A while back, I had a Twitter “conversation” with Daniel Garza of the The Libre Initiative.
After a few back-and-forths, Daniel stated that I was spreading the “biggest lie about Obamacare” when I stated that the GOP had not provided any counter-proposals to Obamacare. Daniel suggested that I Google “Republican alternatives to Obamacare.” I said I would (I’m open minded enough to give an honest look at such proposals) and provide a “book report” on what I’d find. So here is my “review” of the latest comprehensive proposal from the GOP on the topic of comprehensive healthcare.
Daniel had tweeted his view that “economic freedom” provides for better lives.
#EconomicFreedom, improving life for most vulnerable: Life Expectancy Infant Mortality Healthcare Poverty Rates Environment Civil Rights
— The LIBRE Initiative (@LIBREinitiative) June 27, 2015
I replied that “access to healthcare” contributes to better lives as well (for good measure I added a “#ThanksObama”).
During our conversation, Daniel provided some Top-Of-The-Head reasons why a GOP plan would be better:
- Tax Credits
- Keep your own plan
- Insure the uninsured
- Expand doctor choice
- Keep costs down.
These sound good in bullet form. Are they? We’ll come back to these specific items later and address them one-by-one.
The GOP Alternative
The current alternative proposal from the GOP to Obamacare, “The Patient Choice, Affordability, Responsibility, and Empowerment Act “is not technically a proposal, yet. It’s still a “white paper” as no legislation regarding this proposal has yet been put forth either in the House or the Senate (as of July 8, 2015).
This whitepaper was authored by U.S. Senator Richard Burr (R-N.C.), Senate Finance Chairman Orrin Hatch (R-Utah). It is modeled on a whitepaper that was first introduced as early as 2014 by Senators Richard Burr, Tom Coburn, and Orrin Hatch. For the purpose of this review, we’ll focus on the latest version of the whitepaper.
Repealing the Individual Mandate
As expected, the first and foremost pillar of this proposal is eliminating the individual mandate that requires everyone to have insurance. For people who align themselves with the GOP, this requirement that everyone purchase a health insurance policy in anathema (although they support other policies which require individual participation and enforcement by the federal government; however, that’s a discussion for a different day).
Under Obamacare, everyone is required to have insurance. In the past (pre-ACA) young people tended to not purchase health insurance. From a young persons perspective (my son for example): “Why should I buy something that I don’t need / won’t use?”
Like any insurance type, costs go down when you have many payers and few users. So by requiring everyone to purchase insurance (even young healthy adults), the ACA is designed to lower premiums overall. This has proven to be the case, with some qualifiers. For many people the cost of an insurance premium has actually gone down (my wife’s plan has lower premiums, for example). But for the majority of people, the ACA has provided benefits in the form of a lower rate of premium price increases. A partial vistory, to be sure. But better than the runaway increases from the pre-ACA days. [8]
By removing the individual mandate, young healthy people will once again abandon the health insurance market and return to the situation that existed pre-ACA. Removing the individual mandate will lead to an increase in average health insurance premiums.[5] However, I should note that the overall average cost is expected to go down, which is one of the GOP’s goals.[5]
Ironically, there is an item in the proposal that allows states to enroll people by default (somewhat akin to the individual mandate) but allows people to opt out of the system. Small but important distinction.[4]
Tax credits, not subsidies
The next pillar of this whitepaper is replacing subsidies used to help people afford the new health policies with a tax credit.
Both of these approaches are designed to lower the cost of purchasing a health plan. The ACA uses tax money to provide a subsidy to lower income people who want to buy insurance. So, using a simplistic, generic scenario, if the monthly cost for a family health plan is $800/month, a lower-income family may only need to pay $250/month and the subsidy will provide the other $550/month to the insurance provider to make up the difference in the $800/month plan. The provider still gets their $800/month, but the out-of-pocket cost to the family is only $250/month for the plan itself.
With a tax credit, that same family will be asked to pay the full $800/month, however, at tax-time they will receive a tax credit to help lower their tax bill. Ideally, that credit will be enough to make the net cost to the family be the same $250/month that they’re currently paying under ACA.
However, there are some problems with this proposed approach. In some cases they’re pretty big problems that the proposal won’t adequately address.
