Replacement healthcare plan would cost poor and older people the most

Jessica Glenza in New York
People protest Trump administration policies that threaten the Affordable Care Act, Medicare and Medicaid on 25 January 2017 in Los Angeles, California. Photograph: David Mcnew/AFP/Getty Images

House Republicans unveiled their long-promised plan to replace the Affordable Care Act, better known as Obamacare, on Monday. And though Donald Trump promised Americans increased access and lower costs, many would in fact get the opposite.

Some of the bill’s key provisions include cuts to one of America’s largest social safety nets, Medicaid; less generous tax credits for individuals who buy insurance on the open market; and the undoing of incentives for younger Americans to buy health insurance.

To those proposals, add leeway for insurance companies to charge older Americans more, the end of taxes on pharmaceuticals and tanning beds and a 30% penalty for anyone who has a gap in insurance coverage. Many Republicans argue these proposals would help get the federal government out of the way of the market, and drive down prices by increasing competition.

What it would all mean for Americans’ pocketbooks is still coming into focus, but if the bill is passed into law, some effects are clear.

Older Americans are likely to pay more

The proposal introduced by Republicans would allow insurance companies to charge older adults five times what they charge the young. Analysts call this an “age band”. At the same time, the bill would reduce subsidies to all Americans, distributing them by age to everyone who earns less than $75,000 a year individually or $150,000 for a couple.

That may sound like a philosophical difference, until you get into the arithmetic. Young Americans would be eligible for up to $2,000 in tax credits, and older Americans would get double, topping out at $4,000. But with just twice the tax credit, and up to five times the charges from insurance companies, older adults could be left to foot the bill.

So would the poor

Republicans have long sought to upend Medicaid, the government program that provides free or low-cost healthcare to the poor. This bill would accomplish just that. Proposals in the bill would give less incentive to states to cover people by limiting the federal contribution.

The law would transform the current system from an open-ended entitlement to a per capita block grant (stick with me here!). Medicaid relies on the federal government and states splitting the bill. Currently, the federal government pays a percentage of the Medicaid tab, no matter how big or small. This allows the program to be flexible in times of economic turmoil, when more people come on to the rolls.

But Republican changes to the ACA would transform Medicaid into a system that pays states based on the number of people in the system in 2016, even if more people become eligible for Medicaid in subsequent years. Critics say that would leave states with the bill if a wave of people become newly eligible for Medicaid, such as during a recession. That could lead states to cut services, enrollment or both.

It would also roll back the ACA’s expansion of Medicaid by 2020. The ACA paid states to expand Medicaid, with the federal government picking up 90% of the bill. That led to 15 million more Americans gaining insurance, according to the Kaiser Family Foundation. Thirty-two states, including 16 with Republican governors, expanded Medicaid. Starting in 2020, the federal government will no longer pay for new people to join the expansion group.

(House speaker Paul Ryan’s home state of Wisconsin pioneered a partial Medicaid expansion in 2008 before the ACA was in place. If you live in Wisconsin, you can get “Badgercare”, which the state pays for.)

One last Medicaid provision – if you win the lottery, you can’t have it. A provision in the Republican bill bars jackpot winners from getting the public insurance program. We’re not sure how many people this applies to, but call us if you are one of them (seriously).

For people who don’t qualify for Medicaid, and don’t get insurance through their employer, individual subsidies will be smaller. One analysis by the Kaiser Family Foundation estimated that a 27-year-old earning $20,000 a year in Mobile, Alabama, would receive $4,522 in subsidies under the ACA. But the same individual would only receive $2,000 under the current Republican proposal, leaving that person to make up a $2,522 shortfall.

The unemployed could pay more, too

Republicans proposed adding a 30% surcharge in premiums to anyone who loses insurance coverage for more than two months. So, if you suddenly lost your job, and were looking for insurance on the individual marketplace, you would need to find it within two months to avoid this penalty, despite having a reduced subsidy to buy it.

Remember how we said you might pay more?

It won’t be just because the subsidies Republicans are providing are lower. The actions taken in this bill – eliminating the individual mandate and keeping insurance protections – could actually increase your insurance costs.

How? By removing the incentive for younger people to purchase insurance, as well as some of their ability to do so with smaller tax credits, Republicans abandon the Democratic ideal of covering all Americans.

Insurance works by requiring people to buy it when they’re healthy to protect them in the event that they get sick. If people only sign up for insurance when they’re sick, it’s much more expensive for everyone, not just the sick people signing up. Republicans argue their plan will increase competition, blunting the impacts that segmenting risk might have.

Here’s where we know less. Bills like this one usually receive a score from the Congressional Budget Office, essentially an assessment of its impacts and costs, which would predict effects on insurance premiums, coverage and even the federal debt. But because the proposal is so new, the CBO (and most analysts) have not scored it yet. That makes it difficult to predict how it could affect the health system.

However, when the Congressional Budget Office assessed a different Republican plan, where Republicans hoped to remove more ACA provisions including the so-called individual mandate, it predicted insurance premiums would increase by a staggering 25% in one year and that they could be expected to double in 10 years.

Speaking of years from now …

The Republicans want to delay enactment of their plan until 2020. Guess when that falls?

If you guessed after the midterm elections, you would be right.

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