Republicans thought they could come to power and quickly deal Obamacare a mortal wound. Instead, they are in for a long, hard fight with an uncertain outcome.
Early Thursday morning, the GOP-controlled Senate advanced a budget resolution that sets into motion a legislative process to repeal Obamacare. But what comes next is entirely unclear. Republicans have not yet agreed on a concrete or specific replacement plan for a law that has extended health coverage to 20 million Americans.
But they do have ambitious plans for the remainder of America’s health care safety net. Speaker Paul Ryan’s (R-WI) plan to privatize Medicare would increase health care costs for seniors by about 40 percent. He hopes to cut Medicaid, the primary program providing health care to poor people, by between one-third and one-half. He also hopes to invalidate of web of state laws ensuring that health insurance covers well child care, maternity stays, and mammograms.
By the end of President-elect Trump’s four-year term, the American social contract could be completely rewritten. Yet the lawmakers eager to rework this contract rarely speak in clear terms. They dress many of their most aggressive proposals in sterile language such as “balance billing,” or “premium support,” or permitting insurers to sell their products “across state lines.” It’s easy to get confused wondering what these vague proposals mean for Americans who need medical care.
So here’s a quick Republican-to-English guide to translating these buzzwords into the clearest explanations we can offer of what they actually mean.
Speaker Ryan hates the word “voucher.”
His proposal to privatize Medicare does not replace the venerable federal program with the “v”-word, he insisted in 2013. “It’s not a voucher,” Ryan told Fox News, “it’s premium support.”
Technically, there is a distinction between these two concepts. With a voucher system, the government gives seniors a kind of coupon, which they can then use to pay for some of the cost of their health insurance. With premium support, the government pays the insurer directly. But, as a practical matter, this is a distinction without much of a difference.
Whatever you call it, Ryan hopes to repeal Medicare, and replace it with a system where tax dollars help seniors purchase private health insurance.
Should Ryan succeed, seniors will wind up paying much more for health care. Private insurers typically have much higher administrative costs than a single-payer system like Medicare, and those costs are passed on to seniors in a privatized system.
Additionally, insurers bargain with hospitals and other health providers to lower the cost of care — and a nationwide, government-run health program is large enough and powerful enough to drive a very hard bargain with these providers. Private insurers, which represent fewer patients and don’t have the full might of the government backing them, often pay much higher prices than Medicare for the same treatments.
Indeed, in 2011, the Center on Budget and Policy Priorities (CBPP) calculated just how much costs would rise for seniors under a version of Ryan’s plan.
That’s about a 40 percent spike in seniors’ out-of-pocket costs.
“Selling insurance across state lines”
In 2008, permitting insurance companies to sell their plans “across state lines” was one of the central provisions of the McCain-Palin health plan. Although McCain lost to President Obama, this idea still lingers in Republican health care proposals. Speaker Ryan included it in a white paper laying out the House GOP’s health policy plans.
On the surface, allowing someone in New York to buy a health plan offered in, say, Arizona, sounds innocuous. But a primary reason why people in one state typically cannot purchase the same plans offered in another is because of state laws setting minimum standards for health insurance.
Forty-nine states plus the District of Columbia, for example, required health plans to cover reconstructive surgery after breast cancer, maternity stays, and mammograms. Thirty-one states required insurers to cover well child care. Forty-four states and the District of Columbia provided an appeals process for denials of coverage.
Permitting an insurer to sell coverage “across state lines” means permitting them to sell a product that is illegal in another state because it does not comply with one or more of these requirements. It is, in essence, a proposal to eliminate states’ ability to regulate health plans and ensure that they provide adequate coverage to patients.
Medicaid is a federal grant program that offers states fairly substantial amounts of money to set up health care programs for their low-income residents. States that accept these grants, and all of them accept at least some Medicaid funds, must comply with certain rules governing how the state programs will be run.
The term “block grants” refers to a Republican proposal to significantly roll back the rules states would need to comply with in order to keep receiving Medicaid funds. As Speaker Ryan explains in a 2016 white paper, “states would receive maximum flexibility for the management of eligibility and benefits for non-disabled, non-elderly adults and children,” potentially enabling them to kick certain people off Medicaid or to reduce their benefits.
In fairness, this block grant proposal does not entail removing all of the rules governing Medicaid spending. States presumably would not be free to, say, spend Medicaid funds on a new vacation home for their governor. And Ryan claims that “states would be required to provide required services to the most vulnerable elderly and disabled individuals who are described as mandatory populations under current law.”
But block grants could permit states to privatize their Medicaid programs, creating the same problems with higher costs for inferior care that arise if Medicare is privatized. It could also lead states to charge premiums that some Medicaid beneficiaries cannot afford, or to offer plans that don’t provide adequate coverage.
Even more significantly, Ryan pairs his block grants proposal with massive cuts to the Medicaid program — about one-third of all Medicaid funds, according to CBPP. And that’s assuming that Congress does not adopt an even more aggressive alternative proposal which could cut Medicaid funding in half.
Shortly after his post-election meeting with President Obama, President-elect Trump indicated that he would like the keep the Affordable Care Act’s provisions ensuring that people cannot be denied coverage because they have a preexisting condition. Trump’s less mercurial running-mate, Vice President-elect Mike Pence, made a similar claim in November, and Senate Health, Education, Labor and Pensions Committee Chair Lamar Alexander (R-TN) also claims that, under the GOP’s health bill, “you won’t be disqualified from getting insurance if you have a pre-existing health condition.”
