Donald Trump’s White House victory has once again cast the future of the Affordable Care Act into doubt. Throughout the presidential campaign, Trump repeatedly promised to “repeal and replace” the ACA, a mantra of the GOP since the controversial law was enacted in 2010. But a wholesale repeal of so-called Obamacare is highly unlikely, as doing so would require a Republican supermajority in the Senate. And despite controlling both the Senate and the House, Republicans still lack the votes needed to throw out the law altogether.
The more likely scenario is Republicans will repeal certain provisions within the law, with the biggest targets being the individual mandate, public health insurance exchanges, the so-called “Cadillac tax” on employer-sponsored plans with rich benefits and the expansion of Medicaid. But what will the Republican replacements be? The Trump camp has been short on details. The closest thing to a healthcare plan that Trump has put forward are seven bullet points calling for the sale of insurance plans across state lines, expanded use of health savings accounts, larger tax deductions for health insurance premiums, and block grants to states for Medicaid.
Absent a formal Trump policy, the best clues as to what Republican healthcare reform might look like come from House Speaker Paul Ryan, the highest-ranking House Republican and the GOP’s go-to policy wonk. Over the summer, Ryan issued a white paper that generally lays out the Republican vision for healthcare. At 37 pages, many of which are devoted to condemning the current law, the white paper is far from a detailed plan. In fact, the document carries the disclaimer that it’s intended to be “the beginning of the conversation, not the end.” Even still, it offers the best glimpse available as to what healthcare under a Trump administration might look like.
Part I: Commercial Insurance Market
Individual and Employer-Sponsored Coverage
Republicans have made no secret about their distaste for the ACA requirement that most individuals carry health insurance or face a penalty, a provision known as the individual mandate. It’s one of the cornerstones of the ACA and serves as a counterweight to other provisions in the law that prohibit insurers from denying coverage to individuals with pre-existing medical conditions, also known as guaranteed issue. Without the individual mandate, the system would be sunk by individuals who wait until they have a serious medical condition to buy insurance, or so the Obamacare logic goes.
The GOP doesn’t see it that way. Under Ryan’s plan, guaranteed issue would remain. But instead of mandating that individuals carry health insurance, Republicans would make coverage more attractive through a series of measures they argue would result in more choices, lower costs and expanded flexibility. The central premise is this: More people would purchase insurance if they could choose a plan that best fit their needs and could afford it.
Expanded use of HSAs are a key component of the Ryan plan, as are private exchanges paired with defined contributions. Under this model, employers contribute a set amount toward employees’ health benefits. If an employee chooses a plan that is more expensive, he or she pays the difference. If the plan is less expensive, the employee can apply the balance toward other healthcare-related expenses.
Like Obamacare, the Ryan plan seeks to decouple health insurance coverage from employment—a concept known as portability. But instead of offering income-based subsidies to individuals not eligible for Medicare, Medicaid or job-based coverage to help them purchase plans off public health insurance exchanges, the Ryan plan calls for a universal refundable tax credit that individuals would use to help offset the cost of purchasing a plan of their choice from the commercial market. This “portable payment” would be available at the beginning of every month and it would be adjusted by age with older individuals receiving more money than their younger counterparts.
Other key proposals of the Ryan plan include:
- Capping the pre-tax amount that individuals can exclude from their gross income for the value of their employer-sponsored health insurance. The cap would be a replacement of sorts for the Cadillac tax, which places a 40 percent excise tax on employer plans exceeding $10,200 in premiums per year for individuals and $27,500 for families. By placing a cap on the exclusion, Ryan argues, insurers would lower premiums to avoid hitting the cap, employers would be able to raise wages instead of compensating through benefits and individuals would have more take-home pay. Contributions to an HSA would not be counted toward the cap.
- Allowing small businesses and voluntary organizations such as alumni groups and trade associations to pool together and offer association health plans. Because the Ryan plan would retain the guaranteed issue provision within Obamacare, the pools would be prohibited from “cherry picking” only healthy members. They would also be prohibited from charging higher rates for sicker people except to the extent already allowed by state law. The plan also calls for creation of “individual health pools” that would allow individuals to band together and jointly negotiate with insurers on the individual market.
