Donald Trump and Republicans in Congress are vowing to repeal and replace the Affordable Care Act, the signature health care overhaul of President Obama.
The absence of specifics on health care from the president-elect makes the 37-page plan that Speaker of the House Paul Ryan has released the fullest outline of what Republicans would like to replace Obamacare. Some health policy analysts say it looks a bit like Obamacare light.
“Republicans through this plan have embraced, I think rightfully so, the basic idea that everybody in the U.S. should have health insurance,” says Jim Capretta, a health policy fellow at the American Enterprise Institute. “And people who are outside the employer system should get some level of financial help through a tax credit, because, frankly, that’s similar to the tax break that is available through employer coverage.”
Republicans had been criticized for years for promising to repeal the ACA and offering nothing as a replacement. Ryan unveiled the proposal at AEI in June.
The Wisconsin Republican’s comments at the time reflected that: “Well, here it is, a real plan, in black and white, right here. We are officially putting it on the table.”
The Ryan report details what he says is wrong with Obamacare and how Republicans could fix it.
“Don’t force people to buy insurance,” Ryan told the crowd. “Make insurance companies compete for our business.”
“And, yes,” he added, “we’re going to help you buy insurance.”
While the Ryan plan gets rid of the mandate to buy insurance, it otherwise has many provisions that will be familiar to people who know Obamacare. It would offer tax credits to help people pay for insurance. And it would protect people with existing illnesses and medical conditions from being dropped by their health plans.
The main difference from the Affordable Care Act reflects the conservative view that a market approach could make health care more efficient, and cheaper.
While the Ryan proposal is more detailed than many, it does lack some key information. Most importantly, the size of the subsidies that would be offered is unknown, as is the level of insurance that would be tied to them.
Obamacare bases its financial assistance on a policy that pays a set percentage of a person’s health care costs and that carries a minimum set of benefits. Ryan has only hinted at what level of insurance coverage his subsidies are expected to buy.
But a major aim of his overhaul is to move people to insurance policies that carry high deductibles. To pay those deductibles and other health care costs, people would have tax-free health savings accounts. The individual, government or employer could contribute to such an account. That could keep premium costs down for young, healthy people, says Paul Howard, director of health policy at the conservative Manhattan Institute.
“Most of the care that most people need for most of their adult lives can be very inexpensive,” Howard says.
So rather than spending a lot of money on premiums for insurance they don’t need, people could save that money for when they do get sick. Howard says people could start young and save for major health problems over time.
“By the time you’re 40, ideally, you would have built up a health savings plan that would be partly funded by government sources, plus your own sources, a significant nest egg,” he says.
Ryan also wants to limit the tax breaks for employer-based insurance to nudge companies into buying cheaper, high deductible, policies for their employees too. The idea is similar to the so-called Cadillac tax in Obamacare that levies a tax surcharge for expensive health insurance policies.
Howard says workers might prefer a high-deductible plan, especially if they were aware of how much of their compensation goes to health insurance. He says companies should ask their employees the following.
“Do you know that $20,000 of your wages are going every year to insurance?” he asks. “Would you rather have $10,000 in your pocket, put $5,000 into a high-deductible plan or something like that, and then put some aside for a rainy day that will accumulate over time?”
Conservatives argue that making people buy their own health care — even with money provided by the government or their employer — will get them to shop around for the best quality and price, and lower overall health care costs in the long run.
Ryan wants to launch his new system with a single open enrollment period, rather than the annual sign-up windows offered under Obamacare.
People with ongoing medical conditions who maintain their coverage continuously can’t be cut off, or see their prices raised. But what if you let your coverage lapse?
“You could be denied a policy because you have diabetes, and the next time you could get coverage again would be when you turn 65 and become eligible for Medicare,” says Sabrina Corlette, a professor at the Georgetown Center for Health Policy Reform. “The effect of it could be to lock a lot of people out who have pre-existing conditions.”
For people in that situation, Ryan has proposed creating high risk pools — special government subsidized coverage for hard to insure people like those with cancer or other chronic illnesses.
Corlette, however, says high-risk pools have been tried already, in 35 states, and failed.
“When you put people into this insurance ghetto, which is these high risk pools, the cost is going to be extraordinarily high,” she says.
Corlette says Ryan’s plan covers fewer people and offers fewer benefits.
“What Paul Ryan has called for is a much skimpier set of protections so that tax credit buys you a lot less than it would have under the ACA,” she says.
A key feature of Obamacare is that it spreads the cost of insurance across generations. So healthy young people subsidize older sicker people who use more health care.
Ryan’s plan would change that.
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