FactPower: Facts, figures, and talking points for Resistance activists.
Letter to the Senate Finance Committee re: Problems with RepubliCare Bill
On May 21, 2017, FactPower answered a solicitation for input on the RepubliCare bill from Sen. Orrin Hatch, Chair of the Senate Finance Committee. (No, the senator did not actually send us this letter of solicitation.) The letter we wrote discusses the problems with RepubliCare in very broad brush strokes:
Senator Hatch and members of the Senate Finance Committee:
Thank you for soliciting input regarding the American Health Care Act from various "stakeholders," including "thought leaders." I am the Communications Director for a recently formed organization, FactPower.org, whose purpose is to assemble and organize information on current issues and congressional bills. Our primary focus has been on the AHCA, and we have a few perspectives to share, at least with regard to the House version of the bill, passed on May 4. We feel this plan, now dubbed "RepubliCare" by activists, would have devastating impacts in all corners of society:
First, RepubliCare would cut $880 billion from Medicaid over the next decade, mostly through the termination of Medicaid expansion funding. Many low-income Americans have access to insurance only through this program, and they come from all walks of life. This population includes the often maligned "Welfare mother," but it also includes her children. It includes college graduates from affluent families, heavily burdened in student debt, who are struggling to find jobs in their fields. It includes hard-working Americans who have been laid off from their jobs and are competing against their former co-workers in a thin and overly burdened job market.
Most Americans, even in the middle class, live from paycheck to paycheck, with little or no financial cushion for a "rainy day." They are just a pink-slip away from losing health coverage, and the likelihood of finding a job within 63 days is slim. RepubliCare would remove the Medicaid expansion safety net and would trigger a 30% non-continuous coverage penalty and/or a steep preexisting conditions surcharge in a high risk pool for those unable to find a job with health coverage benefits before 63 days have elapsed. This would effectively lock many Americans out of the health insurance market, often for reasons beyond their control.
Second, RepubliCare would result in low-quality insurance plans in many opt-out states. Although these plans would be cheap, they would also be ineffective. Furthermore, good plans would not be available even to those willing to pay. Opt-outs for the 10 Essential Health Benefits would leave enormous holes in covered benefits, commonly for prescription medications, maternity care, and mental healthcare. They would also trigger the re-introduction of annual and lifetime coverage caps. (The ACA's Sec. 1302(c) prohibition of annual and lifetime coverage caps only applies to policies that must adhere to the 10 Essential Benefits.) Furthermore, the ACA's out-of-pocket maximum would be lost by the same opt-out.
The result would be "Swiss cheese" policies such as we had prior to the ACA. These policies would leave entire families (even moderately wealthy ones) exposed to financial ruin from the serious illness of a single family member, when that illness is excluded or inadequately covered. Research has shown that serious illnesses are the most common cause of bankruptcy. Furthermore, we know that bankruptcies declined precipitously since the roll-out of Obamacare, with bankruptcies now having been cut in half relative to pre-ACA levels. Although a number of reasons have been attributed, including changes in bankruptcy law, most experts agree that the ACA has been the primary factor driving the decline of bankruptcies in America.
Third, RepubliCare would allow states to place people with preexisting conditions into high risk pools. High risk pooling has a very poor track record where it has been implemented. These programs are often too small to accept everyone who needs them, and insurance costs can be quite high for those lucky enough to get in. Not surprisingly, the success of these programs depends on how well they are funded. The funding for the federal high risk pool under RepubliCare would be anemic by any standard, perhaps as little as 1-2% of what is needed, per a Center for American Progress (CAP) analysis that Larry Levitt of the Kaiser Family Foundation opines is plausible. This problem is even acknowledged by the Republican Study Committee bill summary, based on the Milliman study it cites. The AARP estimates real-world premiums for the federal pool would be on the order of $25,700 per year, based on CMS (HHS) actuarial data. Furthermore, if a state were to allow insurers to surcharge differently for each illness, premiums could run as high as $140,000 per year (for metastatic cancer), per the CAP analysis, which was based on the same actuarial data.
Finally, we are concerned the tax credit/subsidy structure under RepubliCare would leave low-income and older Americans priced out of the market. Obamacare ensures that nobody has to pay more than 9.69% of their adjusted gross income for medical insurance. However, this same protection is not in place under RepubliCare. Even a moderate income individual with a preexisting condition might be charged more than his/her income for the first year of coverage. The problem could be much worse for older (pre-Medicare-age) Americans, whose premiums would be based on a 5:1 age rating spread (or even greater, if states opt out of this ratio). The simple fact is that many Americans would not be able to afford RepubliCare insurance, especially when the premium vastly exceeds their adjusted gross income. They would drop from the insurance rolls and would have to live without coverage (and possibly even without medical care). The Congressional Budget Office has projected that 24 million people would lose their insurance under the pre-MacArthur version of the bill. We feel this number would be much higher under the version that was passed, because of the state opt-outs.
We would conclude by saying RepubliCare seeks to solve a problem the GOP has deliberately created. To whatever extent possible, the GOP has dismantled, obstructed, and defunded key provisions of Obamacare. It also has spooked insurers by making the future of subsidized markets (and even subsidy payments) uncertain. This has caused insurers to raise premiums and even pull out of markets. Some "problems" have even been invented. For instance, Aetna has cited losses as their reason for pulling out of many markets, when the real reason was to improve their litigation position with regards to their intended merger with Humana. Contrary to assertions by the GOP and the health insurance industry, earnings remain healthy. In fact they have risen an average of 15% during the first three years of Obamacare, relative to the three years before that.
Most Americans like Obamacare and are frightened by RepubliCare. Even a majority of Republican voters, per a Kaiser survey, has favorable opinions about the individual provisions of Obamacare, with the exception of individual and employer mandates. The message is clear that Americans want Obamacare tweaked, not substantially replaced: Markets should be opened up across state lines to increase competition and choice in local markets (a campaign promise by the president). Either Medicaid should be expanded as originally intended, or other measures should be implemented to make subsidized health insurance available to people earning below 100% of the Federal Poverty Level. And if non-group markets are unprofitable and/or priced too high, then the ACA's reinsurance program should receive more funding. Once all Americans are given equal access to health insurance, perhaps Congress can address the real issues underlying high health care costs, like profiteering in the pharmaceuticals industry, high administrative costs, and medical malpractice.
We thank you for your kind consideration of our commentary, and we hope that it has been helpful to this process.
Respectfully, Susan Bennett, Communications Director, FactPower.org