Over the weekend a leaked copy of a draft ACA repeal bill was made public by Politico magazine. The bill draft would implement some of the general descriptions Speaker Paul Ryan outlined in a white paper the week before and like that white paper it leaves questions to be answered on how the bill will replace the ACA.
The repeal parts are simple, the individual mandate and the tax credits would be eliminated. In their place, would be simple tax credits based on age and no longer based on income. On the lower end, young people under 30 would receive a tax credit of $2000 a year to pay for insurance premiums. People 60 and older would get a $4000 tax credit. Insurance companies could charge five times as much in premiums to older patients as they do younger purchasers. There would also be a 30 percent penalty on insurance premiums insurance companies could charge if a person let their insurance coverage lapse (instead of the current individual mandate).
The proposals would allow for $100 billion in state innovation funding which presumably would be a high-risk pool fund. As noted last week here high risk pools are central to the plan. One of the most popular provisions of the ACA is that it bans insurance companies from denying health coverage because an individual has a health condition or preexisting condition. Congressional Republicans have promoted high risk pools as the solution. The 30 percent premium charge for lapsed coverage would also attempt to force people to continue to buy coverage.
High risk pools have not worked as the Commonwealth Fund has outlined . In their past analysis based on the experience of several state attempts, high risk pools can require premiums sometimes 250 percent higher than the individual insurance market and still require annual deductibles of $25,000 per year. And if the $100 billion is the solution a recent report by National Public Radio cites the Commonwealth Fund estimates that to be effective these pools would cost $178 billion a year.
The House bill would do away with the Medicaid expansion that has added 11 million Americans to the insured rolls. The bill does away with this by 2020 when the new tax credits start.
To address the complaints of the 19 states that refused to expand the Medicaid coverage as the other 31 states did, the bill envisions some short term added funding for these states likely through the Disproportionate Share Hospital or “DSH” payments. These payments are given to hospitals through Medicaid based on having a higher number of uninsured patients walking through their hospital doors. These payments have been reduced as the insurance coverage rate increased.
The bill as outlined in the white paper calls for per capita caps. A fixed payment to states based on the number of people by group/category. In short, a complex block grant.
The House legislation would pay for tax credits by taxing “cadillac plans” which is an elimination of tax deductibility of employer-provided plans above a certain level of benefits. The tax is like a provision in the ACA but a tax that Republicans have pushed to repeal.
One problem for the House plan is the Congressional Budget Office scoring. They have judged the credits as too small to help poorer people afford the insurance premiums and not all that important to affluent purchasers of insurance.