President-Elect Donald Trump has suggested replacing
Obamacare with a package of benefits that might include:
- Permitting Insurance to be sold across state lines
- Retention of the mandate covering pre-existing conditions
- Allowing young people to remain on parents’ insurance
- Creating high-risk pools to provide insurance to people with chronic diseases
- Using Health Savings Accounts (HSAs) as an alternative to tax credits
- Expanding the use of high-deductible plans to lower premium costs
Let’s consider some of the challenges the President-Elect
and Congress will face as they craft these – and other – provisions to amend
the Affordable Care Act (ACA).
Selling Insurance
Across State Lines
President-Elect Trump has been clear that he supports this
idea, because it would bring more competition into state markets.
Here’s the challenge. Insurance is regulated by the states,
and some states have tighter regulations than others. To allow insurance to be
sold across state lines, the Congress would have to abridge states’ rights to
allow insurance from less-regulated states into states with more regulations
and consumer protections. Consumers might get more products. But they would be worse products, making
consumers unhappy.
Covering Pre-Existing
Conditions
Trump has also been clear that he would retain this
provision. It is a lifeline for people
with chronic diseases and conditions.
However, these conditions are often expensive to cover. Unless you mix them in a plan that captures
healthier people, too, costs will rise no matter what else you do.
Allowing Children to
Remain on Parents’ Insurance Until Age 26
Trump has said that he likes this Obamacare provision. Here’s the challenge. Keeping healthy, younger people out of the
exchanges has helped to drive up the costs of the plans in the exchanges. If you don’t move them into the insurance
market as early as you can, you’re making insurance more expensive for everyone
else.
Setting Up High-Risk
Pools
The President-Elect has suggested that new high-risk pools
could make sure that people with chronic diseases still have access to insurance. But at what cost? We had a high-risk pool in Connecticut when I
was a state legislator in the 1970s and 1980s.
It was expensive, and the only people who chose to be in it were the
ones who absolutely knew that the insurance would pay out more than the
premiums cost.
Expanding Health
Savings Accounts as An Alternative to Tax Credits
Health Savings Accounts – into which people deposit tax-free
dollars to pay for health care costs – have been offered as an alternative to
the tax credits that currently subsidize the cost of private health insurance
for everyone between 100 percent and 400 percent of poverty. This would help people earning more than 400
percent of poverty who are not covered by group plans, because they wouldn’t
have to pay taxes on their insurance premiums.
But for people earning less than this, the end of the tax credits would
mean that they would have to pay the full cost of their insurance. And while
getting a tax deduction on anything they deposited into their HSA would help
some, deductions are generally never as generous as credits.
Expanding the Use of
High-Deductible Plans
President-Elect Trump has suggested coupling HSAs with the
use of more high-deductible plans to lower costs. In “exchange speak,” think more bronze plans.
Here’s the way this might work.
Assume that a single adult male making $50,000 per year buys
a plan with a $10,000 deductible and pays $250 per month for the
insurance. To use an HSA to cover those
costs, he would deposit $13,000 into his HSA to cover the premium and the
deductible. That would reduce his taxable income to $37,000. If he is in the 15% tax bracket, at the end
of the year he would get back 15% of the $13,000 he deposited into his HSA, or
$1,950.
Spending one-quarter of his income on health care to get
back $1,950 would not make him feel too good about that high-deductible plan.
Any Obamacare reform
will undoubtedly also at least consider repealing the individual mandate and
rolling back Medicaid expansion.
President-Elect Trump has suggested converting Medicaid to a
block grant as well. Doing this could also be challenging.
In 2008, President Obama didn’t support the individual
mandate, either. Will younger,
wealthier, healthier people buy insurance if they perceive they don’t have to? We don’t know, but there is some evidence
that without a mandate, they won’t. And
if they don’t, the price of insurance to everyone else will go up.
Finally, most states expanded Medicaid, including Michigan,
Pennsylvania, Ohio, Iowa, and Arizona.
The federal government is covering more than 90 percent of that
cost. Trump has said that he does not
want to roll back entitlements. Neither
would the voters in these states.
The Challenge Ahead
The goal of ACA was to get more people insured, using the
health care financing system that was already in place.
The challenge ahead will be to keep those people insured if ACA
is changed. Probably the best way to do
this – single-payer, Medicare for all – won’t happen anytime soon. But if the new President and Congress don’t walk
a tightrope in making their changes, single-payer may come along a whole lot
sooner than anyone imagines.
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