The new House Republican plan to repeal and replace Obamacare lacks specifics because it would have to broadly tax employer health plans to raise enough money to adequately fund insurance subsidies, a prominent Republican health economist says.
On Wednesday, House Speaker Paul Ryan and key House Republican committee chairmen presented a 35-page white paper laying out their vision for how to control U.S. healthcare spending and help Americans access and afford health insurance. After fully repealing the Affordable Care Act, the GOP leaders said they would offer everyone who doesn't have Medicare, Medicaid or employer coverage a refundable tax credit in an unspecified amount, adjusted only by age.
Consumers would have a one-time opportunity to enroll in an individual-market health plan without regard to pre-existing medical conditions, and would be able to keep that coverage without medical underwriting as long as they stayed continuously enrolled. But if they discontinued coverage for any reason, insurers could base their premiums on health status. Alternatively, people could receive coverage in state high-risk pools, which the Republican plan would fund with at least $25 billion over 10 years.
The House GOP plan, entitled “A Better Way,” also would abolish the ACA's individual and employer coverage mandates; limit the tax exclusion for employer health plans; convert Medicaid into a program of capped federal contributions to the states with much greater state flexibility in setting benefits; revamp Medicare into a defined-contribution “premium support” model; and implement a wide range of standard conservative proposals including restrictions on medical malpractice suits, sales of health plans across state lines and expansion of health savings accounts.
It seeks to make the individual market more financially viable for insurers by allowing insurers to charge older and sicker customers at least five times more than younger and healthier members, compared with the current 3-to-1 maximum age band.
“For six years, we've promised to repeal and replace Obamacare and make healthcare actually affordable,” Ryan said at the plan's rollout in Washington. “Well, here it is, a real plan, in black and white, right here.”
Well, not so much, according to several health policy experts. “The difference between putting down principles and writing legislation is that when you write legislation, you have to commit to numbers and details,” said John Goodman, president of the Goodman Institute for Public Policy Research, a veteran GOP health policy adviser who helped draft a recent Obamacare replacement bill sponsored by Rep. Pete Sessions (R-Texas) and Sen. Bill Cassidy (R-La.).
Goodman said Ryan's House Republican task force dodged the tough trade-offs in crafting its white paper, which spends a lot of time assailing the ACA. The Sessions-Cassidy bill would keep the ACA's hundreds of billions in new tax revenue, enabling it to offer relatively generous refundable tax credits. The Health Empowerment Liberty Plan would offer every adult, including those with employer-based coverage, a refundable tax credit averaging $2,500, adjusted by age and geography but not based on income; every child would be eligible for a tax credit averaging $1,500.
In contrast, the House GOP plan would abolish the ACA taxes along with the rest of the law, leaving the authors with little revenue for funding their tax credits to those without employer-based coverage, Goodman said. “The brutal reality that Republicans have been reluctant to discuss,” he said, “is if you repeal all of Obamacare, there is no money to insure all of the uninsured.”
That may be all right with Paul Ryan, because universal healthcare is not necessarily his goal. “Obamacare is all about quantity, with the goal to get as many people insured as possible,” the speaker said. “Our plan is about quality. We'll give (consumers) the tools to get the best care possible. We give you a choice and put you in charge, not the bureaucracy.”
But repealing the ACA taxes may force the House Republicans to rely on an even more unpopular funding approach—imposing a tax on employer health plans that's more onerous than the ACA's so-called Cadillac plan tax. While the Republican white paper says “only the most generous plans would see a difference and most Americans' plans would not be affected,” Goodman thinks otherwise. “If that tax isn't big, they won't have the money to have a reasonable tax credit,” he said. “And if it's big, it will hit the average worker.”
That could cause major political headaches for Republicans in the November elections, and afterward, if they win and try to enact an Obamacare repeal-and-replace bill containing such limits on the tax exclusion for employer health plans. “Nobody likes the Cadillac tax, not even Hillary Clinton,” Goodman said.