The Health Care Debate: Coverage

In the last week, a detailed picture of the Republican plan to replace the Affordable Care Act has finally become available. Health care is a hugely complicated issue that cannot possibly be done justice in one post, because costs, coverage, politics, and other aspects all demand a fairly full treatment. Instead I will be writing about it in pieces over the course of the debate. I'll start with coverage, which is the most immediately impactful area of the proposed changes.

The central goal of the ACA (colloquially, Obamacare) was to provide the entire population access to health insurance at a reasonable cost. It requires that people must buy insurance or pay a penalty, and conversely that insurance companies must accept new applicants. Before the ACA, insurance companies would frequently deny people who were already sick new insurance plans, because the company knew it would have to pay out heavily for each chronically sick person it insured. The mandates, as they have become known, solve that problem by making insurance companies take any new customers, but also providing them with enough new customers to mitigate the cost of insuring sick people.

Additionally, the ACA mandates that large businesses either provide insurance for their employees or contribute to the cost of insuring them. For those whose employers do not provide coverage, each state has had to create a marketplace with both online and physical stores, where insurance plans that met a minimum standard of coverage were sold. This gave people access to insurance information and allowed them to shop around for plans, allowed insurance companies to easily find new customers, and made it easy for the government to regulate the quality of plans being sold. Direct subsidies to mitigate the cost of insurance were provided to make sure that those not covered by Medicaid (the government-administered health insurance program for the poor) could afford private insurance, and the income threshold to qualify for Medicaid was raised by a third.

That brings us to where we are. Whatever the benefits and drawbacks of the ACA as a whole, some 20 million more people have health insurance in the United States than did seven years ago when the law was passed. From a coverage perspective, it would seem the ACA has achieved its goals.

The Republicans have stated openly that they do not intend to try to compete with the ACA in terms of numbers insured. Their plan would eliminate the state run insurance marketplaces and the mandate that people buy it, replacing the income-based subsidies for people to buy insurance with age-based ones. Insurance companies would still be unable to deny people coverage, but the new proposal would allow them to charge anyone with a lapse in coverage from the previous year 30% above the market price of their plan.

The most obvious consequence of these changes is that those who do not qualify for Medicaid under the new lower income ceiling would be less able or unable to afford insurance. This is because age rather than income determines the subsidies. A wealthier person would recieve the same amount of financial help buying a plan as a poor person of the same age. Clearly, this means that fewer people of lesser means would purchase insurance. Adding insult to injury, even the subsidies as they exist under the new law will be reduced from the ones under the ACA; meaning that even if insurance prices remain unchanged, out of pocket costs will increase.

There is a final important point to be made about this scheme. The penalties the law allows insurers to impose on those with lapsed coverage would ensure that, once uninsured, people will tend to remain uninsured. Who is most likely to decide that more expensive insurance isn't worth it? The obvious answer is healthy people. If a significant number of healthy people decide against coverage, premiums for those who have insurance will increase at accelerating rates - to make recent increases seem tame by comparison - because the companies will be paying for more medical expenses per customer.

Estimates about the fall in the number of insured Americans range from 6 million (S&P) to 24 million (the Congressional Budget Office). Should reality fall anywhere on that spectrum it will mean at best a sharp spike in insurance costs, at worst a large number of lives lost from insufficient medical care. We shouldn't belittle the issue of medical costs, or how they relate to coverage, but it is difficult to overstate the impact of declining coverage because it translates directly into a lack of proper care. On this front, therefore, the replacement bill is wholly and dangerously inadequate.