On Friday March 24th, Speaker of the U.S. House Paul Ryan pulled the controversial American Health Care Act from a vote on the House Floor. Many questions remain about the state of our healthcare system. We don’t know if there will be a future vote on this same plan, another health care plan or if the Affordable Care Act is here to stay. However, we think it is worth breaking down the American Health Care Act, AHCA, and how it would have affected our current system. Figuring out how this plan would have been implemented will hopefully lend insight into future health care plans as well as the existing structure of healthcare.
The first thing to note is the speed in which this whole healthcare debate resolved itself. The time from the initial introduction to the final end of this bill, lasted less than a month!
The other thing worth pointing out is the bipartisan backlash that the bill inspired. The bill failed because of pressure from both conservative and moderate forces in the Republican Party, to say nothing of the Democratic opposition. Breaking down how this bill would have worked helps explain why it faced so much backlash and why it was considered to be a particularly poorly written law.
The Congressional Budget Office (CBO), a nonpartisan organization of economists that determines the effects of new legislation, released their predictions of the effect of the American Health Care Act. They predicted that the AHCA would leave 26 million people uninsured by the year 2026. Premiums were predicted to increase for everyone by 10-20% in the next couple years.
While this is a complicated bill with many moving components, we want to talk about the biggest effects this bill would have on our health care system. The two biggest changes to the law: tax credits and Medicaid expansion.
The first part of health care this law would affect is tax subsidies provided to people buying health care. ACA distributed subsidies based on income level. People who earn the least, spent the least on healthcare. A person only has to spend a certain amount on health care based on a percentage of their income. The difference between the amount the person had to spend on health care and the actual cost of health care is the amount subsidized. For example, a person earning $20,000 only had to spend 3% of their income. The subsidy scales with the cost of the plan, which is an important part we’ll come back to later. Under AHCA, there would be an age based tax credit. The amount would be maxed at approximately $2,000 tax credit for people under 30 and a $4,000 tax credit for people over 60. This is intended to shrink the cost of the subsidy to save on costs.
MEDICAID CUT AND WHERE YOU LIVE:
This change in tax subsidies works in concert with changes to Medicaid. Currently, the ACA Medicaid expansion is subsidized by the federal government. Both the state and federal government split the cost of the Medicaid expansion. This would have changed under AHCA. Instead, each state would be given a subsidy that is determined by the number of people in the state. More money is given for older citizens. This means that instead of more money going to the states that have the most people in poverty, it would, instead, be distributed to the states irrespective of need.
These two changes in how subsidies are distributed would have had dramatic effects on the number of uninsured people. The first thing to point out is that location matters: health care is cheaper in New York than in Alaska because there are more health care options in urban areas than rural areas. Under the ACA the difference between these costs would be paid for by the federal government and that state. However, the age based subsidy does not cover the cost discrepancy between how much you can pay and how expensive a health care plan is. This means that the new subsidy would not adjust based on where you live. Therefore, people who live in areas with more expensive health care are less likely to be able to afford it.
The $4000 subsidy given to seniors seems to be generous at first glance, but under the AHCA plan, that money would not get someone the same level of health care as with ACA. Under the ACA, there is a 3-1 regulation on the cost of senior insurance. This created a cap so that health insurance for older people could only cost 3 times as much as health insurance for young people. Under AHCA, this changed to a 5-1 rule. This new health care plan creates a cap, but increases the cap so that health insurance for older people is allowed to cost 5 times as much as for young people. So, even though older people have a bigger tax credit, their premiums are higher than before. Most seem to think that the net result would be higher premiums for older people.
Put these together, and the people who benefit most from this plan are young people in NYC, and the people who get less help are poorer, older people in rural areas.
These changes to the ACA and the general faults of AHCA are acutely felt in Arizona. Out of all the different states, Arizona’s health care system has been hurting the hardest. An article in Tucson.com states; “Choices for health care plans are mainly evaporating. Only one county, Pima, will have more than one insurer, and one of those is only offering catastrophic coverage not suitable for many people. Blue Cross Blue Shield Arizona provides that coverage, plus comprehensive plans in all other counties except Maricopa. Health Net is the other insurer in the state, selling plans in Maricopa and Pima County. That shrinking number of choices is a startling change. Maricopa County, for instance, had 11 insurers in 2015 and eight this year. Insurers such as United Health Care and Humana pulled out because of stated big losses. This, in addition to super high increases in premiums have been hurting Arizonans.”
The AHCA plan and the general uncertainty of health care can incentivize insurers to leave Arizona. Right now, the health care market in Arizona is being sustained by the ACA insurance subsidies and there is at least one insurer per market. There is a big financial incentive for an insurance company to stay in the market even if they are the only company there. The insurer that’s left can set prices, and the income based subsidy means that people in the area can afford the insurance even if the premiums are high. The insurance company stays because as long as low income people continue to receive subsidies, there are always people in the area that would buy insurance. However, with the age-based tax credit under AHCA, the amount of the tax subsidy would not adjust appropriately. This means that if we lose the income-based subsidy, that there might not be enough customers who can afford insurance. This would drive the insurance agency out. It is not impossible that this plan could create areas with no health insurance. This is of special concern in rural counties such as Pinal, where there is only one insurance company left. This crucial misunderstanding of how the tax credit and Medicaid expansion would affect local health care markets is why this bill has received bipartisan criticism.
It is not impossible to create a modified health care plan that would cost less and perhaps push less people off of insurance with only slight increases in premium. The lack of care that went into this bill, and the speed by which it was pushed through Congress, only show how unconcerned our leadership is about providing quality health care for all. While the ultimate fate of health care under the Trump administration is still in doubt, critics on both the left and the right are no doubt happy that for now the AHCA will not be the law of the land.