The GOP’s “Obamacare Repeal and Replacement Policy Brief”

The speaker of the House, Rep. Ryan, today introduced the “Obamacare Repeal and Replacement Policy Brief

Let me boil down the proposal for you; it would

  • Expand HSAs, which don’t help the poor and middle class, but are a boon to the wealthy
  • Destroy the current private insurance market, causing massive increases in premiums
  • Replace subsidies with tax credits which won’t cover the proposed new non-ACA regulated plans
  • Cut Medicaid funding through block grants that states don’t want
  • Take away the incentive for businesses to offer health insurance
  • Provide tax credits that are too low to pay for acceptable private insurance
  • Bring back state run high risk pools which have historically been failures
  • Remove state’s abilities to regulate health insurance in their own markets

Said another way, if you work, this proposal stinks; if you are independently wealthy, or are tired of offering your employees health insurance, this is a great plan. Oh, and if care about how your state runs, especially related to states rights to self-regulate markets, you’re going to hate this, too.

By the way, I’m not going to write about their claims about the ACA; they devote more than half of this document to what they believe are the failures of the ACA. It’s unimportant whether they are true or false, all I’m going to write about is their plan for changing the current system. If their plan can’t stand on its own, it’s not a very good plan.

Let’s jump into it.

On page 2, they have a series of bullet points. They sound nice, but are short on specifics. The one specific is talking about health savings accounts (HSA). The problem with health savings accounts is you have to plan for future emergencies. People are notoriously bad about doing that, and when they don’t do it, we, the taxpayers, will be forced back into the role of having to choose between covering people’s health care or letting them die; since we don’t want people to die, we, the taxpayers pay the bill. This will give back much of the state and federal budget benefits we saw from the ACA. The other annoying thing about HSAs is they favor the wealthy over the working poor and middle class. If you pay little or no taxes then an HSA is no different than a savings account.

The next place where they talk about their plan is page 6. There are three items. Repeal the parts of the ACA they can now, decrease regulation from the ACA, and, the last one is, basically, “Over the next couple of years we’ll pass legislation that solves all the things we’re going to break by repealing the ACA”, including allowing insurers to ignore state regulations and move to the state with the fewest health insurance regulations. They can’t do the last item in the list with budget reconciliation, so current insurance regulations stay on the books until/unless they can get legislation passed that takes away the state’s ability to regulate health insurance sold in the state’s jurisdiction.

If you’ve been paying attention, this is basically going back to the “Repeal and fix it later” plan that will destroy the private insurance market (see also ‘Repeal and Delay’ Won’t Prevent Obamacare Repeal Chaos).

On to page 7, we start to see the frightening future the GOP is laying out for us. Step 1, decrease Medicaid, step 2, use block grants to fund Medicaid, even though states don’t want block grants, step 3, HSAs (see above for why HSAs aren’t a solution to anything), and, tax credits. Tax credits from this Congress? Why, that could actually be a reasonable idea! Luckily, we get to read more about them on pages 10 and 11.

So, here we are, at page 10, tax credits. There’s lots of talk about the health coverage tax credit (HCTC), a program that already exists. It’s very similar to the subsidies provided for coverage under the ACA. The interesting thing about the HCTC is if you want to use it, your plan has to meet certain minimum requirements, much like the plans for the ACA had to meet minimum requirements. Those requirements were why so many people had to change health insurance plans when the ACA rolled out. Thankfully almost everyone is now on an ACA compliant health care plan, so, for this year at least, the HCTC would help replace subsidies.

The GOP wants to change that, though.

If the GOP takes aways state’s rights to regulate, and ends the ACA requirements, unless the GOP plan includes regulations requiring that health insurance plans meet HCTC, HCTC won’t help many people. The health insurance companies will flock to Arizona or South Dakota or whichever state offers the least health insurance regulation and they won’t offer HCTC plans except at very high rates, basically negating the value of the HCTC. You’ll be able to choose between 2 plan tiers, one that doesn’t meet HCTC and one that does, and the HCTC qualifying plan will be more than the cost of tier 1 plus your tax credit. Why? Because it’s in insurance companies best interests to have you on non-HCTC compliant plans; for example, covering people with pre-existing conditions cuts into their bottom line. So, out the window goes insurance that covers pre-existing conditions, high risk, etc.

Let me restate that so it’s really clear – the idea that tax credits will make up for subsidies is a well crafted lie. The GOP’s plan will get rid of nearly all health insurance assistance by combining deregulation with tax credits that only apply to high quality plans that the poor and middle class can’t afford. Once more, the wealthy benefit, because they’ll have high quality health insurance and get the tax credit.

