House Republicans finally revealed their plan to undo President Obama's Affordable Care Act on Monday night, releasing legislative language for what they are calling the American Health Care Act. However, even as they tout the bill as a fiscally responsible alternative to the existing system they have long derided as bloated and failing, they seem ready to advance their alternative through the House committee system without an official estimate of its cost or the impact it will have on the accessibility of insurance coverage.
As proposed, the bill would take a number of drastic steps to change the way health insurance is paid for in the United States. Chief among them is the transformation of Medicaid from an open-ended entitlement program to a block grant in which states would receive a fixed amount of money to cover each person enrolled in the program.
The bill would also eliminate the individual and employer mandates of the ACA, which require individuals to purchase health insurance if they don’t receive it through their employer or a government program and mandates that employers of a certain size offer workers coverage.
The ACA’s complicated system of income-based subsidies that was meant to help lower-income people pay for insurance would be replaced by a system of refundable tax credits that vary in value not by income but by age, but which also phase out for high-income individuals. The credits would start at $2,000 a year for people under 30, and rise to $4,000 for people over 60.
The bill would also create more generous health savings accounts, which allow people to set aside income tax-free for the payment of health care costs.
The bill would retain several popular elements of the ACA, including the right of children to stay on their parents’ health plans until age 26. It would also continue to prohibit insurers from denying coverage to people with preexisting conditions and from imposing yearly or lifetime caps on benefits.
In a statement released late Monday, House Speaker Paul Ryan said, “The American Health Care Act is a plan to drive down costs, encourage competition, and give every American access to quality, affordable health insurance. It protects young adults, patients with pre-existing conditions, and provides a stable transition so that no one has the rug pulled out from under them.”
Early Tuesday morning, President Trump tweeted, “Our wonderful new Healthcare Bill is now out for review and negotiation. Obamacare is a complete and total disaster - is imploding fast!”
However, there are numerous questions about the effect the House GOP plan would have on both individuals seeking health coverage on the open market and on the federal budget.
The popular elements of the ACA — particularly the ban on denying coverage to people with pre-existing conditions and the elimination of benefit caps — were also very expensive for insurers. The trade-off that made those concessions palatable to insurers was that coverage for all Americans was mandated, assuring an increase in the number of policyholders to offset the increased costs of sicker customers.
By requiring insurers to continue offering those benefits without the promise of an expanded pool of insurance customers, the bill virtually guarantees some combination of higher prices and fewer benefits for policies offering the same level of coverage as under the ACA.
At the same time, the House plan would remove some of the minimum requirements for health plans, allowing insurers to offer bare-bones policies that offer relatively little coverage in exchange for lower premiums.
The impact of the bill on the federal budget remains something of a mystery. Both the House Ways and Means and Energy and Commerce Committees are expected to take up the legislation as early as Wednesday, before the Congressional Budget Office can estimate the cost of the legislation or its impact on overall levels of health insurance coverage.
Both are major questions. The bill would repeal several taxes that were used to fund the subsidies in the Affordable Care Act, costing the government billions of dollars in annual revenue. They include a surtax on the super-wealthy and a tax on the compensation of insurance company executives. The bill would forego still more revenue by eliminating the tax penalty on people who choose to go without health insurance.
It would also delay the so-called “Cadillac Tax,” a 40 percent tax on employer-provided plans that cost more than $10,200 for individuals and $27,500 for families that was scheduled to take effect in 2020. The Republican plan would push off implementation until 2025.
Early Tuesday, when it became apparent that House committees were prepared to move forward on the proposal without a budget score, Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, tweeted: “Need to see CBO score. Lawmakers should not support a bill without seeing the score.”
This article was updated to correct details abouot the Cadillac Tax.