Tag: repeal and replace

CBO: Full Repeal Would Cover More People than House GOP’s ObamaCare-Lite Bill

A new Congressional Budget Office report projecting the effects of the House Republican leadership’s American Health Care Act weakens the case for the bill’s ObamaCare-lite approach, and strengthens the case for full repeal. The CBO projects that over the next two years, the AHCA would cause average premiums to rise 15 percent to 20 percent above ObamaCare’s already high premium levels. The report raises the prospect that insurance markets may collapse under the AHCA, just as they are collapsing under ObamaCare. It makes unreasonable assumptions about Medicaid spending; more reasonable assumptions could completely eliminate the bill’s projected deficit reduction. Finally, the CBO projects more people will lose coverage under the AHCA than under full repeal.

ObamaCare-Lite, ObamaCare-Forever

The AHCA purports to repeal and replace ObamaCare. In reality, it would do no such thing.

In a previous post, I wrote:

This bill is a train wreck waiting to happen.

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago…

[It] merely applies a new coat of paint to a building that Republicans themselves have already condemned…If this is the choice, it would be better if Congress simply did nothing.

The ACHA retains all the powers ObamaCare gives the federal government over private insurance, gives those powers a bipartisan imprimatur, and therefore gives them immortality. Its repeal of ObamaCare’s Medicaid expansion would likely never take effect. It fails to create real block grants in Medicaid, and preserves perverse incentives from both the “old” Medicaid program and the expansion. It would create an ongoing series of crises in the individual market, for which Republicans would take the blame and suffer at the polls, at the same time it would create pressure for more taxes and government spending. It’s hard to imagine what House Republicans were thinking.

Premiums and Market Stability

Full repeal, in particular repeal of ObamaCare’s health-insurance regulations, would cause premiums to fall for the vast majority of consumers in the individual market.

In contrast, the AHCA would increase premiums from their already high ObamaCare levels. “In 2018 and 2019…average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law,” the CBO reported.

Premium increases of that magnitude could further destabilize ObamaCare’s health-insurance Exchanges. Adverse selection has already led to an exodus of insurers from the individual market. ObamaCare has driven every last insurer from the Exchange in 16 counties in Tennessee, leaving 43,000 residents with no health insurance options for 2018. In a thousand other counties around the country, the law has driven all but one insurer from the Exchange. Nearly 3 million people in those counties are just one carrier exit from being in the same position as those 43,000 Tennesseans.

The CBO posits that, nonetheless, “the nongroup market would probably be stable in most areas under either current law or the legislation.”

In most areas. Probably.

Supporters of the legislation note that the CBO projects the average premiums would then begin to fall after 2019. One reason is that the AHCA would end one of ObamaCare’s health-insurance regulations (actuarial-value requirements). Another is that the CBO predicts states would use the AHCA’s new Patient and State Stability Fund to subsidize high-cost enrollees.

There are reasons to doubt this prediction. First, it assumes the Exchanges survive the ensuing adverse selection and make it to 2020. Second, the Patient and State Stability Fund would not reduce premiums. Like ObamaCare’s reinsurance program, it would hide a portion of the full premium by shifting it to taxpayers. So even though the CBO reports that the portion of the premium that consumers see would fall 10 percent by 2026, it is not accurate to say premiums would fall. We don’t know if the full premium would fall or rise after 2019, because the CBO isn’t telling us.

The House GOP Leadership’s Health Care Bill Is ObamaCare-Lite — Or Worse

During the presidential campaign, Donald Trump promised legislation that “fully repeals ObamaCare.” Monday night, the Republican leadership of the House of Representatives released legislation it claims would repeal and replace ObamaCare. Tuesday afternoon, Vice President Mike Pence will travel to Capitol Hill to pressure members of Congress to support the bill. On Wednesday, two House Committees will begin to mark-up the legislation. House and Senate leaders are hoping for quick consideration and a signing ceremony, maybe by May, so they can move on to other things, like tax reform and confirming Supreme Court nominee Judge Neil Gorsuch.

