By Lillian Chen and Jonathan Palisoc
It is no secret that Congress is planning to repeal the Affordable Care Act (ACA)—also commonly known as “Obamacare”—with last week’s passage of a budget resolution setting the stage for the defunding of the ACA through a simple majority. However, many questions remain as to the particular pathway through which the ACA will be unraveled. A primary source of uncertainty is the transition timeline. Lawmakers speculate that the repeal, or at least certain elements, may not come into effect until anywhere from six months to three years, though insurance experts estimate that two to five years may be a more realistic estimate to allow markets to adjust.
Meanwhile, lawmakers have yet to create a specific replacement plan. Currently, the most concrete ideas have been outlined in Speaker Paul Ryan’s A Better Way white paper. It preserves some key pieces of the ACA, including allowing young adults to keep their parent’s insurance until they’re 26 years old and barring the exclusion of those with pre-existing conditions from coverage. Primary differences from the ACA, on the other hand, include elimination of the individual mandate and federal subsidies. Instead, Ryan proposes providing uninsured people with age-based tax credits so they are able to afford insurance on the private market and expanding health savings accounts for people to save up money to pay for care when they need it. He also proposes to build state-based high-risk pools for those that have pre-existing conditions and can’t afford coverage. The rationale behind such strategies is that people can shop around for better quality and price, making coverage more competitive and thus cheaper. However, critics argue that poorer, sicker patients—arguably those who need insurance the most—are more vulnerable under this plan. Furthermore, the CBO estimates that repealing the ACA could increase the deficit by as much as over $350 billion over 10 years. Representative Tom Price is President-Elect Trump’s choice to head up the Department of Health and Human Services, which currently oversees the administration of the ACA. An outspoken opponent of the ACA, Price has introduced his own legislation, known as the Empowering Patients First Act, to defund it in the four most recent Congressional sessions. Ryan’s plan was based on this piece of legislation, resulting in many similarities between the two.
As the ACA becomes dismantled, it is unclear if and how insurance markets will maintain stability. Legislators have not yet determined if and how they will support insurers during this transition. This comes on the heels of over 6 million new enrollees since November, despite an average 25% increase in ACA premiums for 2017. Without younger, healthier individuals signed up for coverage, as sought through the individual mandate, as well as having more people covered, as sought through the federal subsidies and Medicaid expansion, the individual insurance markets collapse. However, these are the very things conservative lawmakers are seeking to repeal. The individual mandate, in particular, is very unpopular; almost two-thirds of people view the mandate unfavorably. The New York Times created an interactive tool that outlines how the intricacy of the ACA makes it difficult to repeal.
Finally, the election has created a great deal of upheaval in health policy not only at the federal level, but also at the state level. In California, passage of Propositions 55 (high-income earners tax extension) and 56 (increased tobacco and e-cigarette tax) will generate up to 3 billion each year for Medi-Cal, the state’s Medicaid program, while Proposition 52 (hospital fee changes) is expected to save up to 1 billion in state dollars. Proposition 61, a widely publicized measure that aimed to reduce the cost of prescription drugs by tying it to prices paid by the VA, failed to pass. ACA defenders have also pointed to Covered California as the shining example of a successful state marketplace, with insurance prices, premium growth, and number of plan participants all being significantly better than the national average.
However, the Medicaid program has been under scrutiny, with conservative lawmakers seeking to bring it under greater fiscal discipline. Plans to turn it into a block grant program or place per capita spending limits, as well as rollback of the coverage expansion, are all on the table. These types of potential restructuring proposals have faced significant pushback from those who argue that this would limit both funding and flexibility of states to cover and deliver innovative care to vulnerable populations. Thus, while new funds for Medi-Cal is promising news for beneficiaries and advocates, decisions at the federal level may curb progress and leave behind a significant funding gap to care for those under Medi-Cal, especially the almost 3.4 million new enrollees from the Medicaid expansion.
Lillian Chen is a Master of Public Policy candidate at the Goldman School of Public Policy and a Master of Public Health Candidate at the School of Public Health. Before coming to GSPP she worked on healthcare policy at the California Senate Office of Research and California Legislative Analyst’s Office.
Jonathan Palisoc is a Master of Public Policy candidate at the Goldman School of Public Policy and former analyst at the California Department of Health Care Services