As a practical matter, however, it will be difficult for Republicans to keep Obamacare’s protections for people with preexisting conditions if they also follow through on plans to repeal two other parts of the law. As ThinkProgress recently explained,
If individuals are allowed to wait until they are sick to buy health insurance, and then insurers are required to cover them anyway, then sick people will drain all the money out of insurance pools that they did not pay into, leaving nothing left for other patients.
Obamacare solves this problem by adding on two provisions: an individual mandate that taxes people who do not carry insurance at a higher rate, and tax credits that help people who cannot otherwise afford insurance to do so. Together, these provisions bring healthy people into insurance plans before they get sick, thereby ensuring that there is enough money in the insurance pool to go around.
One possible way around this problem is to create high-risk pools, a special health plan for people with high health care costs. Doing so would be a windfall for insurance companies, because it would allow them to keep all the profits they earn from their healthy customers without having to cover the costs of the most expensive patients. But, while high-risk pools would be an expensive and inefficient way to provide health care to people with preexisting conditions, it is a theoretically possible solution.
Yet there are no signs that Republicans are prepared to spend the significant sums that would be necessary to make high-risk pools a viable alternative to the Affordable Care Act. About 52 million people have preexisting conditions, and about 20 million people are insured through Obamacare, although not everyone in the latter group is also in the former.
McCain’s 2008 campaign, however, proposed spending enough on high-risk pools to cover between 875,000 and 1.2 million people. Speaker Paul Ryan proposed spending about $25 billion, which is enough to cover roughly 3 million of the 20 million who will lose insurance if Obamacare is repealed.
“Health savings accounts”
“Health savings accounts” (HSAs) allow individuals to set aside money that can be spent on health expenses, and then deduct that money from their taxable income. They play a prominent role in many Republican health care proposals. For various reasons, they also primarily benefit the rich.
Typically, HSAs must be paired with high-deductible health plans (currently, for a single person, the minimum deductible is $1,300). Thus, a person could purchase such a plan, set aside the cost of their deductible in an HSA, and avoid taxes on the money set aside in this way.
For a certain segment of individuals — people with moderate, predictable health expenses who can afford to set aside money in advance — HSAs allow them to save a little bit of money on taxes. But they are not a solution for people with major medical expenses that they cannot afford. Nor do they account for the unpredictability of health expenses. Most people do not set money aside because they expect to be hit by a bus later in the year.
Because they are structured as a tax deduction, moreover, HSA’s are also regressive. Under existing tax brackets, a person earning $50,000 who sets aside $1,000 in an HSA will receive a $250 tax break. Meanwhile, a person earning $500,000 who does the same will receive a $396 tax break.
“Repeal and delay”
The phrase “repeal and delay,” to be fair, is probably on the wane. In the aftermath of the election, many Republicans hoped to effectively add a sunset date to many of the Affordable Care Act’s provisions, causing them to automatically expire after several months or years.
Such a delay made sense to Republicans for several reasons. Due to quirks in the Senate rules, Obamacare’s fiscal provisions — including the Medicaid expansion, tax credits that help people pay their insurance premiums, and the individual mandate (which charges higher taxes to many people without insurance) — can be repealed with just 51 votes. But the law’s regulatory provisions, including the provision requiring insurers to cover people with preexisting conditions, effectively require 60 votes to strip away.
Repeal and delay allowed Republicans to lock in repeal of many of the law’s most important provisions, then use the threat of an impending deadline to coax Democrats into making a full-on replacement bill “bipartisan.” It also allowed Republicans to push off the date when people who benefit from Obamacare start losing their insurance.
In any event, however, a repeal and delay bill now seems much less likely to become law than it did even a few days ago. As the Center for American Progress’ Topher Spiro and Thomas Huelskoetter explain, delaying repeal was unlikely to prevent people from losing their insurance right away because once “it becomes clear that the marketplaces soon will no longer exist, then healthier consumers would be less likely to enroll or re-enroll in coverage, leaving the marketplace with a less healthy, more expensive risk pool. Knowing this, many insurers would cut their losses and exit the marketplace after 2017.”
And repeal and delay is hemorrhaging support among Republican senators. President-elect Trump, meanwhile, says that he wants to see a replacement enacted “very quickly or simultaneously” with a repeal bill.
At least for the moment, in other words, repeal and delay appears dead.
“Balance billing” is one of the more obscure proposals offered by Republicans in recent years, but it does have one very high-profile proponent. Rep. Tom Price (R-GA), who Trump nominated to lead the Department of Health and Human Services, introduced legislation that would allow Medicare to engage in balance billing.
As The Week’s Ryan Cooper explains, balance billing is “the practice of billing the patient for the difference between the sticker price and what insurance will pay. So if a hospital visit costs $1,000, but your insurance will only cover $300, some providers will ‘balance bill’ you for $700.”
Recall that insurers, including Medicare, routinely bargain with health providers to lower the cost of care. Typically, that bargaining benefits patients and drives down the cost of care. But balance billing could lead to a world where such bargaining leaves patients worse off, since they would be on the hook for anything their insurer did not cover.
That also puts government programs like Medicare, which exist to serve the public, in a difficult position. Any dollar paid by Medicare is ultimately charged to the taxpayers, so the federal government should try to reduce these costs. Balance billing, however, would cause savings achieved by Medicare bargaining to be imposed on individual seniors.
This piece has been updated to reflect the latest news on Republicans’ Obamacare repeal effort in the Senate.