The Changing Face of American Healthcare

The Changing Face of American Healthcare

Healthcare reform was a key point of contention in the recent presidential election. For the past seven years, Republican leaders have been talking about repealing and replacing ACA, infamously known as Obamacare.

Last week, the Congressional Budget Office (CBO) released its official cost estimate report for the American Healthcare Act (AHCA), the GOP’s proposed bill to replace The Affordable Care Act (ACA).

As promised by President Trump, AHCA is expected to cut the federal deficit by a projected $337 billion over a decade. However, assuming it passes in May, it will leave an estimated 14 million Americans uninsured within the next year, and 24 million uninsured by 2026.

ACA has been in effect since 2010, and is seen as a hallmark of the Obama Administration. Under this law, no American citizen can be denied insurance coverage or face capped benefits, dependent coverage is extended to age 26, and all citizens face an individual mandate, under which they must purchase health insurance or pay a penalty. In addition, big businesses face an employer mandate and are required to provide health insurance to all full-time workers. Federal Medicaid coverage has also been greatly extended for the 31 participating states and the District of Columbia. Overall, ACA has provided more Americans with affordable quality health insurance, using subsidies and income based tax credits.

The proposed GOP bill calls for repealing of a majority of ACA codes in 2018. It sets out to lower costs by replacing the subsidies and tax credits under ACA with tax credits based on age, which would start to phase out as an individual’s income exceeds $75,000. It would also do away with the individual mandate on insurance coverage and, starting in 2019, cut a whopping $880 billion from Medicaid funding: a heavy blow to the 16 million poor, elderly, and disabled Americans who were able to secure insurance coverage in 2014 under ACA’s Medicaid expansion. Beginning January 2020, a set amount of Medicaid funding would be sent to states each year. Funding for Planned Parenthood will also be slashed under the new bill.

The CBO attributes the initial drop in insurance coverage of 14 million people to the repeal of the individual mandate and the long run drop in insurance coverage of 24 million people to the cut in Medicaid funding under AHCA.

Without ACA’s individual mandate, healthy people who do not need insurance would have no incentive to buy it. This would leave insurers with sicker, older, and more expensive consumers, whose after tax premiums would then increase. Actual premium amounts vary significantly based on age, and so premiums would be lower for younger people and older people would end up paying more. Most affected by the GOP healthcare bill would be sicker, lower-income Americans between the ages of 50 and 64, which is also just below the Medicaid eligibility age. Overall, CBO estimates show insurance premiums rising up to 20% higher than under ACA before 2020, mostly because of the repeal of the penalty under the individual mandate. Premiums would then decrease; by 2026 they are expected to be 10% lower than under ACA. However, the report emphasizes that older people would bear the burden and face higher premiums while receiving lower tax credits than younger people.

The GOP bill will also to do away with ACA’s employer mandate, including penalizing employers for not providing full-time employees with health insurance. Currently, most people with private coverage still get it through the workplace as a tax-free benefit. This will likely change as employer incentives change under the GOP plan. The CBO estimates that employer coverage would drop by approximately 7 million over a decade.

If ACA stays in place, only an estimated 28 million Americans will remain uninsured, compared to the 52 million that will be uninsured under AHCA.

AHCA is up for a vote in the House  this week. Republican leaders had originally asked for a House vote on the bill without a CBO score. However, questions of cost and coverage remained central to the healthcare debate, as well as outcry from the Democrats, leading to last week’s CBO estimates. If approved by the House, the bill would also need Senate approval to be passed. It is likely to face tough resistance in the Senate, given the CBO’s intimation that poorer and older consumers would suffer the most under the proposed plan.

The GOP claims that the bill is the first piece of a three-legged health care strategy that includes sweeping regulatory changes, as well as additional health bills.

 

 

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