Paul Ryan and Tom Price seek to replace the ACA
How will President-elect Donald Trump and the Republican-led Congress change health care in 2017? While we’re still in the speculation phase—Trump won’t take office until late January—his appointment of Representative Tom Price as secretary of Health and Human Services gives us a few clues.
Price’s “Empowering Patients Act” shares a few key policies with House Speaker Paul Ryan’s “A Better Way” proposal. Between these two conservative proposals, we can make a few predictions on how health care in America could change.
First, it is almost certain that the Affordable Care Act, often called Obamacare, will be repealed. However, it will probably not be dismantled immediately. “Repeal and delay” is what most experts expect—a repeal in name only as a replacement is finalized.
Beyond that, Price and Ryan’s proposals overlap in some areas and differ in others. Let’s compare:
Where they agree:
•Keeping the ACA’s more popular policies
Both proposals keep Obamacare’s two most popular elements—allowing adult dependents to stay on their parent’s plan until age 26, and prohibiting insurers from denying coverage to people with pre-existing conditions.
Cutting regulations around Health Savings Accounts has been a popular conservative health policy since HSAs were signed into law in 2003 as part of the Medicare Modernization Act. Most conservatives agree that the tax-advantaged savings accounts, which allow people to contribute toward qualified medical expenses, make consumers better health care spenders.
•Employer caps and defined contributions
Both Price and Ryan want to cap the amount of tax exclusions employers receive for offering health coverage. Currently, neither employers nor employees pay any taxes on health benefits received at work. Because this is essentially another form of compensation, the federal government misses out on massive tax revenues—Ryan’s report says the subsidy represents the third largest federal expenditure after Medicare and Medicaid. Both plans would limit the benefit employers can receive.
Republican proposals would also allow employers to provide employees with a “defined contribution,” or a lump sum to be spent on benefits. Currently, employers can only do this if the employee spends the money on coverage options provided by the employer. Under the Republican policies, employees could use the funds to buy employer plans or individual plans.
The Republican proposals use “continuous coverage” policies to protect those with pre-existing conditions. This requires insurers to charge everyone standard rates, regardless of how sick or healthy they are, but only if consumers retain continuous coverage. For example, a diabetic would have to go directly from the employer market to the individual market with no gap in coverage, or else face up to 150 percent the standard rate.
Price’s and Ryan’s tax credits are based on age, unlike the ACA’s, which are based on income. Price’s plan would provide $75 per month for those under 18, $100 per month for those between 18 and 25, $175 for those between 35 and 50, and $250 per month for those between 50 and Medicare eligibility. Ryan’s plan does not outline specific credit amounts.
Where they disagree:
Price’s plan provides far less for high-risk pools, which are a coverage option for those with pre-existing conditions who can’t afford individual coverage. His plan associates $3 billion for the development of state-based high-risk pools, whereas Ryan’s plan delegates $25 billion.
Age rating refers to how much more insurers can charge older consumers than younger consumers. The ACA set age rating at no more than three times younger patients. Ryan’s proposal calls that “unrealistic,” and sets age rating at five times the cost of younger patients. Price’s plan has no age rating regulation at all.
Supporters of Price’s and Ryan’s proposals say they are a move toward improved competition and less government intervention. Republicans have long criticized the Affordable Care Act as limiting choice and driving up costs, forcing insurers to cover more than consumers want and over-regulating the industry.
Many conservatives believe the proposed Republican policies will push the United States’ health system toward “consumer-driven” care, which most in the industry agree is necessary to rein in skyrocketing costs. In particular, HSAs and defined employer contributions do give consumers more control over their health care dollars, incentivizing savvier use of the system.
By cutting many of the ACA’s tax penalties and regulations, Republicans believe health coverage will become cheaper and more competitive. In Ryan’s proposal, he argues that, for example, the continuous coverage policy incentivizes good behavior—staying covered— compared to the ACA’s individual mandate and associated tax penalty, which he called “coercive.”
It is true that cutting the ACA’s essential health benefits, which require all plans to cover set standard services, will be good for some consumers. Many do not want or need, say, maternity coverage, and will almost certainly be able to find less robust, cheaper coverage that still fits their needs. For younger and healthier Americans, coverage will likely become more affordable.
But critics of Ryan and Price’s plans say that, in making health coverage cheaper for the healthy, they provide less support for the poorer, sicker patients needing the most assistance. Though many people do not want maternity coverage, certainly many do. Driving down prices for people who don’t want that coverage could make those services more expensive for those who do. Conservatives like to say consumers don’t want plans with “Washington-mandated” bells and whistles, but the reality is many people need robust—often very expensive—coverage.
Because tax credits are based on age, under Price’s plan a CEO would receive the same benefit as a fast food worker. His plan in particular is accused of having very little safety net for the poor, especially as it repeals Medicaid expansion with, currently, no replacement.
The continuous coverage proposals are often criticized as a barrier to coverage that penalizes consumers. We have a similar Medicare policy—eligible consumers must sign up for Part B by a certain date or pay a higher rate for the rest of their lives. Complications arise often—sometimes out of confusion. When the enrollee finally gets coverage, they are shocked to discover they will be paying the higher rate.
This is already a challenging consumer education issue in the Medicare world, and many expect that adding millions of individual consumers to this policy will result in sick consumers facing very expensive premiums if they find themselves uninsured.
Both plans are also targets of criticism from women’s health advocates, as repealing the ACA will likely dismantle the regulations that require insurers to cover contraception and prevent women from being charged more than men due to the higher claims expenses that insurers often expect to have when covering women.
As Larry Levitt of the Kaiser Family Foundation recently tweeted, Obamacare had winners and losers. The replacement policy will, too. Just who those winners and losers will be remains to be seen.