more of their payment at risk. My question is, if this all occurs, and SNFs stop receiving admits of Medicare only members who they perceive will need long term care or not until they get Medicaid coverage who takes those patients? haven’t worked in this space in five plus years so maybe this is moot now, but it was a very big deal then, particularly in LA, MS, GA, WV, and DC where Medicaid was the primary payer for 70% or more of NF populations.

      • I wondered about SNF patients, also. I used to represent SNFs. Residents would come in on Medicare or private pay and then spend down their resources. They would then apply for Medicaid. Months of coverage could be lost as information and assets had to martialed. The 3-month retroactive period could cover that gap. Without that retroactivity, facilities could lose months of revenue.

        The other issue is the block granting of Medicaid. As the bock grants slip behind the level of medical inflation, a feeding frenzy will develop among provider types. There will be winners and losers. And if I were a NH operator, I would be concerned that I would be a loser.

        It is my sincere hope that the so-called “Freedom Caucus” in the House will withhold support and put the republican party unable to retreat to the ACA or move forward with something that provide far less.

    • Without an individual mandate, who winds up paying when those who choose to be uninsured get sick and go to the ER?? Where’s the personal responsibility?

    • Thank you for doing this. Even reading through this truncated and simplified explanation made me want to pull my hair out. I shudder to think what going through the whole thing was like.

      Complicated things are complicated.

    • great article, disgusting revisions. I have not seen any comments about the ACA reducing Plan D medicare donut hole to zero by 2020. Is that changed? I called my Representative’s office and they did not know.

    • I think the adverse selection pressure will be bigger than you state due to interaction with other parts of the plan. Note that if you forgo premium payments successfully for only 4 months you are already beginning to be financially better off than staying with continuous coverage.

      Moreover, relatively healthy people and even some not so healthy will find this very attractive particularly if, as Kevin Drum and others have pointed out, employers will see dropping coverage as a wash for most middling income employees.

      In this scenario an employer pays the employee the equivalent funds of the cost of the employer plan, it gets taxed but the age based subsidies make up the difference so the employee can get equivalent coverage on the personal market. So no hew and cry if the employer drops coverage from those that need coverage.

      But with only the 30% penalty, employees who are reasonably healthy can pocket the money for just a few months and start coming out way cash ahead. So employees who are reasonably healthy would begin *pushing* for their employer to drop coverage so they can pocket the money. If they do get sick they get coverage and pay this minor penalty. The only employees who would push for employer coverage and/or take the money and buy insurance are the unhealthy ones.

    • Thanks for the write up. I don’t really see how this is going to help Americans. Removing the individual mandate with a weak penalty for a lapse in coverage will certainly give healthy people the desire to not enroll in insurance.

    • The ACA calls for denying medicaid to abortion providers, but pretty much all large hospitals provide abortion services. Would effectively force hospitals to choose between serving the medicaid population and providing access to abortion or am I missing something?

    • From Timothy Jost regarding Patient and State Stability Fund, “If states do not apply by the application deadline for 2018 (45 days from enactment) or have an approved application for a subsequent year, the funding will be used for reinsurance purposes, covering 75 percent of claims between $50,000 and $350,000 (or for 2020 or later, such amounts as are established by the Centers for Medicare and Medicaid Services administrator.)”

      Is this like an invisible risk pool as used in Maine? (http://healthaffairs.org/blog/2017/03/02/invisible-high-risk-pools-how-congress-can-lower-premiums-and-deal-with-pre-existing-conditions/)

      Asking for a friend, thanks

    • In the section on subsidies you say:

      “People making more, ironically, are potentially in for a windfall.”

      Looking at the bill overall, I’d say there isn’t much irony here. Overall, the thing is a giant tax cut for the wealthy and the subsidy distortions are part of the package. I’d point that out in your Triage piece.

    • I fear this bill is a sign of what we can expect from our government in the decade(s) to come. The GOP will keep dismantling programs, and most Democrats, though they’ll talk a good line, will probably let them. I hope I’m wrong.

      The ACA is a major improvement over what we had, but there’s no denying it’s broken, as well. (As self-employed people in our thirties, my husband and I fall just beyond financial support and now pay $500/mo for what is catastrophic coverage by any other name.) The ACA could be repaired, maybe, but I get the distinct impression that extreme partisanship won’t allow us to repair or improve anything significant, especially if the other party created the program first.

      We all know that’s at least some of what’s behind this. The GOP, and Trump especially, can’t stand that the ACA is nicknamed Obamacare. To be fair, if anything useful was created under Trump (I’ll believe it when I see it!), the Democrats couldn’t tolerate it being called Trump[whatever], either.

      It’s no surprise we can’t seem to get anywhere. We’re reinventing wheels for selfish, partisan reasons. Healthcare isn’t a right in this nation. It’s a pawn.

