April 1, 2017
By Neil Cosgrove
Coverage in the media of the provisions in the Affordable Care Act and Republican proposals to replace it has been intense but fragmented since Republicans gained control of both the executive and legislative branches of the federal government this past November. Discussion of other possible proposals for improving Americans’ health care, such as a single-payer system, has been practically non-existent. To help our readers understand each of the above three approaches, and to determine their impact on citizens, the NewPeople is providing succinct summaries of what each approach offers.
What the Affordable Care Act Does
The Affordable Care Act was passed by Congress and signed by the president in 2010, and fully implemented in 2014. Its overall intent is to create universal coverage through regulation of a marketplace in which private “non-profit” and for-profit health insurance companies offer policies to citizens, and by expansion of coverage through the government-sponsored Medicaid program. The law seeks universal coverage through the following provisions:
- Requiring individuals and families to have health insurance, with the federal government assisting in the payment of premiums by those below certain income levels through subsidies. The intent of this mandate is to lower insurance costs and the premiums of those most likely to need medical care by pulling younger, healthier people into the marketplace, who can then share the costs of such care. To help pay for the credits and expanded Medicaid, the law charged a 3.8% investment tax on the wealthy and a 0.9% surcharge on wages over $250,000.
- Expanding Medicaid coverage by increasing eligibility for such coverage to include all those individuals and families with income not exceeding 138 percent of the federally determined poverty level. The law originally stipulated that every state would be required to participate in Medicaid expansion, but the Supreme Court eventually ruled that states could choose to participate or not, with 31 states currently enrolled, and receiving expanded funding from the federal government that covers over 90% of the increased costs.
- Requiring that insurance companies provide coverage to individuals with “pre-existing conditions” without charging those individuals exorbitant premiums. Through governance provided by the law, the differences in premiums for individuals 50 to 64 and younger, usually healthier individuals cannot exceed 3-to-1. In addition, young adults up to 26 years of age could remain covered by the family policies held by their parents.
- Lowering the costs of insurance by lowering overall costs for care, through an emphasis on preventive care, on pressure to meet “set costs” for particular kinds of care, and on tying payments to outcomes, rather than the amount of care delivered. The law also established minimum standards of care for insurance policies companies could offer.
The law has succeeded in lowering the number of uninsured Americans from 16% in 2010 to 8.8% in 2016, with 20.4 million more people now covered, according to the Pittsburgh Post-Gazette. In addition, significant drops in bad debt and in spending on charity care have benefited hospitals.
What the law has failed to do so far is create universal coverage, as seen from the figures above. Insurance companies that underestimated payments they would have to make over the first few years of the law have either dropped out of the marketplace or increased premiums significantly, while customers often settle for plans with high deductibles and co-pays. Many people would rather risk paying penalties than obtain coverage.
David Leonhardt of the New York Times argues that neither the penalties nor the subsidies are high enough to lessen the number of hold-outs, while Politico says enforcement has been spotty, with poor oversight of special enrollment periods allowing people to jump in and out of coverage, depending on their health situation. A lack of knowledge of the law’s benefits may also have kept some people out of the marketplace.
What the Failed Republican Health Care Plan Would Have Done
Early in March, the Republican House leadership made public their proposed bill for replacing the Affordable Care Act (ACA). Much later in March that same leadership failed to gather the votes that would have moved the bill to the Senate. It is impossible to know what the final form of a bill that can pass both the House and Senate would look like, or whether any bill will ultimately become law. Given internal divisions within the Republican caucus, it appears less and less likely that Republicans will succeed anytime soon in repealing the ACA and replacing it. The House bill sought to replace “Obamacare” while ensuring that the number of uninsured does not return to 2010 levels, through the following provisions:
- Removing the individual and employer mandates requiring health insurance, including the penalties for not having insurance. The bill retained the so-called “Cadillac tax” on high-priced plans. People would be encouraged to purchase policies through refundable tax credits, which means that even if the tax due is less than their designated credit, filers will receive a refund for the difference. The bill’s tax credits would be determined solely by age, whereas the Affordable Care Act also took income and geographic area into account, and range from $2,000 for those 30 and under to $4,000 for people 60 and over.
- Phasing out the ACA’s Medicaid expansion, with states allowed to enroll more people in Medicaid until 2020, when there would be a freeze on enrollment. At that point states would have to begin choosing which people should be eligible for Medicaid and which are not, since expansion of whom is covered would not be possible. Federal Medicaid support to the states would then take the form of block grants based on number enrolled.
