The Impact of
the ACA and the AHCA’s
coverage provisions
Anup Malani
Overview and preview
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The impact of the AHCA depends what ACA did
The first-order effect of ACA is not to improve health (and why)
The main effect of the ACA/AHCA is to change who pays for health
ACA was not as progressive as supporters think
AHCA is not as regressive as opponents think
A (possibly) better alternative
ESI
Non-group
Medicaid
What did the ACA do?
• States may expand to 138% of FPL
($17k/indiv., $34k/family) (31 states did)
• Federal govt will pay 90%+ of expansion
• Cut DSH payments
Cost: $700b/10 years
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•
•
•
Community rating (3:1 on age)
Individual mandate
Minimum coverage and other regs
Subsidies to ensure premiums ≤ 9.5% of
AGI up to 400% FPL ($48k/indiv;
$98k/family)
Cost: $700b/10 years
• Employer mandate
• Cadillac tax after 2018
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•
•
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Til 2020: 90% match only for 3/2017 expansion states
Post 2020: Per capita funding (2016 level + CPI + 1%)
Post 2020: States can elect block grants
Repeal DSH cuts. $10b state stability fund for 5yrs
• Relax community rating (5:1 on age or more)
• Replace mandate with 30%+ premium penalty for noncontinuous coverage
• State can relax minimum coverage
• Restructure/reduce subsidies
• 2018-2019: Increase for young, reduce for old
• 2020: $2-4.5k credit/cap increasing with age
• $135b high risk stability fund
• Repeal employer mandate
• Delay Cadillac tax til 2025
ESI
Non-group
Medicaid
What does the AHCA do?
• States may expand to 138% of FPL
($17k/indiv., $34k/family) (31 states did)
• Federal govt will pay 90%+ of expansion
• Cut DSH payments
Cost: $700b/10 years
•
•
•
•
Community rating (3:1 on age)
Individual mandate
Minimum coverage and other regs
Subsidies to ensure premiums ≤ 9.5% of
AGI up to 400% FPL ($48k/indiv;
$98k/family)
Cost: $700b/10 years
• Employer mandate
• Cadillac tax after 2018
•
•
•
•
Til 2020: 90% match only for 3/2017 expansion states
Post 2020: Per capita funding (2016 level + CPI + 1%)
Post 2020: States can elect block grants
Repeal DSH cuts. $10b state stability fund for 5yrs
• Relax community rating (5:1 on age or more)
• Replace mandate with 30%+ premium penalty for noncontinuous coverage
• State can relax minimum coverage
• Restructure/reduce subsidies
• 2018-2019: Increase for young, reduce for old
• 2020: $2-4.5k credit/cap increasing with age
• $135b high risk stability fund
• Repeal employer mandate
• Delay Cadillac tax til 2025
AHCA likely won’t affect health outcomes
• Most studies show health insurance increases utilization
• But only a few studies find (small) effects on health, for narrow populations
• Card et al. (2009) find 1% drop in 7 day mortality (of baseline rate of 5%) due to
Medicare for folks at 65 who are in ED. (But covers previously insured people. And
Finkelstein & McKnight (2005) find no effect from Medicare in 1965.)
• Currie papers find effects on poor under Medicaid. (But Oregon HIE.)
• Goldman et al. (2001) find effects for HIV+; Huh & Reif (2016) for Medicare Part D.
• Better, recent studies show little first order effects on health
• RAND HIE: only for the poor, not statistically significant (Newhouse 1993)
• Oregon HIE: mainly self-reported boost in mental health (Finkelstein et al. 2012)
• Recent BRFSS study shows no improvement from ACA (Courtmanche et al. 2017)
Why doesn’t insurance improve health?
• Higher utilization, but little impact on health suggests flat of the curve
medicine
• Emergency Medical Treatment and Labor Act (EMTALA) of 1986
guaranteed credit for medical care, so sickness doesn’t affect access
• Medicare participating hospitals have to provide care to everyone regardless
of ability to pay.
• Hospital can recover from patient or write off.
• Plus access to consumer credit improved over time
So patients got absolutely necessary care even without insurance
…And the sickest were better insured before ACA
ACA reduced debt, but debt is often
passed on to hospitals, government
• Recovering from patient
sometimes leads to bankruptcy.
But that is also a mix of social
insurance (others’ interest rates
rise) and a loan (your access to
credit declines).
• Hospitals’ bad debts partly
financed by Disproportionate
Share Hospital (DSH) payments
from Medicare & Medicaid. Total
bad debt $56b, $14b after DSH
and local govt payments (Hadley
et al. 2008)
Health insurance is really about who pays
Program ($ billions)
Private
Health
SCHIP/DOD/
Insurance
Medicare
Medicaid
VA
OOP
Total
Total
1135.4
678.6
565.5
129.0
350.4
2858.9
Federal
316.0
278.2
339.3
91.6
51.4
1076.5
State
0.0
6.8
226.2
37.4
0.0
270.4
Private
819.4
393.6
0.0
0.0
299.0
1512.0
Notes: Of $316b, $268 is tax expenditure on group insurance, $48b of subsidies for exchanges
and non-group tax expenditure.
