Thursday, May 25, 2017

The New GOP Obamacare Replacement Plan: Same as the Old?

The Republican Party has been struggling with passing a plan to replace Obamacare. The Republicans attempted it back in March, but did not receive enough votes (even from its own party!) to pass the American Health Care Act (AHCA). Earlier this month, they released a modified version of the AHCA, and on May 4, the AHCA passed the House. The Senate indicated that they are writing their own version of a repeal-and-replace bill. Yesterday, the Congressional Budget Office (CBO) released their report on the effects the new AHCA that the House passed earlier this month. The main questions on everyone's mind are a) "Is this AHCA an improvement over the previous AHCA?", and b) "Is the new AHCA an improvement over Obamacare?"

I conducted my analysis of the initial AHCA a couple of months ago, which you can read here. Since I performed a previous analysis already, I will keep this shorter by explaining the differences between the new AHCA and the initial one, followed by a comparison of the numbers and a brief conclusion.

The new AHCA maintains a lot of the previous AHCA's provisions. However, there are some changes. The one with the biggest budgetary effect was delaying the repeal of the payroll tax increase (CBO, p. 11). States can also waive the requirement of establishing "essential health benefits," as well as the community rating. Community rating is prohibiting insurers from setting premiums on the basis of such demographics as age or gender (CBO, p. 12). There are some other more minor provisions, but that covers the major ones. What ended up being the difference?

  • Impact on Coverage. In the initial AHCA, there would have been an additional 24 million uninsured. In the new version? 23 million (CBO, p. 3). This might sound like a lot, but as the American Action Forum pointed out how the "additional 24 million uninsured" claim was misleading: about half of those "losing" insurance are those who were forced by Obamacare to purchase insurance, but no longer want insurance. 
  • Impact on the Federal Budget. Over the next decade, the new AHCA is supposed to reduce the budget deficit by $119 billion (CBO, p. 1; see below). How much was the budget deficit reduction beforehand? $337 billion over ten years. That means the new version of AHCA is $218 billion more expensive than the initial version.

  • Impact on Premiums. In the initial AHCA, premiums were supposed to be higher in 2018 and 2019 than in the ACA (aka Obamacare). However, over the next decade on average, the AHCA was supposed to cause a smaller increase in premiums than the ACA. For the new AHCA, the CBO had a more difficult time making predictions about premium increases (CBO, p. 6-7). The reason for this ambivalence is because it is unclear which states will accept the waivers that are part of the new AHCA. The CBO predicts that the new version of the AHCA will cause premiums to rise more than Obamacare in 2018 and 2019 (the same as it did for the estimate on the initial AHCA), but the CBO did state that premiums would decline on average over the next decade, regardless of whether the given state accepts the waivers. However, the CBO did add the caveat that some individuals could experience an increase in services depending on how each state defines essential health benefit (EHB), as well as which EHBs patients consume. The CBO selects that maternity care and mental health services could increase depending on how the individual state reacts. Even with this caveat, premiums will decrease on the whole, which is an improvement from when Obama lied about how Obamacare was going to lower premiums. This is important because the CBO admitted that Obamacare caused premiums to skyrocket (CBO, p. 4), not to mention the Department of Health and Human Services released a report on Tuesday finding that premiums have doubled since 2013 in 24 states. 
  • Healthcare Market Stability. Under the current law (i.e., Obamacare, ACA), the subsidies have kept non-group market participants largely insulated from price increases. This does not negate the fact that subsidies for demand [in healthcare] cause artificially high prices or that someone ultimately has to pay the bill. The CBO also admits that Obamacare has caused limited options of health care providers (CBO, p. 4), which is unsurprising because a) Obamacare literally made catastrophic coverage and other forms of less generous coverage to be illegal, and b) a majority of the health care exchanges have proven to become unprofitable because Obamacare disincentivizes younger and/or healthier individuals to participate in the Obamacare exchanges. What about under the new AHCA? Generally, the CBO predicts market stability. There is, however, a sixth of the market that the CBO surmises will become unstable due to the waivers. Community-based premiums would rise for those with pre-existing conditions. Those in non-group markets will experience higher-than-average costs (CBO, p. 5). Like with other policies, the AHCA has its tradeoffs, but most states will have stable markets.

In the previous paragraphs, we see issues with the status quo of Obamacare: premiums are too high, healthy individuals are being deterred from buying health insurance, and options are limited for patients. Something needs to be done to undo the harm caused by Obamacare's insurance regulations. On the whole, not much has changed since the modification of the AHCA. Since the modified AHCA does not undo the essence of Obamacare, it can only be considered at best a moderate improvement over Obamacare, and that depends on which metrics you're using to compare. Regardless of whether the AHCA passes or not, the lack of free-market reforms signals that state of health care in the United States does not look good.

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