Everyone needs to take a step back. This bill is a train wreck waiting to happen.

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all. Congress would have to revisit ObamaCare again and again to address problems they failed to fix the first time around. ObamaCare would consume the rest of Congress’ and President Trump’s agenda. Delaying or dooming other priorities like tax reform, infrastructure spending, and Gorsuch. The fallout could dog Republicans all the way into 2018 and 2020, when it could lead to a Democratic wave election like the one we saw in 2008. Only then, Democrats won’t have ObamaCare on their mind but single-payer.

First, let’s look at how the main features of this bill fall short of repeal.

WSJ: How ObamaCare Punishes the Sick

In today’s Wall Street Journal, I discuss new economic research showing ObamaCare is making health insurance worse for patients with high-cost medical conditions.

Republicans are nervous about repealing ObamaCare’s supposed ban on discrimination against patients with pre-existing conditions. But a new study by Harvard and the University of Texas-Austin finds those rules penalize high-quality coverage for the sick, reward insurers who slash coverage for the sick, and leave patients unable to obtain adequate insurance…

If anything, Republicans should fear not repealing ObamaCare’s pre-existing-conditions rules. The Congressional Budget Office predicts a partial repeal would wipe out the individual market and cause nine million to lose coverage unnecessarily. And contrary to conventional wisdom, the consequences of those rules are wildly unpopular. In a new Cato Institute/YouGov poll, 63% of respondents initially supported ObamaCare’s pre-existing-condition rules. That dropped to 31%—with 60% opposition—when they were told of the impact on quality.

Republicans can’t keep their promise to repeal ObamaCare and improve access for the sick without repealing the ACA’s penalties on high-quality coverage.

The lesson is clear. To repeal ObamaCare, opponents need to talk to voters about how the law is reducing the quality of health insurance and medical care for the sick.

Read the whole thing.

House Republican Health Plan Might Provide Even Worse Coverage For The Sick Than ObamaCare

WASHINGTON, DC - JUNE 22: House Speaker Paul Ryan (R-WI) discusses the release of the House Republican plank on health care reform at The American Enterprise Institute for Public Policy Research on June 22, 2016 in Washington, DC. (Photo by Allison Shelley/Getty Images)

After six-plus years, congressional Republicans have finally offered an ObamaCare-replacement plan. They should have taken longer. Perhaps we should not be surprised that House Republican leaders* who have thrown their support behind a presidential candidate who praises single-payer and ObamaCare’s individual mandate would not even realize that the plan cobbled together is just ObamaCare-lite. Don’t get me wrong. The plan is not all bad. Where it matters most, however, House Republicans would repeal ObamaCare only to replace it with slightly modified versions of that law’s worst provisions.

Here are some of ObamaCare’s core private-health insurance provisions that the House Republicans’ plan would retain or mimic.

