The hotly-anticipated Senate Republican health care bill came out on Thursday morning. The airwaves quickly filled up with predictable talking points from both sides. But once the dust settles, it will emerge that the Senate bill will have far-reaching effects on American health care: for the better.
Substantial improvements to the House bill
In March, when House Republicans published their bill to replace Obamacare—the American Health Care Act—I described it in Forbes this way: “GOP’s Obamacare Replacement Will Make Coverage Unaffordable For Millions—Otherwise, It’s Great.” I meant it. There were great things about the House bill, in particular its far-reaching reforms of the Medicaid program.
But Paul Ryan’s bill contained a fatal flaw. Its flat tax credits, which provided identical assistance to the poor and the wealthy, would price millions of near-elderly low-income workers out of the insurance market and trap millions more in poverty.
Estimated changes in average silver premiums for 60-year-olds, net of subsidies, under the American... [+]
Fortunately, buried in the House bill was a way out of the morass. Section 202 of the bill contains a transitional schedule of tax credits that was meant to serve as a bridge between the old Obamacare system, ending in 2017, and the new Paul Ryan system, beginning in 2020.
It turns out that if you simply kept that bridge in force, and tossed overboard the Paul Ryan flat tax credit, you’d solve all of these problems with the House bill. By making that change, the near-elderly working poor would be able to afford coverage, and the poverty trap would be eliminated.
Estimated changes in average silver premiums for 60-year-olds, net of subsidies, using an... [+]
And that’s precisely what the Senate bill did! Section 102 of the Senate bill—the Better Care Reconciliation Act of 2017—closely mirrors Section 202 of the House bill, with age- and means-tested tax credits up to 350 percent of the Federal Poverty Level.
Making this change not only solves the problems I described above. It also makes it easier to reform the Medicaid program.
The centerpiece of the @FREOPP plan (https://t.co/jy8EM7Gbtf)—means-tested, age-adjusted tax credits—is in the Senate bill. This is huge.
— Avik Roy (@Avik) June 22, 2017
Real Medicaid reforms
The Senate bill includes and refines the best part of the House bill: its reforms of Medicaid, the dysfunctional government-run health care program for the poor whose enrollees have no better health outcomes than the uninsured.
Because the Senate bill’s tax credits are robustly means-tested and available to those below the poverty line, the bill is able to repeal Obamacare’s Medicaid expansion while offering higher-quality coverage to individuals who signed up for Medicaid under the expansion.
The reason that Medicaid’s health outcomes are so poor is because the outdated 1965 Medicaid law places a laundry list of constraints on states’ ability to manage their Medicaid programs. As a result, the main tool states have to keep Medicaid costs under control is to pay doctors and hospitals less and less each year for the same care. Hence, many doctors don’t take Medicaid, and Medicaid enrollees struggle to gain access to care.
The Better Care Reconciliation Act of 2017 addresses these problems in several ways.
First, the bill repeals Obamacare’s Medicaid expansion, and replaces it with tax credits so that low-income Americans can buy the coverage of their choice at an affordable price.
Second, the bill gives states a new set of tools to make their Medicaid programs. For example, under Obamacare, states are only allowed to check if someone is eligible for Medicaid once a year, even if that enrollee has moved to a different state, or becomes no longer eligible, or is no longer alive. Jonathan Ingram of the Foundation for Government Accountability, in a recent report, recommended allowing states to redetermine eligibility more frequently and thereby culling their rolls of ineligible individuals.
Third, the bill puts the legacy Medicaid program on a long-term per-capita cap tied to medical inflation through 2025, and conventional inflation (CPI-U) thereafter. This change is important, because Medicaid per-enrollee spending is growing at a slightly slower rate than Medical inflation; hence, making the program sustainable requires the use of CPI-U. The fiscal sustainability of Medicaid is essential to making sure that those who depend on the program can know it will be there for them in the future.
Innovation at the state level
A third area where the Senate bill does extremely well is in giving states the latitude to come up with new ways to serve their needy populations with better results and lower costs.
We’ve talked already about the new flexibility that states will have with their Medicaid programs. They’ll have even more flexibility to open up their private insurance markets to innovation and competition, through a new set of “Section 1332” waivers in which the validity of the waiver applications will be assumed by the federal government so long as the plan doesn’t increase federal spending.
Furthermore, the bill offers states around $100 billion in stability and innovation grants that states can use to shore up their insurance markets, by providing extra assistance to the needy or the sick.
The Senate must fix its individual mandate replacement
There’s one key flaw in the Senate bill. It had been originally reported that the bill would contain a six-month waiting period for those who did not sign up during open enrollment each winter. Such a waiting period is important to ensure that people don’t jump in and out of the insurance pool when they're sick or healthy, respectively.
But no such waiting period was included in the bill, reportedly because the Senate is still trying to work out how such a waiting period would work within Senate parliamentary rules. That will worsen the bill’s score from the Congressional Budget Office, which is already likely to claim that the bill will cover at least 18 million fewer Americans, due to the CBO’s belief that repealing the individual mandate will alone have that effect.
Addressing right-wing complaints
Some on the right are complaining that the Better Care Reconciliation Act doesn’t do enough to repeal Obamacare, echoing those on the left in 2010 who complained that Obamacare wasn’t a single-payer bill.
Full repeal was never going to be possible in a Senate where Republicans did not control 60 votes. And furthermore, we have learned that moderate Republicans in both the House and the Senate have no appetite to fully deregulate Obamacare at the federal level.
But any Republican conservative in the Senate who is thinking of voting “no” on this bill: how many times in your life will you have the opportunity to vote for a bill that fundamentally transforms two entitlement programs? How often will you get to vote for a bill that cuts spending by hundreds of billions of dollars? How often will you get a chance to make a difference for millions of your constituents who are struggling under the weight of rising premiums and exploding deductibles?
As Sen. John Cornyn (R., Tex.) put it on Thursday, “it’s time to put up or shut up.”
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DISCLOSURE: There has been some speculation on the internet as to my personal relationship to the Senate bill. I had no role in writing the bill, nor do I have any financial relationships with any governmental entity aside from paying taxes. However, I regularly speak to policymakers in Washington and elsewhere about public policy, as do all leading think tank scholars. In addition, many of the ideas I've proposed at The Apothecary and elsewhere, in particular replacing Obamacare’s Medicaid expansion and insurance exchanges with means-tested and age-adjusted tax credits, are reflected in the bill. All of the ideas expressed here and elsewhere are my own personal views on public policy, and I receive no compensation in any form that is in any way contingent on the policies I propose or recommend.
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