Page 11 keeps talking about tax credits, and it’s scary. Basically, they want to get rid of job based tax credits (totaling $7,500-$15,000 per year), which means most Americans will lose their health insurance they get through work.

The obvious side-effect is every business will stop offering health insurance. This legislation is basically forcing employers to either give everyone a $15k a year raise or to drop health insurance. Some companies may try, and some companies may give you a raise (not many, but some) but that’s just too much to even consider for most companies. Some industries will continue to offer health insurance as a benefit because that $15k is a tiny portion of their payroll per employee, but that’s rare (can you say the financial services industry? I knew you could).

Thank goodness, though, the GOP will replace the employer tax credits with individual tax credits (totaling $2,500-$5,000). Whew, what a relief, we’ll still get government assistance to pay for our health insurance! But wait, those tax credits are lower for individuals and families than they were for businesses.

Now step back a minute. Why is it cheaper buying toilet paper at Costco than at 7-11? It’s because of the bulk discount. Your employer gets the same bulk discount on health insurance. People on the private market don’t. So, a higher insurance rate, with a lower tax credit equals … you got it! More expensive health insurance for you! And look at that difference! Do you have an extra $10+k a year to pay for health insurance?

BTW, if you hate choosing insurance now, imagine how hard it will be when you’ve got to wade through the minefield of poorly regulated plans rather than the pre-vetted options your employer provides. Those plans are going to make those end user license agreements you never read on your software look like pleasant reads. So, higher costs and if you pick wrong, you’ll get screwed on benefits. Thanks GOP, this is a particularly evil way to hurt people that can’t afford financial advisors.

Oh, and the credit isn’t tied to your income, it’s only tied to your age. So, if you are in your 60s, you’ll get the maximum credit, but if you are young, you’ll get next to no credit. That sounds good (younger people have cheaper insurance, right?) but it’s another way of helping the wealthy instead of the middle class and poor. If you are young and poor, the credits won’t allow you to buy anything but the most meager health insurance. The insurance companies will craft plans that offer the least benefit legal at exactly the cost of the credit. That means, with only minimal regulation on what that is, poor young people will have health insurance in name only. Get in a car wreck and have million dollar health insurance costs? Sorry, your cap is $100k, and we’re not paying that $100k either because you broke some obscure rule. In other words, back to what it was before the ACA only worse. You think bankruptcies due to health care costs were bad before the ACA? Pretty soon you’ll long for those days.

Oh, and here’s a nice kicker from page 12 – do you believe that abortion is actually health care? I’m not asking if you approve of it, just whether it’s health care or not. This plan doesn’t. You cannot choose a health insurance that covers abortion and use your tax credit on it. Congress is telling you what abortion means, you don’t get to decide. But wait, don’t they say over and over in this document that health care choices should be up to the individual? Why yes they do… I leave it up to you to figure out how to reconcile these two opposing statements.

Not covering abortion is stupid. Having a baby is much more expensive health care than an abortion, plus what happens to the baby when it’s born to a mother that doesn’t want it? I understand there are many people that find abortion unethical and don’t want their taxes to pay for it, but from a purely logistical point of view, this is a crazy expensive restriction which will lead to higher debt, more people on welfare, more crime, etc.

The rest of page 12 and 13 are about HSAs. Again, as I wrote above, HSAs provide little to no benefit for the working middle class and poor.

Page 14 and 15 talk about using block grants as a way to hide decreased funding for Medicaid, effectively kicking millions of Americans off Medicaid, putting them into the private market, where they won’t be able to afford coverage, which leads to you and me, the taxpayer, funding their emergency health care, which increases state and federal deficits. Is the GOP still pretending to be the party that wants to decrease debt?

Page 16 talks about state run high risk pools. Let me quote something from it, “Some may suggest State Innovation Grants would lead to enrollment caps or waiting lists – like certain high risk pools functioned prior to Obamacare. This is false.” Actually, from reading their own document, it’s not. They do say, “Why would anyone allow them to potentially harm the very patients they are intended to help?” – why indeed? It’s fine to have good intentions, but if your plan has been shown, historically, to cause those problems, you have to do more than say, “We don’t want that to happen” you actually have to change the plan.

That’s it. Page 17 is a list of citations. This is an astoundingly radical plan that would decimate our society by making it harder for nearly everyone to get health care while simultaneously increasing government debt.

I do want to say I agree with getting rid of the employer tax credit. As a person dealing with cancer, I can tell you how afraid it makes you that your health care is tied to your job, but if you get rid of it, you have to make it easier for people to get health care, not harder. That means expanding Medicaid so it’s available to anyone. That’s the only option we have at this point if we want to move away from health insurance being offered by employers.