Part II: Government Programs
The Ryan plan rolls back the expansion of Medicaid put into motion by Obamacare and gives states two options for funding: a per capita allotment or a block grant.
- Under the per capita allotment approach, a state would draw down funding based on its federal matching rate using a formula that considers the number of enrollees in each of the four major Medicaid beneficiary categories: aged, blind and disabled, children, and adults. The amount of the allotment would be determined by how much the state’s average expenditures for beneficiaries in those categories during 2016, adjusted for inflation.
- States that opt out of the per capita allotment approach would automatically receive a block grant of federal funds to finance their Medicaid programs. The amount of the grant would be based on pre-expansion expenditures. How the funds are spent would be determined solely by the state, although they would be required to provide certain services to elderly and disabled individuals considered mandatory populations under current law.
States that have not already expanded Medicaid as of January 2016 would not be allowed to do so under the per capita allotment approach. Those states that have already expanded Medicaid would see their additional federal funding phased out starting in 2019.
Under Republican rule, Medicare would look more like Medicare Advantage, which the GOP considers to be a successful example of how free-market competition and choice can improve healthcare. The Ryan plan would repeal benchmark caps on MA plans, eliminate minimum negative payment adjustments, implement value-based insurance design throughout the program and expand the open enrollment period.
Like the ACA, the Ryan plan calls for shifting healthcare reimbursement away from fee-for-service toward fee-for-value. Under Obamacare, much of this effort is being channeled through the CMS Innovation Center, which is testing a host of new payment and service delivery models such as the Pioneer Accountable Care Organization program, the Medicare Shared Savings Program and the Bundled Payments for Care Improvement Initiative. Republicans argue these programs are “experimenting” on seniors and threaten to limit services to the sickest beneficiaries. The Ryan plan would shutter the CMS Innovation Center effective January 2020, when current funding for the center is set to expire.
Other noteworthy Medicare proposals include:
- Combining Medicare Parts A and B effective Fiscal Year 2020 and establishing a unified deductible. The plan would also implement an annual maximum out-of-pocket cap on the amount a beneficiary pays each year, as well as a 20 percent co-insurance for all Medicare services. The goal of such changes is to bring fee-for-service Medicare more closely in line with Medicare Advantage.
- Creating a Medicare Compare website that compares MA and traditional fee-for-service for each Metropolitan Statistical Area on a core set of quality measures. The website would serve as the foundation for a “competitive bidding system” that would adjust Medicare beneficiaries’ premiums based on the historical bid amount for the MA plan and the equivalent FFS “bid” amount, as well as how the MA and FFS plans in a particular MSA perform on the core quality measures. This system would replace the National Quality Strategy included in Obamacare.
- Launching a Medicare Exchange beginning in 2024 that would allow beneficiaries to choose between private MA plans and the traditional FFS Medicare program, using a “premium support payment” to subsidize the cost. The payment would be adjusted based on health status and income, with sicker and lower-income beneficiaries receiving more money and wealthier seniors picking up a greater share of premiums. Critics have called such a plan a voucher system—a label that Ryan rejects—and implementation would surely face strong Democratic opposition.
What the ACA will look like after the Republicans have had their way with the law is anybody’s guess at this early stage. Popular, less controversial provisions such as allowing children under age 26 to stay on their parents’ insurance, are likely to survive, while other provisions—some of them fundamental to making the law work—will most certainly be thrown out or rendered unrecognizable. Whether the ACA is repealed in whole or in part, the changes will not take effect overnight. If Ryan’s plan is any indication of the timeline, the most drastic changes likely wouldn’t begin until 2019.
Both Republicans and Democrats agree that the U.S. healthcare system is fundamentally broken, but the parties have radically different philosophies on how to go about repairing it. The Obamacare approach was through affordability and access. The GOP path depends on choice and competition. Who’s right? Only time will tell. But one thing is certain: There’s no going back to the way it was before.
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