January 17, 2017

Private: Health Care as Political Hot Potato

Health Care Reform, Nicole Huberfeld

by Nicole Huberfeld, Ashland-Spears Distinguished Research Professor of Law, University of Kentucky

The Patient Protection and Affordable Care Act (also called Obamacare) has extended health insurance coverage to more than 20 million Americans and achieved historically low un-insurance rates, yet most do not know much about the law or why its dramatic measures were necessary. The ACA responded to a constellation of health care and health insurance failures, including that un-insurance had reached an historic high of more than 16 percent at the time of the 2008 election. Fewer and fewer employers offered health insurance as an employment benefit for more than a decade before President Obama was elected and those that did had significantly increased employee cost sharing over time. The long-standing American assumption that people who work have health insurance was no longer true.

Further, the uninsured were concentrated among the working poor, who were not offered health insurance as an employment benefit or could not afford insurance that was offered. Though slightly more than half of Americans receive health insurance as an employment benefit, that is only meaningful for people earning more than the average income of about $51,000 per year. For people earning below 400 percent of the federal poverty level ($47,250), employers are significantly less likely to offer health insurance; part-time workers are even less frequently offered health insurance.

Additionally, individual and small group health insurance markets have had such high prices as to be inaccessible. And, in every market, insurers used tools such as preexisting condition exclusions, caps on coverage and other discriminatory practices to eliminate subscribers deemed not healthy. While public financing covered the elderly in Medicare, for the poor, Medicaid has offered an incomplete safety net, only covering the “deserving poor”, which meant about 40 percent of low-income individuals. The nation’s millions of uninsured citizens sought treatment in emergency rooms, which offered a point of rescue but not a permanent source of access to care (and which was unsustainably expensive for hospitals).

The ACA responded to these and other problems by universalizing health insurance coverage, making people who were excluded both insurable and able to purchase insurance. The two key measures for achieving universal coverage were expansion of Medicaid eligibility to non-elderly childless adults and creation of health insurance exchanges that facilitate the purchase of individual or small group insurance with tax credits for insurance premiums for those earning 100-400 percent of the federal poverty level. These subsidies expanded the pool of insured subscribers, which in turn sustained private insurance markets to balance the ACA’s reforms that facilitated coverage regardless of health history or other individual characteristics. To ensure that people would not opt for coverage at the moment that they become ill, the ACA also required that individuals carry minimum essential coverage or pay a tax penalty, known as the individual mandate.

If the newly convened Congress passes the budget reconciliation bill that was just introduced, essential elements of the ACA would be repealed, though not the law in its entirety, because budget reconciliation can only involve revenue measures. Budget reconciliation could eliminate funding for Medicaid expansion, premium tax subsidies, tax penalties for the individual mandate, and tax penalties on large employers who fail to offer insurance benefits, as well as other measures such as taxes on medical devices that finance health care. This surgical repeal effort would crumble the pillars of the ACA. According to recent polls, this is exactly the opposite of what people want; they want lower out of pocket costs and are concerned about losing coverage if they earn too little in a state that has not expanded Medicaid or too much so that they cannot receive subsidies. None of these fears would be addressed by selectively repealing the funding for the ACA; in fact, these problems would be much worse.

Under budget reconciliation, some popular elements of the law would remain such as the prohibition on pre-existing conditions, but consumer protections without corresponding purchase of insurance by healthy people makes health insurance unaffordably expensive. If the individual mandate and tax subsidies for purchasing insurance simultaneously disappear, people earning below 400 percent of the FPL, who have received the greatest benefit from Medicaid expansion, subsidies and other cost-sharing relief under the ACA, would be unable to purchase insurance or otherwise pay for America’s uniquely expensive health care. Further, loss of funding for Medicaid expansion would leave both states and beneficiaries in the lurch. States have relied increasingly heavily on federal funding for medical care since the Great Depression, and governors are urging Congress to secure funding for Medicaid so that they are not stuck with millions of uninsured. These individuals will wait until their illness or injury is dire before arriving in emergency departments, sicker and more expensive to treat, just as they did before the ACA was implemented.

The bare bones ideas for replacement of the ACA show no regard for crisis that existed for middle and low income individuals before the ACA. Reliance on vehicles such as health savings accounts or tax deductions for health insurance display indifference to financial plight facing those without employer-sponsored insurance. Health insurance is expensive; plans such as Tom Price’s physician-protective “Empowering Patients First Act” top out at about $3,000 in tax credits to purchase non-employer sponsored health insurance, which is laughably inadequate given that health insurance for a family of four cost an average of $18,142 in 2016.

The ACA built on the American non-system for health care, so it is inherently imperfect. While the ACA did not produce an easily navigated system, universal access to health care through non-exclusionary insurance was a promising step toward addressing entrenched exclusion. Health insurance markets and practices were rendered more uniform and Medicaid was no longer limited to certain categories of qualifying people or illnesses. These changes enacted a new approach to American health care – universality – and that clearly has rubbed some policymakers the wrong way. But, going back to the old ways will only lead to worse individual and collective health for all Americans.