- Changing the requirement that insurance companies must cover people with “pre-existing conditions,” into a “continuous coverage” requirement. People with lapsed coverage must be offered insurance but, beginning in 2019, if they had gone 63 or more continuous days without coverage a 30% penalty would be placed on their premiums. In addition, a 64-year-old could, under this bill, be charged five times what a 21-year-old might pay in premiums, thus eliminating the 3-to-1 ratio set by the ACA.
- Eliminating the 10 essential benefits the ACA said must be included in health insurance policies. Insurance companies would be free to offer policies with maximum allowable payments, with higher deductibles and co-pays, and with excluded procedures and therapies at whatever premium levels they believed the market would bear. This set of required standards proved to be a main point of negotiations between the Republican House Leadership and their highly conservative Freedom Caucus members. The leadership agreed, in the bill they subsequently pulled on March 24th, to drop the standards, in return for keeping the taxes on wealthy wage-earners until 2024. All told, the states would have a pile of money ($115 billion) to finance “high-risk pools” and help cover “mental health issues, maternity care, infant care, and substance abuse issues,” according to the GOP chair of the Ways and Means Committee Kevin Brady. Without the ACA standards, insurers would likely drop such coverage from their offered policies.
Republican governors from states who have participated in Medicaid expansion were generally opposed to the “phase out” of that expansion. (In Pennsylvania alone, nearly 700,000 more people have received insurance through that expansion.) Several Republican senators and some less conservative Republican House members were clearly spooked by the Congressional Budget Office’s analysis that the House bill would result in 24 million people losing their health insurance over the next 10 years.
Democrats want to keep “Obamacare,” and improve it somehow, while broader criticisms of the Republican bill were neatly summed up by the Money web site: “The bill drastically cuts tax credits for the oldest and poorest Americans, while giving the upper class a major tax break.” Polls published just before the bill was pulled indicated that only 17% of Americans supported it.
What a Single Payer System Could Do
Advocates for a “single-payer” or “Medicare for All” approach to healthcare characterize the Affordable Care Act (ACA) as an “important first step,” but ultimately inadequate to achieving the goal of universal health care for all Americans. The details we provide below are derived from two different single-payer proposals, the Pennsylvania Health Care Plan (PHCP) recently reintroduced to the state legislature by Representative Pamela DeLissio of Montgomery County and the “Medicare for All” national plan presented by Senator Bernie Sanders during last year’s presidential campaign. The PHCP is based on a provision in the ACA that gives states the option to develop their own health care plan if “the proposed plan is more economical and efficient,” states Rep. DeLissio.
- Both the DeLissio and the Sanders plans would insure every Pennsylvania or American citizen for all the care currently covered by private companies’ policies, and would add not commonly covered vision and dental care. Both plans would also eliminate deductibles and co-pays. The Pennsylvania plan would pay for coverage via a trust fund accumulated through a 10% employer tax on payroll and a 3% individual income tax. Sanders’ national plan would get the bulk of its revenue from a 6.2% income-based employer tax and a 2.2% income-based individual tax, but also by creating more progressive income tax rates, taxing investment income at the same rate as wages, and an estate tax. Both plans claim their approach will actually result in significant savings for both employers and individuals, given current spending on premiums, deductibles, and co-pays.
- As for current government-administered plans, Medicare would still exist and under the PHCP seniors would still pay their Part B premiums but would no longer need supplemental policies to cover drugs and other expenditures. The need for Medicaid would no longer be necessary. The plans insist they are not “socialized medicine” because doctors and other medical workers would remain private, and not government employees.
- Under the Pennsylvania plan, Quality of Care Panels will ensure that various health professionals, institutions, and suppliers will meet necessary standards.
While these proposals simply eliminate the current system of private health insurance, it must be noted that such insurance does still exist in countries with universal, government-sponsored health care systems. Ever rising costs have sometimes troubled such systems. The Sanders’ plan estimated annual cost at $1.38 trillion a year for the entire country, while a 2014 estimate of expenditures for the Pennsylvania plan was $49 billion.
The biggest obstacles to these plans, so rationally and instinctively appealing, are the deeply ingrained ideological and cultural assumptions that exist in this country regarding such a radical change in the way we manage healthcare. With Republicans, commonly opposed to even much smaller government programs, in charge of so many legislatures, including the U.S. Congress, the near-future of single payer plans is not promising. The plans’ advocates, nevertheless, continue to work to break down resistance to “single payer” and to ultimately witness the triumph of an idea they believe is long past due.
Neil Cosgrove is a TMC Board Member and a Member of the NewPeople Editorial Collective