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It should be abundantly clear to rational observers that, while the U.S. health care system is broken, the Republican House reform proposal – called the “American Health Care Act” (AHCA) – will make matters even worse. The general details of the legislation should now be well known: 1. repeal the Affordable Care Act’s (ACA) mandate that Americans purchase health insurance; 2. Eliminate the ACA’s health insurance exchanges and replace individual federal subsidies for those buying on state health care exchanges with health care-related tax credits; 3. Eliminate the tax increase on individuals earning more than $200,000 a year, and couples earning over $250,000, needed to pay for the health insurance exchange subsidies; 4. Empower states to allow insurers to increase their rates, denying health care to individuals with pre-existing conditions; and 5. Allow states to create high-risk pools for individuals seeking insurance who are priced out of traditional insurance markets due to pre-existing conditions.
The health care system in the U.S. is deeply dysfunctional, and the status quo set up under Obama’s ACA is unsustainable. On the one hand, the ACA’s mandate and subsidies have resulted in millions of Americans registering for care, and the number of uninsured Americans has fallen significantly, from 17.1 percent in late 2013 to 10.9 percent in early 2017. On the other hand, just because more people have health care doesn’t mean it’s affordable care. Numerous health insurers have left the federal and state insurance exchanges entirely, including Aetna, Humana, United Health, and others, because they oppose paying higher costs to insure sick Americans with pre-existing conditions.
The ACA was premised on the notion that insurers could better cover the costs of sick individuals if large numbers of healthy Americans were also forced to buy insurance on state insurance exchanges, thereby spreading the cost of caring for the sick across many policy holders. But these costs are greater than many insurers are willing to bear, and we’re now seeing a strong push back via insurance companies abandoning the exchanges entirely or radically increasing the cost of their plans on those exchanges. As the Kaiser Family Foundation estimates, the number of insurers operating in exchange markets declined in 74 percent of all states from 2015 to 2017. While an average of 6 insurers operated in each state in 2015, the number had fallen to 4 by 2017. A third of American states (17 total) now only have one or two insurers offering coverage on their exchanges, hardly enough to promote any sort of meaningful competition that might encourage rate reductions for customers. Furthermore, costs have skyrocketed for the plans that are available. Kaiser estimates that health insurance premium costs increased by more than 10 percent in two-thirds of American states from 2016 to 2017 alone. The average 40-year-old purchasing a silver insurance plan on an exchange across the 50 states saw their premiums increase by a whopping 24 percent from 2016 to 2017.
Such a massive increase in health costs is a massive red flag for consumers. Coupled with double digit increases in the cost of care each year, and over many years, it suggests that the health care system is fundamentally broken, with Americans increasingly being priced out of coverage. The reason for the recent spike in costs, and for insurers’ flight from the exchanges, should be obvious: profit motive. In a for-profit health care system, insurers strongly oppose providing affordable care to sick Americans. In a privatized health care system, corporations treat the sick as a threat to profits. The notion, embraced in the insurance industry, that companies should be able to price sick people out of the health care market is incredibly callous, pathological, and evil, at least if society’s goal is to provide for the needs of citizens. But quality coverage for the greatest number of people, including the sick, is not the goal of health care corporations. They seek to maximize profits, while minimizing health care expenses.
The ACA’s Democratic supporters naively thought they could play nice with the insurers, and that insurance companies would cover the sick (with the help of government subsidies), without gouging consumers. Obviously, they were wrong. Democrats could have introduced a system of price controls into the ACA to prevent private insurers from gouging citizens. Or they could have passed a health insurance reform with a “public option,” in which the government provides coverage to the sick and poor, independent of corporate insurers. Neither of these solutions was deemed acceptable by the Democrats. The party gained attention in late April of this year, when 104 Democrats – a majority of party members in the House – co-sponsored a universal health care bill. But majority support from the party’s rank-and-file doesn’t count for much when party leaders oppose such efforts.
The ACA was never a solution to the health care travesty afflicting Americans, and those who have experience with the law know this all too well. I was forced to purchase health insurance for my wife and two children on the Illinois insurance exchange from 2014 through 2016. At the time, I was employed as a full-time, tenured professor by a small college, where administrators pursued a scorched-earth policy against their employees, refusing to pay a cent for family health insurance. Under the Wal-Mart model of education, every penny saved is a penny earned in the minds of the neoliberal administrative class. At the time, I was nearly bankrupted by health care costs, despite Obama’s promises to provide “affordable” care for all Americans. My wife required several medical surgeries following her two miscarriages, and an additional surgery due to complications following the birth of our second son. Furthermore, my oldest son is Autistic, and was receiving expensive therapies, which meant large out-of-pocket costs and deductibles. My younger son also required expensive therapies, as he suffers from a medical condition called Apraxia – a neurological condition that delays speech-development and other motor skills. The costs for my wife and two sons on the Illinois exchange were prohibitive. Not even counting my own insurance costs, my family costs averaged between $17,000 to $20,000 a year. For a college professor making less than $65,000 a year after taxes, such costs were prohibitive.
Despite my negative experiences under the ACA, the law did get a few things right. The law expanded Medicaid, while banning insurers from denying people care due to pre-existing conditions. It also raised taxes on higher income Americans to provide insurance subsidies to working families buying insurance on the ACA exchanges. Despite the ACA’s flaws, the Republican AHCA plan is even worse. The Congressional Budget Office estimates that the bill would result in 24 million Americans losing their insurance in the face of the cutting back Medicaid eligibility, the elimination of federal insurance subsidies to individuals, the collapse of the insurance exchanges, and the re-introduction of pre-existing conditions denials.
