Obamacare Repeal and Replace Measure Falls Short

The Affordable Care Act amendment offered by House leadership yesterday seems well-intended. But it falls far short of the “repeal and replace” promises that have been made for years.

Instead of offering better health insurance, more choices, and greater affordability as promised, the draft proposal pushes more people into private health insurance exchanges, through which insurers will offer poorer coverage at a higher cost. 

Older adults will immediately pay as much as 60 percent more for their health insurance.

All individuals will find themselves subjected to a new “individual mandate,” disguised as a 30 percent premium surcharge for those who lose their coverage for more than two months and for those 26 year olds who fail to enroll as soon as they leave their parents’ policies.

A new high risk pool for those with chronic diseases will become a multi-billion dollar unfunded mandate on the states by 2026.

Employers will no longer have to provide insurance to their employees.

People newly covered by Medicaid who are unfortunate enough to lose coverage for a month or more will find themselves permanently excluded from the program.

The “essential benefits” that mandated that insurers cover mental health and other conditions the same as they cover physical health will be wiped out from the Medicaid program forever.  And they will effectively disappear from private insurance products as well when insurers are newly permitted to offer insurance products that pay far less in benefits than individuals pay for the insurance.

These are just some of the provisions of the new proposal that should concern people.  But they are not the only ones.

Consider the Medicaid program.  Medicaid is an expensive program, costing $546 billion in 2015.  That is a lot of money, and members of Congress are completely justified in trying to bring those costs under control.

It has been proven time and again through the Medicaid waiver process that the way to do this is not to just pay less than it costs for health care providers to deliver quality care. It is to expand the range of services that can be provided, including non-medical services, such as employment or housing supports.  To get a Medicaid waiver, a state has to prove that what it will do will cost less than it would have spent doing the same old things. 

So there is a huge body of evidence that could have been used to re-fashion the Medicaid program. And it makes no sense to continue to require states to go through the onerous process of applying for new waivers every time they want to replicate something that has already been done successfully in another state.

But this proposal does nothing to give states greater flexibility in managing their Medicaid dollars.

Instead, it offers a new Medicaid cost sharing formula to the states.  It says that the federal government will institute a per capita cap – in other words, a capped payment – for every individual on the Medicaid program.

But here’s the problem.  The cap will take effect in 2019, but be based on what states are spending in 2016. 

The way the federal government will calculate the cap is simple. It will take the amount spent in 2016, inflate it by the rise in the medical CPI, and make that the initial state payment.

On its face, that sounds reasonable – the medical CPI is rising more quickly than the CPI in general.  But Medicaid costs are rising more quickly than that.  This past year, the medical CPI went up 4.7 percent.  But Medicaid costs – largely due to an aging, sicker population the program covers – increased by 5.9 percent.

A 1.2 percent difference may not seem like much. But, remember, this is based on a $546 billion budget.  Every percentage point is worth $5.5 billion.  So after three years, when the new cap goes into effect, states will be picking up nearly $20 billion in new annual Medicaid costs – before they even get started.

The federal government projects its budget costs and savings over a ten year period.  That means that during the first ten years, this simple, little, mild-sounding budget initiative will cost states more than $200 billion.

That’s pretty harsh, but so is this proposal.