  1. ObamaCare offers refundable health-insurance tax credits to low- and middle-income taxpayers who don’t have access to qualified coverage from an employer, don’t qualify for Medicare or Medicaid, and who purchase health insurance through an Exchange. House Republicans would retain these tax credits. They would still only be available to people ineligible for qualified employer coverage, Medicare, or Medicaid. But Republicans would offer them to everyone, regardless of income or where they purchase coverage.
  2. These expanded tax credits would therefore preserve much of ObamaCare’s new spending. The refundable part of “refundable tax credits” means that if you’re eligible for a tax credit that exceeds your income-tax liability, the government cuts you a check. That’s spending, not tax reduction. ObamaCare’s so-called “tax credits” spend $4 for every $1 of tax cuts. House Republicans know they are creating (preserving?) entitlement spending because they say things like, “this new payment would not be allowed to pay for abortion coverage or services,” and “Robust verification methods would be put in place to protect taxpayer dollars and quickly resolve any inconsistencies that occur,” and that their subsidies don’t grow as rapidly as the Democrats’ subsidies do. Maybe not, but they do something that Democrats’ subsidies don’t: give a bipartisan imprimatur to ObamaCare’s redistribution of income.
  3. As I have tried to warn Republicans before, these and all health-insurance tax credits are indistinguishable from an individual mandate.  Under either a tax credit or a mandate, the government requires you to buy health insurance or to pay more money to the IRS. John Goodman, the dean of conservative health policy wonks, supports health-insurance tax credits and calls them “a financial mandate.” Supporters protest that a mandate is a tax increase while credits—or at least, the non-refundable portion—are a tax cut. But that’s illusory. True, the credit may reduce the recipient’s tax liability. But it does nothing to reduce the overall tax burden imposed by the federal government, which is determined by how much the government spends. And wouldn’t you know, the refundable portion of the credit increases the overall tax burden because it increases government spending, which Congress ultimately must finance with additional taxes. So refundable tax credits do increase taxes, just like a mandate.

Members of Congress Introduce Cato ‘Large HSAs’ Concept

WASHINGTON, DC - JANUARY 29: (L-R) Sen. Jeff Flake (R-AZ), and Sen. Patrick Leahy (D-VT) speak at a press conference on Cuba at the U.S. Capitol January 29, 2015 in Washington, DC. Flake is introducing legislation with bipartisan support that would lift a longstanding ban on U.S. citizens traveling freely to Cuba. (Photo by Win McNamee/Getty Images)

Sen. Jeff Flake (R-AZ), Rep. Dave Brat (R-VA), and other members of Congress have introduced legislation based on the “Large HSAs” concept I first proposed here and developed herehereherehere, and here.

The “Health Savings Account Expansion Act” (H.R. 5324S. 2980) would expand the availability and benefits of tax-free health savings accounts (HSAs) in several ways. It would nearly triple existing HSA contribution limits from $3,400 for individuals and $6,750 for families to $9,000 and $18,000. It would allow tax-free HSA funds to purchase health insurance, over-the-counter medications, and direct primary care. It would eliminate the mandate that HSA holders purchase a government-designed high-deductible health plan. And it would repeal ObamaCare’s increase of the penalty on non-medical withdrawals. Americans for Tax Reform and FreedomWorks have endorsed the bill.

I’m sure I will have lots to say about Flake-Brat, but here are a few initial impressions.

