By Don McIntosh
The Affordable Care Act (popularly known as Obamacare) is complicated, expensive and flawed. But the American Health Care Act (AHCA), which passed the U.S. House May 4, wouldn’t “repeal and replace it” as Republicans promised; it would tweak it and break it, making it much worse.
To see how, you need to understand a little about how the ACA works. ACA tries to reduce the number of uninsured by expanding Medicaid to cover all those at or near the poverty line, and adding financial carrots and sticks to get others onto an insurance plan. Individuals get subsidies to buy insurance on regulated state-level exchanges, and face tax penalties if they don’t buy insurance. Big employers pay penalties if they don’t provide insurance. Small employers get incentives for buying insurance on exchanges. [But not union small employers that get health insurance through union-sponsored trusts; they were left out.]
And all this is paid for with a variety of taxes — on medical equipment manufacturers, tanning salons (because tanning beds cause cancer), and most importantly, by extending the Medicare payroll tax to high income taxpayers and to “unearned” (investment) income. The most broadly controversial tax — the so-called “Cadillac” tax on expensive employer-provided health insurance plans that cover many union members— has yet to be implemented because Congress voted in 2015 to delay it to 2020.
In theory, the regulated state-level insurance exchanges are supposed to restrain increases in insurance premiums — because insurance companies compete on price for standardized insurance products, and because the ACA says at least 90 percent of premium dollars must go to health care, with only 10 percent for insurance company administration, tax, and profit. Insurance companies are barred from refusing coverage to the sick (those with “pre-existing conditions” in the industry’s soul-less jargon), but in turn, they benefit from the “individual mandate” — the requirement that all the healthy purchase insurance under pain of tax penalty.
In practice, it didn’t work as well as predicted: Too many healthy people remained uninsured, because the tax penalty wasn’t draconian enough and/or the subsidies weren’t rich enough. And maybe more importantly, the exchanges did nothing to restrain the prices charged by hospitals or other health providers. The fact that premiums continued to rise led some people to conclude that Obamacare is a failure, overlooking the fact that an estimated 20 million more people are now insured because of it.
What does the American Health Care Act do to all of that? Here are some highlights:
- It starves off the most effective part of the ACA. Medicaid would be converted from a federal guarantee to a state block grant, with funds ratcheted down every time someone drops off the Medicaid rolls.
- It gives up most of the revenue. AHCA keeps the Cadillac tax (though delaying it to 2025), but repeals the Medicare tax on high-income taxpayers and the medical equipment manufacturers.
- It mucks up the subsidy/penalty structure. In Obamacare, subsidies are based on income, and the least-income get the most subsidy. That makes sense, since the point is to make it affordable enough so people buy insurance who otherwise wouldn’t. AHCA changes subsidies to be based on age, with older people getting more. That will result in healthy lower-income young people going without, which would destabilize the insurance market. Making matters worse, AHCA replaces the already-ineffective tax penalty with something worse: a rule letting insurance companies charge 30 percent extra to those who’ve gone without insurance. Think about that: If you go without because insurance is unaffordable, a policy making it even less affordable to get back on will guarantee you stay uninsured … until you’re sick.
- It brings back ‘pre-existing conditions.’ ACA says insurers can’t refuse coverage to those with pre-existing conditions, but AHCA says states could let insurers charge them more.
AHCA passed May 4 by 217-213, with no hearing, no analysis from the Congressional Budget Office, and no support from Democrats. The bill’s fate in the U.S. Senate is uncertain. Thanks to the filibuster rule, if the Senate’s 48-member Democratic caucus sticks together, it could defeat AHCA or any other bill to undo the ACA, or at least engage in history-making debate if Republicans are prepared to duke it out on the Senate floor.
MORE: See the Kaiser Family Foundation’s more detailed breakdown of the AHCA here.
How Oregon and SW Washington members of Congress voted
FOR: Oregon Republican Greg Walden
AGAINST: Washington Republican Jaime Herrera-Beutler; Oregon Democrats Earl Blumenauer, Suzanne Bonamici, Peter DeFazio, and Kurt Schrader.