    • There is no need to wait for a CBO score.

      They are repealing all of the funding sources (taxes). This is going to increase the deficit substantially. The GOP will not raise any taxes to fix it. They will argue at some point in the future that we have to cut all of these programs, because we can’t afford them (because they cut the taxes that would pay for it) and a lot of GOP voters will never figure any of this out.

      At a macro level, the wealthy will get tax cuts / tax credits, and the working class and the poor will have less assistance to afford insurance.

      The insurance industry will start selling crappy bare bones policies that will be full of holes and leave people busted if the get sick, again.

      The “mandate” is gone, which didn’t really incentivize people enough in the first place, and it is replaced with a different mechanism that is supposed to do the same thing. “Mandate” being an artful phrase, as it was simply a tax/penalty paid to the government. Under the GOP system you pay a tax/penalty to the insurer – if you are a Republican I guess that’s a really, really, really amazing and fantastic improvement.

      So congratulations, GOP. Trumpcare will take our sucky health care system (which sucked even worse before the ACA) and make it more sucky again.

    • I do not think the government should not be in charge of our insurance. Let the people that want it buy their own and those who choose not to have insurance then that is on them. We as tax payers should not have to pay for those who had rather have a cell phone than buy health insurance. The Obamacare is a failure and its cost is ridiculous and the democrats went along with it, I guess they were lining their pockets. Nancy Pelosi is a joke and she is so addle brained she talks like a person with dimentia, cannot remember things and cannot speak. Th democrats have caused confusion about everything. They need to accept defeat and work together with the republicans and our President. President Trump is trying to help the people, but you still have those who want to cause problems, grow up people, you are suppose to be adults.

      • Yikes

      • “We as tax payers should not have to pay for those who had rather have a cell phone than buy health insurance”

        I have a question or two, NRS:

        -Can Trolls get Cancer? If so, is it curable?

        and

        -Is being a troll considered a pre-existing condition by the typical insurer(s)?

        Feel free to reply later, I know that the big time difference between St. Petersburg and America can be a real pain.

    • I have a question about this claim:

      Essential health benefits remain intact in the exchange market, including preventive services and maternity care.

      Section 134 (Increasing Coverage Options) of the GOP bill appears to sunset the essential health benefits for exchange plans after 2019. So they’re safe for now, but will be gone in three years. Unless I’m reading that incorrectly, I wouldn’t call this “untouched.”

    • I’d drop the details about how Medicaid is paid for in the first part. That’s primarily of interest to the states, not to people buying insurance.

      The most important thing I’d add (and I’d emphasize it strongly) is to rate the plan wrt how well it fulfills Trump’s promise in his speech to Congress. (http://www.cnbc.com/2017/02/28/trump-health-care-five-principles-for-obamacare-replacement.html).

      Here’s my sense.

      1 Pre-existing conditions. Yes. No change from ACA.

      2. Tax credits. Yes. No change from ACA.

      3. Give states enough money so that no one is left out. No.

      4. Legal reforms. Don’t know. What are they. Do they do what they claim to do?

      5. Sell plans across state lines. No.

    • Trump also said, “Tonight, I am also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better health care,”

      Does this plan do that? Here’s what John Cassidy in The New Yorker says.(https://goo.gl/PFZxEj)

      “The bill aims to take a wrecking ball to the principle of universal coverage. If enacted, millions of Americans would end up without any coverage. For many people who purchase individual policies, especially older people, it promises fewer services for more money. And it also proposes a big tax cut for the rich, which would be financed by slashing Medicaid, the federal program that provides health care to low-income people.”

    • Sorry for all the comments, but here’s James Kwak. https://goo.gl/Rrj7jD

      Because Trumpcare eliminates the individual mandate, more healthy people are likely to opt out of coverage. This will increase the average actuarial cost of people buying individual plans, which will push up premiums—a transfer from sick people to healthy people. Trumpcare also repeals the Obamacare limits on cost sharing (deductibles, copayments, etc.) for low-income families. So in addition to paying more to buy health insurance in the first place, poor people will have to pay more when they actually try to use their health insurance.

      The basic outlines of the plan are simple: Cut taxes on the rich, cut spending on the poor, and expose more families to rising health care costs. The thing is, we’re talking about health care here. People will need the same amount of health care no matter what Congress does. If the government pays less for health care, poor people will have to pay more. If they can afford it, Trumpcare is effectively the same as a tax on the poor. If they can’t afford it, it’s even worse. This is as naked an example of class warfare as you’ll see today.

