The text of a draft bill to repeal and replace Obamacare leaked on Friday. Because the draft hews to principles that Republicans have outlined before, its basic contours aren’t that surprising. As I explained to Greg Sargent at the Washington Post:
The emerging GOP replacement would repeal tax hikes on the very rich and, instead, impose a tax [on employer coverage] that would hit many more people, including lots of public employees like schoolteachers and police officers. At the same time, it would slash Medicaid for the poorest Americans, as well as subsidies that the near-poor rely on to buy private coverage.
Drilling down to details, I had some observations. Take these with a big grain of salt: the leaked draft is dated February 10, so we don’t know how closely it resembles what’s currently under discussion in the House.
- It’s an inauspicious sign for Republicans that they don’t even have a title for the bill.
- The bill would undo the Medicaid expansion, shift Medicaid spending back to the states, and impose a system of per capita caps. The budget hit to expansion states would be enormous, raising questions about whether Senate Republicans from those states could support it.
- If a state exceeds its per capita cap in a given year, any overruns will come out of its Medicaid payments the following year. Good luck balancing a state budget with that kind of shortfall. One surprise: although federal payments would decrease markedly, the size of the per capita caps appears to be indexed to medical inflation (see 1903A(c)(2)), so their value might not erode over time.
- The bill would replace income-based tax credits with age-adjusted tax credits. Among other problems, those age-based tax credits won’t go as far in high-cost insurance markets as they do in low-cost markets. Premiums for the second cheapest silver plan in Alaska will amount to $10,848 in 2017. Will Senator Murkowski really vote for a bill that offers only $4,000 to help a 61-year-old buy coverage? And just $2,000 to a 29-year-old? Also, the tax credits don’t appear to be indexed for inflation, so they’ll stay flat even if the cost of coverage soars.
- As of 2020, the bill would end the cost-sharing reductions that help low-income people cover the deductibles and other other out-of-pocket payments that most exchange plans impose. If you’re a family making $32,000 a year and your kid breaks her elbow, how will you afford a $3,000 deductible, which is pretty typical for a silver plan? Even with coverage, you’d face a financial catastrophe.
- More immediately to the point, the leaked bill doesn’t appropriate money for the 2018 and 2019 cost-sharing reductions. At the same time, the district court in House v. Burwell held (correctly) that there’s no appropriation to keep making those payments. The court’s injunction has been stayed pending appeal to the D.C. Circuit, where the case is being held in abeyance. But nothing prevents the Trump administration from dismissing that appeal and ending the cost-sharing payments. If it were to do so, the exchanges would collapse immediately. Does Congress plan on doing anything to prevent that possibility?
- The individual mandate would be repealed immediately, not in 2020. Even with some half-hearted continuous coverage provisions in place, eliminating the mandate will destabilize the exchange markets. Premiums for 2018 will skyrocket; in some markets, no insurer will be willing to sell exchange plans.
- Further destabilizing the markets, the “like it, keep it” fix is made permanent.
- The bill wouldn’t restrict the Judgment Fund from paying risk corridor judgments. Without a provision like that, as I’ve explained, insurers stand to recover something on the order of $15 billion from the U.S. Treasury. Again, was this an oversight? Or an effort to play nice with insurers?
- The bill amends the rules governing essential health benefits and age bands, giving the states the authority to set their own rules. Whether that’s a good idea or not—and I think there’s something to be said for it—these are non-budgetary changes. As such, the Senate probably can’t adopt them in a reconciliation bill, which means they’re dead on arrival.