December 11, 2018
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The Senate’s health plan won’t work in the real world

AARON P. BERNSTEIN | REUTERS
AARON P. BERNSTEIN | REUTERS
Senate Majority Leader Mitch McConnell speaks to the media about plans to repeal and replace Obamacare on Capitol Hill in Washington, June 27, 2017.

Monday’s report on the Senate health care bill from the Congressional Budget Office said 22 million people would lose coverage under the plan and that coverage in the non-group market would become far stingier than it is today. By Tuesday, the bill had been pulled back for revision.

The quick sequence was revealing: Senators clearly could use some extra time to figure out how to bridge a giant gap between policy theory and reality.

The budget office report illustrates how policymaking can become divorced from the reality of people’s lives. Here are three big examples of how the Senate health bill, as currently configured, may sound one way in theory — and in talking points — but would work out quite another way in practice.

First, the bill phases out the Affordable Care Act’s 90 percent federal match for expanded Medicaid eligibility over four years, reducing it to each state’s regular matching rate. The theory is that this phase-down period would provide time for states to decide whether they want to replace the lost federal funds and continue their Medicaid expansions.

But consider these estimates of how much it would cost states to replace those federal funds: California would have to come up with $12.5 billion when the phase-down is fully implemented in 2024, a 400 percent increase; Ohio would need $1.6 billion, a 272 percent increase; Nevada, $343 million, a 243 percent increase; and West Virginia, $178 million, a 168 percent increase. The impact on the other expansion states would be similar.

There is no way states can replace funds of this magnitude. If the expansion states try to replace even a significant share of the money, they will be forced to increase taxes or make significant cuts to other parts of their budgets, including for public schools, higher education, environmental protection and corrections. And because the federal match would be phased out incrementally beginning in the first year, states would have every incentive to end or freeze their expansions quickly. The idea that a phaseout would give states time to plan and adjust is driven by a belief that states can operate Medicaid with far less money if they have greater flexibility. In this case, with funding cuts this large, it’s simply wishful thinking.

That leads to reality gap No. 2: the theory that the 14 million people who are covered under Medicaid expansion could buy private coverage with the tax credits offered under the Republican plan, in effect privatizing the Medicaid expansion. This is the biggest reality check in the Senate bill.

Let’s look at a typical adult covered by the Medicaid expansion. He is a 35-year-old man who lives in, say, Minden, Nevada, makes $15,000 per year and may even have voted for President Donald Trump. Under the Senate plan, he could buy a policy costing him about $400 per year after using his tax credit, but his plan would come with a deductible of more than $6,000 per year. (The Senate plan’s policies are calibrated to cover just 58 percent of costs.) On a $15,000 income, he cannot afford to get sick with a policy like that. Assuming he has a car to get to work, pays rent, eats food and otherwise has the same basic expenses as any other human being, such a policy would be far from affordable for him. In fact, this is why this hypothetical Trump voter was uninsured before Medicaid was expanded in his state; like millions of his counterparts across the country, he could not afford private coverage.

The Senate plan also trims back the pool of people in the non-group market who will be eligible for tax credits, by reducing the threshold from four to 3½ times the federal poverty line. That leads to reality gap No. 3.

Consider a 60-year-old woman in the town of Strong, Maine, making just less than $45,000 per year. She has high blood pressure, takes daily medication and needs regular monitoring because of her previous thyroid cancer. Under the Affordable Care Act, she is eligible for a premium tax credit of about $7,000 and a comprehensive policy with a premium cost to her of about $4,500 in 2020, when the Senate health bill would take effect. Under the Senate plan, she would not be eligible for a tax credit. A similar plan under the Senate bill would cost her more than $15,000, or one-third of her income.

Gaps between the theory and practice of policy are not some Republican creation. Under the Affordable Care Act, many people have struggled with costs or were forced to change plans and provider networks annually to keep their premiums down. But the Senate bill takes this divergence to a new level. Private insurance cannot be better than Medicaid if it is unaffordable; states do not have some magic way to cover millions of people with far less money.

The bill may now be altered, and senators will certainly hear from constituents over the holiday recess. They should listen carefully to what they have to say. As it’s written, the Senate health plan would substantially widen the gap between policy theory and the real world — making coverage unaffordable for millions more Americans.

Drew Altman is president and chief executive of the Henry J. Kaiser Family Foundation.

 


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