First, tax credits will do nothing for the poorest members of our society. There are still many, many people who do not have health insurance because, the cost of the premiums is too high (even with the ACA subsidies). One of my worst personal let-downs came after the ACA was initially enacted when I happily informed someone that people would be able to provide health insurance to their family for as little as $100/month. A case worker from UC Davis Center for Reducing Health Disparity informed me that many of the people they deal with do not have an extra $100/month to purchase health insurance for their family. Many families, have two wage earners who are making only slightly above minimum wage. In many cases, this is enough to disqualify them from medical (California’s version of Medicare), but not enough for them to purchase health insurance. So they remain uninsured.
So getting a tax credit at the end of the year, especially a tax credit that doesn’t cover the cost of a comprehensive health plan, is meaningless to them. For the working poor, any money received as part of a tax credit will likely be spend on other essential items: food, clothing, utilities, education expenses or perhaps transportation costs to maybe have greater job options. But it is very unlikely to be spent on a health insurance policy.
Under the proposal, “catastrophic” health policies will once again become available. These low-cost, minimum-benefit plans will be priced very low. Perhaps low-income people will be able to purchase one of these plans with their tax credits, but these plans are not worth the paper they’re written on and were rightfully banned under the ACA (more on this later).
Cover the uninsurable/ Pre-Existing conditions
This is of particular interest to me, as I was once one of those “uninsurable” persons (pre-ACA, in California, “old, fat Mexicans” were largely excluded from coverage outside of employer-provided plans).
The proposal allows for all to purchase a health plan “only so long as a person remained continuously insured for at least 18 months”[1][4]. So if you’re currently covered (#ThanksObama!) you will be provided an opportunity to purchase a health plan under this proposal. However, your costs will likely go up (more on this later). But, importantly, once you have a plan, you will be allowed to keep it.
The problem with this item, is the people who remain uninsured, or those whose pre-existing conditions impose great costs on insurance carriers. People not currently covered, may not be covered at all in the future. There is no requirement for carriers to provide policies to people not currently covered. Similarly, should a person drop coverage for any reason (loss of job, missed payment, insufficient tax credit), will no longer be guaranteed acceptance by an insurance carrier. It is possible for one to re-gain coverage after a lapse (it’s just not guaranteed).
For people with expensive health conditions, the coverage offered may be more expensive. So if you’ve had a medical condition (suppose you’re a breast cancer survivor) that the insurance company deems suspect, your insurance rates will likely rise dramatically. So it will be “much more difficult for millions more who are without health insurance today to gain it in coming years” [6]
The proposal allows uninsured have access to state-run high risk pools. These plans existed before ACA and were fraught with limited benefits (pray you don’t get cancer), high premiums (for those who can afford them), and caps (sorry child, you’re going to die before you’re a teenager).[1] They were available to many, but not all. So per this proposal, the solution to high-risk patients, is to push coverage responsibility to the states.
Although I was a “high-risk” patient and was therefore denied coverage, I made too much money to take advantage of the state’s high-risk pool (as well as too much money to take advantage of my hard-earned VA benefits). Under the old system, and this new proposal, I would be one of those people who would have to pay all costs out-of-pocket, and hope that I did not have any serious medical incidents. So you can bet your bottom dollar that I will be rolling-over my health plan if this proposal takes effect. I’m just hoping that I can afford the premiums!
One item that is hard for me to accept is that expenses to pre-natal and pediatric care are no longer required to be offered to patients at all.
Keep your plan
This is a stated goal of supporters of the new proposal (including Daniel). This is also a goal which is impossible to meet under any conditions, should this proposal become law.
“…moving to an entirely new system would probably force millions of consumers out of their current health plans, the same transition that Republican lawmakers have criticized the current law for doing.” [6]
As, I’ve pointed out before, many people will get kicked off their current plans once the switch from subsidies to tax credits is made. Many people will be forced to abandon their ACA-provided comprehensive plans and will have to purchase new “catastrophic” plans. Some will simply not be able to afford a plan at all. Next, many younger people will choose to abandon their current plans, since “young invincibles” don’t feel they will benefit from these plans (not quite the same as being forced from a plan, but in the end, there will be fewer covered people).Lastly, the current plans allowed under ACA have limits on how much the cost of the plan can go up in a year. Any plans that have this limit explicitly noted, will be cancelled immediately should this proposal become law.
