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As Republicans put repeal-and-replace on hold, what would actually fix the Affordable Care Act?

Both parties acknowledge that Obamacare has problems.

Senate Majority Leader Mitch McConnell announced a delay in the vote on the Senate GOP’s bill to alter the Affordable Care Act after support for the bill faltered.
REUTERS/Aaron Bernstein

The news for Republicans’ plans to repeal and replace the Affordable Care Act have not been great: the past few months have seen stories detailing GOP infighting over policy, reports of bills negotiated and written behind closed doors, budget analysis projecting that these plans would leave millions and millions of people without insurance coverage.

The news got so bad, in fact, that on Tuesday, Senate Republicans delayed their health care bill from an expected floor vote this week.

Democrats, naturally, have pounced on all this: unanimously against the GOP’s designs on health care, the opposition party has described them in the harshest, starkest terms available. Rep. Keith Ellison said that some people will pay for the GOP’s bill with their lives; Sen. Elizabeth Warren tweeted that the bill’s tax cuts were “blood money” that pays for tax cuts “with American lives.”

Instead of scrapping Obamacare altogether, Democrats have long called on Republicans to work with them to improve the law. But Republicans have scoffed at that, arguing that Obamacare is broken, in an irreversible “death spiral,” and the only cure is to repeal it and start over. In recent years, insurers have fled the ACA’s marketplaces for insurance, leaving those in some states with few options to obtain coverage. Other states have seen significant increases in insurance premiums.

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Though Democrats reject Republicans’ apocalyptic vocabulary — collapse, death spiral, crumbling — they acknowledge that there are significant problems with Obamacare; members of both parties say that the cost to obtain coverage is far too high, and that the economics of the insurance marketplaces aren’t working.

So, setting political realities aside, what could be done to fix the law?

The ‘death spiral’

The causes of the so-called death spiral are debated, but there’s agreement that a problematic sequence of events have happened: because insurers can’t charge sick people more for coverage under the ACA and have to provide more benefits, they have lost money in the first years of the law, as expected.

Government measures to offset insurers’ losses have been inadequate and been blocked: in 2015, Florida Sen. Marco Rubio led a group of Senate Republicans in denying funding for measures designed to offset the losses insurers were expected to sustain in the first decade of Obamacare. These were called “risk corridor payments,” meant to be made to insurance companies annually. Rubio in the GOP compared them to a slush fund or bailout for insurance companies. With insurers on the hook for a much more significant chunk of money than expected, however, costs for consumers went up.

Rising premiums drove away the healthier, younger people who reasoned paying the fine for not having insurance was less costly than paying for insurance, which increased even further the cost of insuring the remaining sicker patients.

This bad economic proposition has forced insurers to exit state markets where they were losing money. For example, this year, three insurance companies announced or suggested that they would opt out of providing coverage in Iowa, leaving over 50,000 enrollees with no insurance option next year, and all residents with no avenue to purchase individual coverage in the Obamacare marketplace. People in 49 U.S. counties have no insurance options on the individual marketplace; about a quarter of all counties have just one insurer on the market.

In Minnesota, the insurance marketplace experienced the fourth-highest increase in average premium last year; the legislature approved in January a $330 million package to support people coping with soaring health care costs.

The GOP’s plans

When it comes to the matter of actually agreeing on a fix to halt Obamacare’s “death spiral,” the two parties have found little common ground.

The plans that congressional Republicans put forth have sought to provide relief for people getting hit with serious premium increases. When lawmakers who supported the House’s bill, the American Health Care Act, defend it, they often bring up constituents suffering from skyrocketing premiums under the ACA.

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The Senate’s plan extends for two years subsidies to reduce peoples’ out-of-pocket costs for insurance, but both chambers’ bills aim to operate fully on tax credits, replacing the ACA’s mix of tax credits and subsidies to help people purchase insurance. The ACA’s measures to reduce out-of-pocket costs took into account a person’s age, income, and cost of insurance in their area, while the AHCA’s tax credits only take into account age, and the Senate’s bill considers age and income. (Important to note: the Senate plan, which was withdrawn as proposed, may change in the coming days.)

Beyond that, both House and Senate bills loosen up regulations that would allow people to purchase cheaper plans, though some analysis suggests that these subsidies may fall short, while out-of-pocket costs and deductibles would simply increase as a result. Premium prices vary widely by age and location, but broadly, older Americans are projected to see higher payments than younger people.

Importantly, the Republican plans would do away with Obamacare’s individual mandate; the House replaces it with a one-year 30 percent tax on premiums if people let their coverage lapse, while the Senate would make people wait six months to obtain coverage if their coverage lapses.

Insurers are concerned that the GOP’s plans do not have strong enough incentives to spur healthy people to get and keep coverage, and that the plans do not have enough resources to keep insurers in high-risk, high-cost state markets.

But Republicans maintain that their proposals will make the markets healthier. Second District GOP Rep. Jason Lewis maintained Republicans are, in fact, fixing the ACA.

“We’re going back even further than the ACA, since there were problems in the markets that predate the ACA,” Lewis said in a statement. “But the real issue here is the death spiral in the insurance markets, which the ACA created, and the Democrats have offered no real solutions for.”

Democrats: get more people in the market

Democrats don’t dispute that people are paying more for health insurance and that the exchanges are growing increasingly unworkable. Most admit that if no changes are made, the system could fail. But they maintain that those changes should happen within the framework the ACA established, and with most planks of the law intact.

As Senate Minority Leader Chuck Schumer said this week, Democrats never argued Obamacare was perfect. But a common refrain you hear from Democrats these days — one that has endured for the past few years — is that the ACA was not intended as a complete legislative product: the law’s architects fully anticipated that Congress would move to amend and improve the law over time.