    • The adverse selection and death spiral started in the ACA, as predicted but refuted by those who wanted it to work. And raising costs on the old and poor simply because the money offered is less than what they’re given now? Premiums are unaffordable and even if they’re paid for, out of pocket costs are still unaffordable, yet with all of the backlash, insurers are still dropping out of the marketplace and increasing costs even more (hint: because of that adverse selection). This new bill might improve competitors and reduce individual costs making the newer credits more appropriate? Nobody knows yet. What’s awful about this new bill is it’s similarity to the ACA. Even with ACA coverage many of the poor still didn’t have access to care. Too many physicians I know refuse to accept their plans. Overall I think the Republicans need to go back to the drawing board on this one, however, it’s odd reading your premature analysis include many things that were used to critique the ACA but were blown off at the time. I think the only way you would be happy is if this were the equivalent of the NHS.

    • While there is a lot to not like about the House’s AHCA bill, I think your discussion of the income-based subsidies and specifically the assertion that older people will all be paying more could use more nuance, and requires discussion of the age band ratios changes that are also being proposed.

      Prior to the ACA, states set their own rules regarding the maximum ratio insurers could charge for the oldest (age 64) to the youngest (age 18 typically). A few states required a 3:1 ratio while a few others went as far as 7:1, but most states (42 of them, I believe) were 5:1 and generally worked pretty well. These ratios are touchy because if you set them too far in one direction you drive one group or the other out of the market (or at least the healthy members of that group). When the ACA came along it mandated a 3:1 ratio, which means that in most states young people had a sudden increase in premiums, while older people got a slight drop (there are several reasons why it wasn’t a dollar-for-dollar exchange, which is another story – this was predicted and debated in 2009-2010, but the AARP was organized and lobbied this very hard and ultimately got their way while the young Obama voters wondered what hit them).

      The little discussed mathematical truth is that this 3:1 ratio requirement is one of the biggest reasons why the individual market under the ACA is failing: the young, who happen to also tend to be the most healthy, just aren’t given a fair enough price in comparison to what they get out of it, even when factoring in the unexpected car accident etc. Unless they are getting generous income-based subsidies (meaning they earn between ~133% and 200% of the Federal Poverty Level AND aren’t on their parent’s plan), the young and especially the young-and-healthy have avoided what is clearly a bad deal. Opening Medicaid to healthy men (and, sorry to say it, expanding dependent coverage through Age 25) helped drain the healthiest young people from the individual market pool, thus amplifying the pain of the 3:1 ratio’s effects. This means everybody remaining in the pool, from top to bottom, has had to pay more into the system (AND, it should be noted, the insurers were still losing money in this market, meaning everybody should have been paying even more than they have, if you can believe it!).

      So in a vacuum it is true that removing the income-based tax credits and replacing them with age-based tax credits may seem like a pretty terrible deal for the older folks. But when you take into account the correction of the 3:1 ratio to a 5:1 ratio, paradoxically, may have a very positive effect on system. That is, if the system can bring in a lot more of these young invincibles to help pay for the pool’s claims, in theory everybody’s rates should go down. In other words, it is quite possible that while older consumer’s rates may go up RELATIVE to what younger people have to pay, by attracting more young people with lower rates (not just subsidizes) even the older people’s rates will go down as well. In private insurance circles this is what is called “building the pool” and is what makes the deference between everybody having fun vs. going down the drain. So while this isn’t necessarily going to work perfectly in all states, these income-based tax credits may not be as bad of a deal as many naysayers are claiming.

      Finally, an aside: while it is fun to make fun of the Republicans for not having a unified plan to solve the nation’s health care woes, a little humility on the Democrats part would go a long way: there has not been and there is not currently a unified Democratic solution to the problems we are having right now, either. Pretending that the ACA was keeping costs down, or even that it was sustainable, was the left’s version of climate-change denial. As much good as expanded medicaid and subsidized premiums are doing for individual people, the math on the macro scale is a growing monster that over time could bring down the whole system… not just the health insurance market, but Medicare/Medicaid, education, defense, research, infrastructure… everything. If Democratic leaders even pretended to be concerned with the costs of what they built, the Republicans probably wouldn’t have been handed the reins. Do the Democrats have their solutions worked out when they take back the House in 2019? I hope so, It looks to me like the Republicans are committed to keeping their triangle of power exactly as long as the Democrats did in 2009-2010: one House election cycle.

    • A trivial linguistic point. How can the Republican proposal be called an Act if it hasn’t been adopted yet? In the UK, draft laws are consistently called “bills” until they receive the Royal Assent that makes them law.

    • I don’t know why if you’re young and healthy that you’d not take the risk of an increased premium without continuous coverage if you’re on the fence about coverage.. It seems to me to be a better bet than the Mandate penalty.

      This plan seems to try to be not Obamacare but not reverting to pre ACA situation. It’s not something that achieves any objective except for the rent seeking medical industry. For the insurance industry I expect this is the death knell for the individual market. Groups will have to be formed to create their own prospective pools to avoid the risk factor that must go into the premiums.