2017-05-19 / View From Here


The new health care bill

I'm not sure it's worth commenting at length on the latest Washington flap, the firing of FBI director James Comey. If it turns out that President Trump was personally involved in election-related collusion with the Russians, something I doubt happened, he will have far bigger problems than his somewhat maladroit handling of Mr. Comey. If he wasn't involved, there isn't much here. It wasn't long ago that Democrats were saying they lacked confidence in Mr. Comey. And, yes, there are enough investigations without a special prosecutor that any wrongdoing by Mr. Trump will be uncovered.

This piece will instead discuss the American Health Care Reform Act (ACHA), the Republican vehicle recently passed in the House to repeal and replace the Affordable Care Act, also known as Obamacare. Health care matters considerably to average Americans, and Congressional Republicans need to tread very carefully here. A bill that is perceived as unfair or excessively harsh could lose them their House majority in 2018.

In general terms, the GOP bill eliminates both the individual mandate to purchase health insurance and the employer mandate to provide a plan. In lieu of the individual mandate, a 30% surcharge is imposed on coverage to previously uninsured individuals. The minimum actuarial standards for employer plans are ended. An age weighted system of credits for health insurance is provided, with higher income limits than under Obamacare but smaller credit amounts. Individuals are encouraged to provide for their own care through expansion of flexible spending and health savings accounts. The maximum differential for premiums between the young and the pre-Medicare older individuals (for example, age 64) is increased from 3 times to 5 times. Federal subsidies to states for Medicaid are subject to a per person cap.

By far the most overwrought criticism of the AHCA relates to preexisting conditions. Under some circumstances, a state can elect to permit waivers of community rating in individual policies, which in effect would allow medical plans to price premiums on the basis of medical history. States that do this would have to establish high risk pools and the legislation provides for subsidies for these pools.

As National Review's Rich Lowry points out, the effect of this provision is extremely limited. It does not apply to anyone covered under an employer plan, nor to anyone covered by Medicare or Medicaid, nor to anyone covered in the individual market with a coverage gap of less than 63 days, nor to a resident of a state that has not requested a waiver. And, as noted, there is a fund established to ameliorate the effect of this provision.

Beyond the overwrought rhetoric about preexisting conditions, the AHCA attempts to address real shortcomings of Obamacare, and not just the increased taxes and coercive nature of the individual and employer mandates, and not even the new taxes it imposes.

Basically the Obamacare system raised premiums for many people, particularly in the individual markets, to unaffordable, or at least excessively high, levels by requiring younger and healthier participants to subsidize high risk individuals. The result is a vicious cycle under which many healthy participants opt out and in effect take their chances. This is already happening in a number of states where insurers are pulling out of the individual market or raising premiums sharply, which will further deplete coverage of healthy participants. The only real response would be to keep increasing subsidies to insurance companies, which creates an unchecked entitlement and likely a call for a single payer system, also known as socialized medicine.

The AHCA will be modified by the Senate. On the political side, its viability may depend on lowering premiums for many people, and soon. On a policy side, there need to be assurances that credits are structured so that large numbers of people will not lose reasonable levels of coverage. On the whole, the AHCA is a work in progress, but its provisions do address some important issues.

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