The “American Health Care Act (AHCA)” – What It Does and How it Changes Obamacare (ACA)

Earlier this week, the Republicans proposed their Repeal and Replace alternative to the Affordable Care Act (ACA, or “Obamacare”), called the “American Health Care Act,” (AHCA) which is still in bill form. Some Republicans decry the bill, saying it’s too similar to the ACA, and some say they will oppose if it causes millions of Americans to lose their healthcare coverage, which the Congressional Budgeting Office is likely to say that it will.

This video from Healthcare Triage does a great job of breaking down the complexities of the bill and also discusses some similarities to, and differences from, Obamacare. In the highlights section below, I outline some of the major aspects of the bill, taken from this video. The “What’s Untouched,” section expresses why some Republicans think this is very similar to Obamacare. However, based on the changes the bill is proposing, the concern from four Republicans is very real that millions in their states will lose coverage.

The Highlights (*Scroll down for the “What Does It All Mean?!” section*)

  1. Medicaid
    • Everyone who signs up by 2020 gets to keep their Medicaid. But in that year, entry into the expansion is frozen, and people will only remain eligible if they don’t have a lapse in coverage of more than a month.
    • Also in 2020, we change Medicaid to a per capita block grant program (future funding is capped, based on past expenditures and number of beneficiaries, and if the states need more funding, they need to account for the gap themselves, which could mean cutting funding to children, doctors visits, or drugs, which was the case in the 1950s, prior to the introduction of Medicaid in 1965. Note: Medicaid covers 81 million people, or about 1 in 4 Americans). The cap rises by medical CPI plus 1%. The initial rate will be set by looking at 2016, and increasing spending to 2019 based on that formula. That could lead to a drop in relative funding in 2020 if health care spending increases faster than inflation from now until 2020 (which is it very likely to do – monthly inflation rates from 2009-2016 ranged from -2.10% to 3.87, and healthcare spending is expected to be 5.8% through between 2015 and 2025).
    • As of now, you can get Medicaid today and have it cover your spending from up to the preceding three months. This is important because people can get coverage for things that occurred for some time before they signed up. Under the AHCA, this window is reduced the month in which beneficiaries apply.
    • States will have to determine re-eligibility for people on Medicaid every 6 months, which is a huge burden for patients and will likely lead to an increase in loss of coverage.
  2. Other Payments
    • In 2018 and 2019, $15 billion in disproportionate hospital payments (payments the government makes to hospitals to care for the uninsured) are given to states that did not expand Medicaid to do with what they want.
      • This means they could make high-risk pools (high-risk patients may have premiums up to twice as high as if they were healthy), increase the size of the subsidies/tax credits, or they could reinsure insurers to protect them from high-cost patients.
    • In 2020-2026, the payments are reduced to $10 billion, but states have to match the payments in the form of 7% in 2020 to 50% in 2026.
  3. Subsidies
    • Anyone with a pre-existing condition can keep their coverage and can’t be charged more than others. However, if they let their coverage lapse for more than 63 days in a year, they can be charged 30% more for 12 months.
    • The subsidies are no longer determined based on how much you earn (under the ACA, you receive more in tax credits if you are poor, and less if you are rich, since you can afford to pay higher premiums), it’s based on how old you are. The older you are, the more you receive in tax credits. This means that poorer folks, especially old poor people, will have a hard time affording health insurance.
    • Your subsidies also cannot be used to cover abortion, meaning you will either have to pay out of pocket for this service, or if you can’t afford an abortion, you will be forced to carry to term and raise a child in poverty.
  4. The Exchange Market
    • The individual mandate is gone. It is what protected insurance companies from picking and choosing who they wanted to cover (read: young, healthy people), known as “adverse selection” — the same phenomenon that occurred prior to the individual mandate required by the ACA.
    • This is exacerbated by the 30% penalty for late enrollment, since healthy people will be less likely to purchase insurance until they become sick, as the penalty is the same no matter when they enroll after missing coverage. Death spirals seem much more likely under the AHCA.
    • Age bands are increased starting in 2018, making insurance cheaper for young people and more expensive for older folks. Under the ACA, you can charge an old person up to three times as much as a young person. Under the AHCA, this is increased to five times greater.
  5. Taxes
    • All taxes under Obamacare remain in effect in 2017, but are removed in 2018 (Cadillac Tax, Medical Device Tax, Tax on High Salaries of Insurance Executives, Medicare Tax on Higher Earners, taxes on insurance companies, pharmaceuticals, and tanning salons, etc.)
  6. Miscellaneous
    • The bill defunds Planned Parenthood, but increases funding for community health centers (could reduce access to healthcare for poor neighborhoods, depending on which community health centers receive funding and how it is allocated).
    • People can now put more money into their Health Savings Account (HSA), increasing the limit to $6,550 for an individual and $13,100 for a family in 2018. An HSA is an account in which you can deposit money and have them be exempt from taxes. This is typically utilized by those in salaried positions or working for companies that offer health insurance and advice. Poorer or less educated folks are unlikely to know what an HSA is or how to take advantage of the pre-tax exemptions, further increasing the gap between rich and poor.
  7. What’s Untouched (Yay!)

**What Does It All Mean?!**

  1. Most important: The bill is very unlikely to be in its final form. There is no CBO score yet, which will indicate if this will raise or lower the deficit, as well as indicate the cost if the bill is signed in to law. Once the CBO releases data on how much it will cost, and what happens to the deficit, as well as healthcare estimations on how many people will lose coverage, the bill is likely to change.
  2. In current form, the bill is very likely to cause a reduction in the number of insured Americans. Many people (especially poor people) will find the subsidies and tax credits insufficient, and they will not be able to buy care. This increases healthcare costs for all of us, since hospitals and insurance companies will foot the bill (and in turn, raise premiums and healthcare costs) when the poor and the unhealthy require emergency care and cannot practice preventative care with a primary care physician. Additionally, the Medicaid slowdown (via the per capita spending) will mean the states will have less funding starting in 2020.
  3. This is unlikely to lead to a deficit reduction in the long term, since revenue streams are reduced or will end, and there is a high amount of spending in the bill. One option would be planning deep cuts to Medicaid in the future, which would result in its own issues.
  4. The “continuous coverage” plan is likely to make adverse selection and death spirals worse, since healthy people have little incentive to be insured, since their only penalty is a 30% increase in premiums for 12 months. They would simply just get insurance retroactively when needed.
  5. The AHCA is in some ways, Obamacare Lite. There is a fair amount of regulation, the exchange market still exists, the Medicaid expansion is still intact until 2020, and the subsidies and taxes don’t go away immediately. But, there are some strikingly important differences to the ACA: the subsidies are shifted from those that are poor to those that are not as poor, and Medicaid undergoes a radical change in 2020 with the introduction of the block grant per capita program very similar to what existed in the 1950’s, prior to the introduction of Medicaid. The AHCA punishes poorer, older folks, in favor of the healthy, the wealthy, insurance companies, and those who know how to take advantage of the tax breaks.

Here’s to hoping that some Republicans will continue to fight this bill in recognition that millions of their states’ citizens may lose coverage, and that their states may struggle to keep up with rising healthcare costs as a result of the per capita block grant program.

Please call your (Republican) Congressmen to express your concern.

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