As someone who has had to actually think about health care, and has investigated ACA and other plans for my family, I wanted to share some thoughts on the new house republican alternative. I’d like to stay as nonpartisan as possible. My observations:
- It saves the government a bunch of money, primarily by giving much less support to the poor. ACA subsidies for low-income people were quite substantial; $2000-$4000 per year is pretty tiny. For reference my family costs were around $1400 per month; if our hh income had been $75k/year we’d get $600 per month tax credit to offset and the kids might also get free Medicaid. Much more than the Republican plan offers.
- It’s bad for Planned Parenthood. Not a surprise – it’s a Republican plan, after all! Whether you like or dislike this depends on your political persuasion.
- It cuts a bunch of taxes that were added to fund the affordable care act. Again, what you think of this will depend on your yearly income and political beliefs.
- It gets rid of the hated individual mandate but preserves protection for people with pre existing conditions.
In summary, compared to the ACA: Good for taxpayers, Good for people who want to not buy insurance, and generally good for my family. Bad for poor people who want health insurance, bad for Planned Parenthood.
A Plan that Ignores the Big Challenge
What I want to focus on here is how the Republicans handle the twin problems of pre-existing conditions and the individual mandate. These two are interrelated; getting rid of pre-existing conditions is great, but it opens up the “free rider” personal strategy of not buying insurance until you get sick, then hopping onto insurance to milk the system. This would make insurance unsustainable as the pool of users would be 100% super expensive cancer and heart patients.
To avoid this problem, the ACA added a requirement that all Americans must enter the system or face steep penalties. This ensures a varied risk pool that is the point of all insurance. But of course the people who were previously free riding didn’t like the requirement; it was a centerpiece of criticism of the law.
Clearly, Republicans realize that they can’t bring back pre-existing condition exclusions, so they propose their own alternative: An incentive for people to stay in the system. If you quit and lapse in coverage, joining costs you a 30% rate penalty.
The idea is to “push” more healthy or young people into the system, but 30% seems grossly inadequate. As a healthy person, I should probably just skip out on health insurance. I can save a huge expense on insurance for as many years as I’m healthy. Then in 5-10 years when I develop a hugely expensive disease, I’ll run to the insurance companies who are mandated to offer me coverage at a 30% premium and cost them $500k in medical expenses. And guess what my insurer will do? Raise rates for everyone, providing more incentive for healthy people to opt out. Eventually you end up with insurance covering only gravely sick people, with predictably grave rates.
This is exactly the kind of “death spiral” the critics of the ACA predicted. I suspect it will be even worse for the Republican plan, but that’s hard to say.
To be clear, these are incredibly hard problems. ACA had weaknesses because of the many conflicting interests that had to be satisfied. What the Republicans are discovering is that there’s no easy solution or plan. This is just the opening bid; it will be fascinating to see where it lands. But at least it appears nobody – even house republicans – want to go back to a system that charges healthy people insurance premiums until they are sick, then does everything it can to kick them out and keep them out with pre-existing condition requirements.