The repeal of the ACA mandate means a significant reduction in the pool of individuals buying health insurance on the private market. Individuals within various social groups are likely to self-select out of coverage. Some examples include: poorer, young Americans who feel they are healthy enough to go without health insurance; previous Medicaid recipients who are no longer eligible for coverage; working and middle class individuals who were already struggling to pay for the exorbitant costs of health care, and are no longer required to do so; and sick individuals who will be priced out of the traditional insurance market, and unable to afford coverage in the high-risk pools. There was much talk from Republicans about coercing Americans to remain on their insurance plans, and that leaving such plans would mean their insurers would increase premiums by 30 percent if they decided to drop their plan and later re-enroll. This proposal was supposed to ensure that individuals would not simply drop their coverage once the ACA mandate was eliminated, and would remain on their insurance so that enough healthy Americans stayed in insurance pools to help pay for sicker Americans. But this proposal isn’t realistic. From the point of view of low-income individuals struggling to pay for insurance, why worry about the potential higher costs of health care that may materialize further down the road when you can’t afford the health care costs in front of you now?
Republicans seem quite disconnected from reality when it comes to the harmful effects that will flow from the AHCA. Their policies will hurt millions of people. They want to replace the current federal subsidies under the ACA, which go to insurers and allow individuals to pay lower health care premiums, with even more health care-related tax deductions for individuals who purchase private insurance. This plan will further subsidize the affluent – those who can already afford health care – while harming poorer, working Americans relying on the subsidies to afford any insurance at all. The elimination of insurance exchange subsidies for individuals will cause millions to drop out of the insurance market. What good is a tax rebate if you can’t afford the monthly premiums, out-of-pockets, and deductible costs for your insurance plan?
Republicans have also proposed creating “high-risk pools” to cover Americans with pre-existing conditions who are uninsurable in an environment that allows insurance corporations to jack up rates on the sick, effectively denying them coverage. But the funding for these pools is anemic at best, as is now clear from looking at the Republicans’ House bill. Providing a more conservative cost estimate, Larry Levitt of the Kaiser Family Foundation estimates that the high-risk pools will cost at least $25 billion a year. Other groups, such as the liberal Center for American Progress (CAP), estimate the pools may cost $33 billion a year. As CAP reports, funding the high-risk pools will cost $330 billion over 10 years, despite funding provisions under the Republican House proposal amounting to just $13 billion a year, or $130 billion over 10 years. Although Republicans added another $8 billion to cover the high-risk pools before passing the bill, this still amounts to as much as a $192 billion shortfall over a decade. In other words, available funds from the House bill will provide only 55 percent of all funds needed according to Kaiser’s more conservative estimate of the high-risk pools’ cost, and just 40 percent of the cost according to CAP’s more expansive estimate.
Are we to believe that insurance companies will simply eat the cost of hundreds of billions in health care payments to sick enrollees, in light of the federal government’s shortchanging of high-risk pools? If these pools receive only half of the funds required to provide benefits to sick Americans, why wouldn’t we assume the rest of the costs will be pushed onto consumers, especially if the AHCA legally allows insurers to do so? If sick Americans are priced out of high-risk pools that are exorbitantly expensive, then we have essentially returned to the pre-ACA status quo of denying millions care due to pre-existing conditions. As the Center for American Progress estimates, 31 million Americans are currently insured through “small-group” and “individual markets” with “about half of whom likely have at least one pre-existing health condition.” CAP projects that the high-risk pools, as currently constituted, are likely to provide care to less than 2 million people, a small fraction of the more than 15 million people with pre-existing conditions.
Insurers are already abandoning the ACA exchanges at an alarming rate, despite heavy federal subsidies for insurance buyers, and a large pool of customers to help defray the costs of caring for sick individuals. If under the best of conditions, private health insurers are unwilling to cover the (admittedly expensive) costs of the sick, what makes one think that they will be willing to do so with heavily under-funded high-risk pools with only sick people in them? The obvious answer is that insurers won’t provide affordable care through these pools. In short, the Republican plan for dealing with sick Americans is a clunker. It’s dead-on-arrival, merely reinstituting the old, pre-ACA status quo that denied millions of Americans accessible care.
There are some potential alternatives that could deal with the problems at hand, if Democrats and Republicans were willing to consider them. These include: 1. Retaining the ACA’s subsidies to individuals purchasing health insurance on an exchange, while imposing strong cost-control regulations on private insurers for the health care plans they provide, coupled with a continued prohibition on denying individuals care due to pre-existing conditions; 2. Introducing a “public option,” in which the federal government “cuts out the middleman” private insurer, and provides needed care directly to all sick and uninsured Americans; or 3. Creating a universal health care system, which eliminates the primary cause of the central problem with American health care – for-profit health insurers that are dead-set on denying affordable care to the sick and needy. If most Democrats are serious about a universal health care system, the path forward is obvious: remove the current leadership of the party, including Pelosi, Schumer, and any others who stand in the way of progressive reform. If rank-and-file Democrats are not themselves serious about implementing a universal health care system, then Americans must remove the Democratic Party itself from power, replacing it with a party committed to progressive, social democratic policies.