Source: 2016 data from CBO (https://www.cbo.gov/sites/ default/files/recurringdata/51298-2016-03healthinsurance.pdf); NHE 2016 projections from 2015; Hadley et al. (Health Affairs 2008) for uncompensated care.
Which also has distributive implications
Federal funding is progressive
State funding is not as progressive
Community rating
not so progressive either
Medicaid
Push people out of Medicaid
to non-group market
at top end of Medicaid income scale
Shift away
from government funding
Nongroup
Shift away from community rating
to experience rating
+ federally funded high risk pools
Shift away
from funding from the healthy
to funding from the government
ESI
Big picture: what does AHCA do?
Shift away from group-market
to non-group market
at bottom end of ESI income scale
Shift away
from funding from healthy
to funding from the government
Overall effect uncertain. Likely reduced funding from healthy and
perhaps government (overall funding declines), increased funding from sick.
Best of Both Worlds Plan (AEI 2011)
• Eliminate Medicaid, tax breaks for group market (to fund plan)
• Eliminate community rating to stabilize the insurance market and eliminate crosssubsidies from the young & healthy (who are poorer)
• Use funds to subsidize premiums for people who are both poor & sick
• Healthiest 80% of hhds: Fully subsidize a plan with no copay, deductible = FPL
• Rest: Fully subsidize a plan with no copay, deductible = FPL – 300%
• Let people use subsidies for any plan they want
• Condition premium supports on purchasing long-term insurance plan to eliminate
repricing risk (Handel, Hendel, Whinston 2015)
We estimate plan would cost no more than ACA, be more progressive.
We can also devise a plan that is equally progressive, but cost less.
This is possible because we take money from the sick rich, and give to poor sick.
END
Insurance
ACA
AHCA
Medicaid
•
Option for states to expand Medicaid to 133% of FPL
(mainly for males). (31 states have.)
Feds pay 94% of expansion til 2019, then 90% starting
from 2020.
DSH cuts.
COST: $700b/10 years.
•
Premium subsidies to ensure premiums never more than
9.5% of AGI up to 400% FPL.
Policies must be community-rated. Age-based
premiums capped at 3:1.
Policies must have 60% minimum actuarial value.
No pre-existing condition exclusions and guarantee
issue.
Individual mandate to address adverse selection. Weak
penalties.
COST: $700b/10 years.
•
Employer mandate: penalties if employer doesn’t offer
insurance and workers get subsidies on exchanges.
Cadillac tax after 2018 (weakened to 2020)
MLR must be 85%
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•
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Eliminate employer mandate
Delay Cadillac tax til 2025
MLR must be 85%
Medicare payroll tax on high earners; 3.8% tax on
unearned income for high income earners
Taxes on drug companies, insurance companies, tanning
salons
•
Repeal HI payroll tax on high earners after 2022, repeal 3.8% tax on
unearned income for high income earners immediately
Repeal taxes on drug companies, insurance companies, tanning salons
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Non-group
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Group
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Funding
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Stop high ACA federal match for states that expand, but grandfather
federal match for states that expanded as of Mar 2017.
Stop ACA 90% match for grandfathered expansion states after 2020.
Convert all states to per capita funding at (2016 levels + growth at CPI +
1%) starting in 2020
States can elect for block grants starting in 2020
Repeal DSH cuts. Add state stability fund of $10b over 5 years.
Restructure and reduce premium supports
• 2018-2019: Increase premium credits for young, reduce for old
above 150% FPL.
• 2020 on: 2000-4500 credit/person increasing with age. Cap at
$14k. Increasing at CPI + 1%.
Relax community rating from 3:1 to 5:1 premium ratio on age. States
can relax further. Establish $135b high risk stability fund.
States can relax min coverage requirements. All other regs remain.
Replace individual mandate with 30% premium penalty for noncontinuous coverage of 60 days/year.
Most had subsidized insurance before ACA
Population
under 65
(millions)
Private
employer
coverage
(millions)
Other
private
coverage
(millions)
Medicaid
(millions)
Before ACA
(2012)
266.7
151.8
11.8
After ACA
(2015)
269.4
154.7
Change
2.7
2.9
Period
Medicare
(millions)
Other public
Coverage
(millions)
Uninsured
(millions)
48.1
6.5
8.1
45.2
20.8
55.4
7.0
8.1
28.7
9
7.3
0.5
0
-16.5