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US healthcare reform: Caught between a rock and a hard place
The US House of Representatives voted 217 to 213 on 4 May in favor of the American Health Care Act (AHCA), a bill set to repeal and replace major provisions in former president Barack Obama's Affordable Care Act (ACA) also known as Obamacare. This is a highly significant event in recent US history, where Congress could end up rescinding a benefit given to the Americans after it was enacted into law.
All Democrats and 20 Republicans voted against the AHCA, but only 216 votes were needed for it to pass. The bill now moves to the Senate where it is likely to face additional challenges and opposition that would probably result in the introduction of various other amendments. President Donald Trump has stated that working towards approval of the bill has "brought the Republican Party together", adding that he is confident it will pass the Senate, while Senate minority leader Chuck Schumer has stated that the bill will not likely get through the Senate, and may not even qualify for passage as it does not focus on addressing the deficit.
The controversial bill, first introduced by Speaker of the House Paul Ryan in March, was initially pulled ahead of a House floor vote because there remained notable opposition to the proposed legislation from within the Republican Party, particularly from the conservative Republican House Freedom Caucus members. At the time, a CNN poll showed that only 17% of Americans were in favour of the bill. Since then, several amendments have been introduced that have scaled back more provisions from the ACA - provisions once considered "popular" on both sides of the aisle - such as the 'essential health benefits' and 'pre-existing conditions' provisions. In the latest draft of the bill, states would have the authority to waive certain restrictions imposed on the insurance market by the ACA, including the provision that prevents insurers from setting premiums based on health status or pre-existing conditions (also referred to as community rating). Instead the federal government intends to provide states with a significant amount of funding to help subsidise premiums for individuals that could realise exorbitant increases due to their pre-existing conditions.
A summary of key AHCA provisions incorporating the new amendments are listed below:
- Allow states to waive certain restrictions imposed by the ACA on the insurance market, such as allowing states to opt out of the requirement to include 10 essential health benefits, increase the age-rating ratio, and set premiums based on pre-existing conditions for those with coverage gaps.
- Repeal individual and employer mandates by no longer requiring individuals and businesses to purchase or provide insurance to their full-time employees, effective from 31 December 2015, with retroactive relief provided for penalties imposed in 2016.
- Repeal ACA premium and out-of-pocket subsidies provisions that provided federal assistance to lower-income individuals (earning below USD47,550 in 2017) to cover premiums and out-of-pocket costs associated with their marketplace plans as of 2020. As of 2018, federal subsidies can be used to buy off-exchange plans and catastrophic plans.
- Modernize Medicaid and scale back expansion by reducing federal funding for Medicaid expansion as of 2020, and gradually transition the state-run program from an entitlement benefit to a block grant per-capita allotment that would be based on age and disability of enrolees.
- Establish a Patient and State Stability Fund whereby the federal government would provide states with USD100 billion until 2026 to help consumers pay for healthcare and insurance. An additional USD15 billion will be allocated to the program to fund maternity coverage and newborn care, as well as mental health and substance use disorders. Another USD8 billion will be earmarked for use by states that have been granted community rating waivers until 2023.
- Set up an Invisible Risk Sharing program to help subsidize premiums for individuals with pre-existing conditions, starting with an allocation of USD15 billion, with access to additional funds from the Patient and State Stability Fund.
- Increase the basic annual limit for Health Savings Accounts (HSAs) contributions tied to high-deductible plans from USD2,500 under the ACA, to at least USD6,550 for self-only coverage and USD13,000 for family coverage as of 2018.
- Replace the ACA marketplace-plan federal subsidies with advanceable, refundable age-adjusted tax credits to help consumers purchase insurance; these would be gradually reduced with increasing income (USD100 tax credits would be phased out for every USD1,000 in income above USD75,000 for individuals or USD150,000 for families). Tax credits would range from USD2,000 for an individual under 30 to a maximum of USD4,000 for an individual aged 60 or older, with low-income families potentially receiving up to USD14,000 in credits.
- Repeal ACA taxes: including taxes on prescription drugs, over-the-counter medications, health insurance premiums, and medical devices starting 2018.
In short, low-income and older Americans with pre-existing conditions that gained access to affordable coverage for the first time under the ACA would probably find their premiums unaffordable under the AHCA as Medicaid expansion is scaled back, federal subsidies to help low-income individuals pay for premiums are eliminated and replaced with very limited tax credits, and older individuals or those with pre-existing conditions have to pay premiums multi-fold higher than other consumers.
Opposition to AHCA
House opposition leader Nancy Pelosi on the House floor ahead of the vote referred to the bill as "Robin Hood in reverse", noting that it represents "a billionaires tax cut again disguised as a healthcare bill", in reference to the USD600 billion in tax cuts included in the legislation that are expected to benefit primarily high-income earners. President of the American Medical Association (AMA) Andrew Gurman issued a statement regarding the AHCA approval in the House noting that it "will result in millions of Americans losing access to quality, affordable health insurance and those with pre-existing health conditions face the possibility of going back to the time when insurers could charge them premiums that made access to coverage out of the question", urging the Senate and the administration to work with stakeholders including physicians, patients, and provider groups to find a bipartisan solution that preserves the "safety net for vulnerable populations". The AARP has also issued another statement in strong opposition to the AHCA, and has stated that it will be informing its 38 million members "how their elected Representative voted on this health bill", in order to hold legislators accountable. The CEO of the Association for Community Affiliated Plans, Margaret Murray, stated, "This bill cuts Medicaid by four-fifths of a trillion dollars and phases out the enhanced federal funding match for the Medicaid expansion," adding, "It will severely limit access to services for the more than 70 million people who rely on Medicaid for effective health coverage - and locks states' funding to what they spent on Medicaid in 2016."
A rock and a hard place
Despite its challenges, and the lack of profitability of marketplace plans in some states prompting insurer exits, the Affordable Care Act significantly decreased the percentage of uninsured individuals in the US to an unprecedented 9% in 2017. According to the Congressional Budget Office, the AHCA - as formerly drafted in March - would result in 24 million individuals opting out or losing their health insurance by 2026 if it were to become law. This would raise the percentage of uninsured in the US back up to 16%, and would undo most of the benefits realised under ACA. For years Republicans have campaigned and introduced legislation in an attempt to repeal the ACA under the previous administration; however, now that the opportunity is there, finding an adequate replacement to fill the gaps left after the ACA is repealed has proven to be a challenging task. The latest AHCA draft is unlikely to win a popularity contest; however, as insurers increasingly exit ACA exchanges due to lack of profitability, Americans will find themselves caught between a rock and a hard place.
Margaret Labban is an Analyst for the Life Sciences practice at IHS Markit
Posted 24 May 2017
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