Rep. Keith Ellison told MinnPost “there’s never been a piece of legislation, not one ever, that has not needed to be reformed and improved. That goes without saying.”

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Republicans were not interested: when they took control of the House of Representatives in 2011, they made clear their only goal was killing the health care law. Democrats point to the example of Rubio and the risk corridors as a sign of their intent to undermine the law’s implementation if it couldn’t be repealed outright.

Sen. Al Franken told MinnPost that effort sabotaged Obamacare. “Getting rid of the risk corridors, that drove out people like Blue Cross Blue Shield out of the main market in the exchanges. Because we have less competition, you have less choice and higher prices,” he said.

To most Democrats, changes to the insurance exchanges could make the ACA much more successful and end the death spiral. “There are a lot of things that are going right with the ACA,” Ellison said. “I don’t want to get into a negative thing… the bill is working. But we do need to work on the individual exchange market.”

Some argue that the government should take stronger action to shore up the insurance marketplaces, largely by mitigating insurers’ financial risks — keeping them happy enough to remain in the marketplace, preventing situations like Iowa’s from occurring.

Options include increasing subsidies for individuals to buy plans, or granting insurance companies additional, direct subsidies or increasing existing subsidies — potentially through re-establishing risk corridors — to deal with the costs of insuring high-risk patients. (The House’s AHCA did include $8 billion for states to fund coverage for high-risk patients, which Democrats said was inadequate.)

First District Rep. Tim Walz said he doesn’t want to place the failings of the individual marketplaces on the risk corridors, but said it’s an important part of the puzzle. “I’d like to see what that would look like if [the risk corridor] was fully functioning,” he said.

Besides pumping more money into the insurance markets for both insurers and consumers, those on the left also favor incentivizing younger, healthier people to participate in the exchanges, which would bring down costs. Some experts have suggested adjusting the penalties people pay if they don’t have coverage — the goal being to ensure that as many healthy people as possible participate in the exchanges. (Under the ACA, adults without insurance have to pay a $695 annual fine.)

Wisconsin health care executive John S. Toussaint, writing in Harvard Business Review, suggests making the penalty equal to the cost of the cheapest insurance plan on the market, and making it mandatory for people to stay in the pool for at least one year.

John Cassidy, in the New Yorker, suggests another approach: “drastically” raising the fine for not having insurance, enough so that remaining covered even with premium payments would be less expensive than opting out and paying the fine.

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Those on the right are skeptical of these measures. “Both sides seem concerned that people are waiting until they’re sick to buy insurance,” said Lewis in a statement. “While Democrats prefer a federal mandate, Republicans prefer market incentives resulting from lower premiums.”

The big goal for many Democrats, particularly progressives, is the establishment of a public option — a government-operated health insurance plan that would compete with private ones. (After much debate, a public option was excluded from Obamacare when the law was being considered.)

Proponents say a public option would be modeled on Medicare, and provide those in some areas who are now without insurance options, or left with few, with a viable alternative. Cheaper costs on the public option, the argument goes, would spur insurers to lower their prices to become more competitive.

Franken said a public option would be a boost to the entire system. “A lot of us in the Democratic party want to create a public option, which gives everyone in the country the ability, especially in those countries that have very little competition, to have someplace to go.”

Room for compromise?

Few of these Democratic ideas for shoring up the Affordable Care Act have much chance of going anywhere in the current Republican-controlled Congress. But there are a few areas where Democrats and Republicans could plausibly work together to make improvements to the health care system — some of which could occur regardless of what happens to Obamacare.

One area is the rising cost of prescription drugs. According to a Johns Hopkins University estimate, Americans spent $425 billion on prescription drugs last year, a full 10 percent of all health care spending. It is now the fastest-growing share of medical costs.

But the ACA largely left pharmaceuticals alone, even as they eat up more of patients’ cash. In the Senate, both Franken and Sen. Amy Klobuchar have advanced measures to lower the cost of pharmaceuticals. Klobuchar has sponsored legislation with Arizona Sen. John McCain to allow the importation of cheaper prescription drugs from Canada, for example.

There is also broad Democratic support to allow the government’s Center for Medicare and Medicaid to negotiate prescription drug prices for all Medicare patients. (Klobuchar introduced a bill on this; it has 11 co-sponsors, including Franken, but no Republicans.)

But Democrats expressed disappointment that the GOP’s legislation as constructed contains few of their ideas on how to improve health care. The House and Senate’s bills were crafted by a small group of Republicans, and contain no Democratic input.

Those on the right say that the GOP’s bill has more in common with Democratic proposals than most might realize. In a buzzed-about op-ed for the New York Times, conservative analyst Avik Roy argues that the Senate GOP plan borrows several Democratic policy ideas, such as linking per-person Medicaid spending to medical inflation costs, which Roy says is identical to a proposal pushed by former president Bill Clinton.

But Democrats aren’t buying the notion that there’s anything for them to cheer in the GOP plan. Walz — who caught some fire from the right for criticizing Obamacare harshly last week — says “I wish they’d come up with a bill that’d work, and I’d support it… . They’re going to have to fail miserably on this and then come back.”

Democrats say they stand ready to help Republicans improve the system if or when the GOP does come back. If the Senate falls short of the 51 votes it needs to pass its bill, they might be forced to go to the table with Democrats: Majority Leader Mitch McConnell is warning his senators that this will happen if they do not pass a bill.

Franken was not surprised that McConnell moved to pull the bill, which he said was deeply unpopular. “I would take Mitch’s word there,” he said. “If they fail, I think they’ll come to the table.”