  1. Flake-Brat would free workers from the government program we call employer-sponsored insurance—but only if that’s what workers want. The federal tax code currently tells the average worker with family coverage she can either surrender $13,000 of income to her employer and let her employer choose her health plan, or surrender a huge chunk of that money to the government by paying income and payroll taxes on it. The Flake-Brat bill would allow her to keep that money and either save it, use it to stay on her employer’s health plan, or use it to purchase better coverage somewhere else, all tax-free. The choice would belong to her, not to Congress or the IRS.
  2. Flake-Brat is a bigger tax cut than you’ve ever seen.  Large HSAs would be the largest-ever scaling back of the federal government’s role in health care. The Flake-Brat bill is effectively a $9 trillion tax cut. That’s how much money the current tax exclusion for employer-sponsored insurance will divert from workers to their employers over the next decade. Flake-Brat would return that money to the workers who earned it. Flake-Brat is thus an effective tax cut equal to all of the Reagan and Bush tax cuts combined. It is nine times the size of the tax cut associated with repealing ObamaCare.  Unlike health-insurance tax credits, Large HSAs involve no government spending and would not mandate that taxpayers purchase health insurance, as existing HSAs and health-insurance tax credits do. (The bill and its sponsors describe that requirement as a “mandate.”)
  3. Flake-Brat would make health care better, more affordable, and more secure. It would do so by dramatically reducing government’s influence over the health care sector. By shifting from employers to consumers nearly a quarter of the $3 trillion Americans spend annually on health care, Large HSAs would begin to make the health care sector and health policy respond to the needs of patients. Large HSAs are also less restrictive than existing HSA law or health-insurance tax credits. As a replacement for ObamaCare, Large HSAs would encourage innovative products like pre-existing conditions insurance that make coverage more affordable and secure.
  4. Flake-Brat shows Congress could create Large HSAs with or without repealing ObamaCare. Large HSAs are the most promising ObamaCare replacement plan to date, but Congress can create them before it repeals ObamaCare. The Flake-Brat bill would create Large HSAs even with ObamaCare still on the books. In fact, Flake-Brat would build support for repealing ObamaCare by exposing consumers to the full cost of its hidden taxes.
  5. Flake-Brat is a marker. The Flake-Brat bill defers consideration of a number of issues. All else equal, expanding tax breaks for HSA contributions would reduce federal revenues and increase federal deficits and debt. Like any proposal to level the playing field between employer-sponsored coverage and other coverage, the bill creates the potential for employer plans to unravel as (healthy) people choose better options. Were Congress to enact Flake-Brat with ObamaCare still on the books, there could be even more complicated interactions. The bill doesn’t totally level the playing field, either. Everyone would get an income-tax break, but only those with an employer who facilitates HSA contributions would get the payroll tax break. (Large HSAs can completely level the playing field with a simple tax credit that mimics that exclusion for such workers.) The authors don’t address these issues in the bill, or their supplemental materials. They will have to address them at some point. Fortunately, there are solutions. (For more on those solutions, see the “developed” links in the second paragraph.)

All in all, the Flake-Brat bill is a much-needed addition to the debate over the future of American health care.

A Long-Overdue Conversation about How to Replace ObamaCare

With the prospect of a Republican president who could conceivably repeal and replace ObamaCare, it is time for ObamaCare opponents to take a hard look at their “replace” plans. As I have argued elsewhere, expanding health savings accounts – a proposal I call Large HSAs – beats other alternatives like health-insurance tax credits. In short, if opponents succeed in repealing ObamaCare, Large HSAs would take another step in the direction of a market system. Health-insurance tax credits would constitute a step backward, because they would simply resurrect some of ObamaCare’s worst features–including an individual mandate and much of ObamaCare’s government spending and redistribution.

I set off a kerfuffle last week when I wrote that Sen. Marco Rubio’s (R-FL) ObamaCare replacement plan contains an individual mandate in the form of tax credits for health insurance. Rubio supporters and others were none too pleased. 

The Senate’s Historic ObamaCare Repeal Vote

Highlights from my op-ed today at Real Clear Policy on last week’s Senate vote repealing the majority of ObamaCare:

Health-care entitlements are supposed to be a political third rail — touch them, and you die. This Senate vote means majorities in both chambers of Congress will approve a bill repealing not one but two health-care entitlements…That alone makes yesterday’s vote historic.

Even more remarkable, it is doubtful Republicans will suffer at the polls for it. Republicans have done well by running against Obamacare. Most recently, Matt Bevin won the governor’s race in Kentucky by campaigning against ObamaCare’s Medicaid expansion, which his predecessor implemented.

The history-making doesn’t end there. A bill repealing the majority of ObamaCare is now almost certain to land on President Obama’s desk. It is not often that presidents have to veto a law repealing most of their signature legislative achievement.

Finally, the vote is historic for what it portends: It proves that America is just one presidential election away from repealing ObamaCare…

With that prospect on the horizon, states that have not implemented ObamaCare’s Medicaid expansion will now be even more reluctant to do so. This vote may even encourage Governor Bevin to make Kentucky the first state to withdraw from the expansion…

Republicans and Democrats should replace ObamaCare not with “ObamaCare-lite,” but with reforms like large health savings accounts (HSAs), which would drive down medical prices and deliver an effective tax cut of $9 trillion — greater than the Reagan and Bush tax cuts combined.

 

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