No doubt, there will be many people who are offered the chance to keep their current plan. But the number of people who choose to keep their plan (absent the current subsidies) will likely be small.
Expand Doctor Choice
Under the ACA, there were three main levels of care. The most restrictive, most affordable plan, had limits on services that were covered. Many providers opted to not accept these limited plans and so many doctors dropped these patients.[9]
But the important thing to note, is that the doctors opted to drop patients out of profit motive. When the ACA first rolled out, there was a flood of mis-information coming from right wing “News” sites that claimed that as many as “214,000” doctors opted out of ACA. This of course was mis-leading at best as these doctors chose to keep getting paid for the more lucrative plans. They simply chose to stop helping the neediest persons who had no other choice but to purchase the only plan they could afford.
Under the proposed plan, it’s back to business-as-usual: doctors charging outrageous fees and insurance companies happily paying those fees since the patients pay for those unrestricted fees via their rapidly increasing premiums.
Keep Costs Down
This proposal provides affordable plans GOP plans offers to reduce cost by eliminating the “minimum benefit requirements” for plans and by imposing the “continuous coverage” provision. By reducing what services the insurance companies need to pay for, and by reducing the number of sick people the insurance companies need to cover, the GOP plan will make insurance companies more profitable, therefore (according to trickle-down theories ) reducing costs to consumers purchasing the plans.
Coupled with the tax credits, the GOP plans assumes that people will be able to buy an adequate plan for just the cost of the tax credits they will receive.[1]
The possibility that the upper management of insurance companies would pocket these savings as “incentives” and “bonuses” apparently has not occurred to the bill’s authors. (I’d rather believe this, than the more likely scenario that the insurance companies will be donating to the bill’s authors’ campaigns next election cycle).
Conclusion
In the end, the current proposal/ whitepaper just takes us back down the path to where we were before the ACA became law. A place where the poor and ill were relegated to the human scrap-heap of people to whom the GOP pays little more than lip-service. Persons (like me) who had pre-existing conditions but earn a middle class income will be able to keep their existing plans, for a few years at least. After that, my premiums will increase once again at an alarming rate, and I will be right back where I started: living in in fear of suffering a catastrophic illness or injury that would put me in an unrecoverable debt situation (my brother is in this exact predicament now).
For persons of low income who are uncovered, even with ACA, they will remain uncovered under this new plan. So things have not changed for them. They were in a tough spot before, in a tough spot now, and will continue to be in a tough spot under this proposal.
As expected, the well-to-do will come out ahead. The restrictions that were put in place to help spread the benefits of the ACA are gone and the well-to-do will once again be able to use their health plans as another avenue of income generation via investment options.
“Same as it ever was” as the song says.
References
1. Health Care Policy and Marketplace Review
http://healthpolicyandmarket.blogspot.com/2015/02/a-detailed-analysis-of-republican.html
2. Seeking Obamacare alternative, Republicans eye tax credits
http://www.reuters.com/article/2015/04/20/us-usa-healthcare-republicans-idUSKBN0NB0BZ20150420
3. An Actual Republican Alternative to Obamacare
http://www.bloombergview.com/articles/2015-02-05/a-republican-alternative-to-obamacare-that-s-worth-discussing
4. GOP offers another Obamacare alternative
http://www.mcclatchydc.com/news/politics-government/article24779761.html
5. The Patient Choice, Affordability, Responsibility, and Empowerment Act
http://healthandeconomy.org/the-patient-choice-affordability-responsibility-and-empowerment-act-2/
6. Republicans outline their Obamacare alternative
http://www.latimes.com/nation/la-na-gop-health-plan-20150205-story.html
7. 3 Male Lawmakers Propose Eliminating Obamacare’s Maternity Coverage
http://thinkprogress.org/health/2015/02/05/3619623/gop-obamacare-alternative-maternity/
8. Obamacare’s projected cost falls due to lower premiums under health care law, CBO says
http://www.washingtonpost.com/news/wonkblog/wp/2015/03/09/obamacares-cost-is-falling-as-fewer-receive-coverage-under-health-care-law-cbo-says/
9. How Obamacare Leaves Some People Without Doctors
http://www.huffingtonpost.com/2014/04/10/obamacare-patients-without-doctors_n_5044270.html