ACA repeal and replacement complicated by two key challenges
With President-elect Donald Trump officially taking office, Republicans are working to finally fulfill their promise to repeal the Affordable Card Act (ACA), commonly referred to as ObamaCare. However, despite the Republicans eagerness to put the ACA behind them, two key challenges make this more difficult than it initially seems.
First, there is disagreement among congressional Republicans on what will replace the ACA. On one extreme, some Republicans are not interested in selecting a replacement for the ACA when the repeal happens, if at all. However, a growing number of Republican senators, including John McCain (R-Arizona) and Susan Collins (R-Maine), would like to have a replacement ready when passing the repeal. Additionally, those more moderate Republicans are very concerned with ensuring that no one is made worse by the replacement—a difficult task for sure.
Second and most important, the underlying structure of the United State healthcare system and economy makes it challenging to craft a replacement plan that does not harm millions of Americans. The ACA was crafted to meet each of the three pillars that support our healthcare system: access, quality and affordability:
Access: Requirements preventing discrimination based on pre-existing conditions, gender and age were developed to provide all Americans with access to health insurance.
Quality: A required essential benefits package ensured that everyone purchasing health insurance would have true quality coverage, including everything from maternity care to prescription drug coverage.
Affordability: Lastly, the individual mandate, combined with premium subsidies and Medicaid expansion, attempted to make health insurance affordable.
Any quality replacement from Republicans must address each of these three pillars or face the likelihood of making millions of Americans worse off than they were under the ACA.
Combined, the problems posed by disagreements on replacement options and the difficulties of the U.S. healthcare system make the Republicans’ task an uphill battle.
Republicans’ replacement options attempt to address three pillars of the healthcare system
While many replacement ideas have been floated, components of a market-based approach to ACA replacement have been most common. To best analyze them, it makes sense to explore how they do or do not address the three pillars described above.
To solve the access challenge, Republicans frequently cite the concept of allowing people who maintain continuous health insurance coverage—not necessarily with the same insurer or plan—to purchase insurance without discrimination based on health status. Additionally, consensus on Medicaid appears to be to replace the current system with block grants to the states, allowing each to create the system that works best for their residents’ particular needs. Out of these two ideas, the continuous coverage concept has the most merit, as it could have the same result as the ACA’s anti-discrimination rules and coverage mandate. The main difference is that the Republicans would accomplish this through an incentive instead of the penalty approach for not having insurance under the ACA. The Medicaid block grants are a trickier proposition, since it is unknown whether individuals who need coverage would get it or even what that coverage would look like, when defined on a state-by-state level.
The quality component has largely been missing from the various Republican proposals. Rather than provide specific guidelines or requirements, like the ACA’s essential benefits package, the Republican idea seems to be to allow the market to define the range of options. In this model, each individual would be free to choose the package that works best for their particular needs. While this is a noble concept, it is somewhat concerning in practice: unlike most other consumer goods, health insurance is often mystifying to the general public, making it challenging for most people to even understand the benefits, let alone be confident in a purchase decision. In reality, it isn’t hard to imagine most Americans, especially those with low- and middle-incomes, buying a cheap, barebones plan that will only really help the healthiest, claim-free people. Out of the three pillars, quality seems to be the least thought-out for the new Administration.
Most of the Republican ideas do attempt to address the affordability pillar, however. The first plank is to allow health insurance to be sold across state lines. Here the hope is to create a more robust and competitive market. While allowing health insurance to be sold across state lines will likely lead to more insurer consolidation, it’s unclear if this policy change will ultimately lead to lower premiums.
Secondly, in lieu of the ACA’s subsidies, Republicans have proposed a refundable tax credit based on age that would be given to each person buying insurance (initial tax credit proposals have mostly been less generous than the ACA subsidies, however). This tax credit and the expanded use of Health Savings Accounts (HSAs) (that is, individual accounts that can use pre-tax dollars to pay for healthcare expenses) are the commonly cited components of the Republicans’ affordability plan. However, this approach only works if people are willing and able to fund their HSAs and if customers can exert their purchasing power. Given that most low- and middle-income Americans are cash strapped and rarely fund their retirement accounts, it seems unlikely that they will suddenly fund HSAs.
While the Republicans have a core set of ideas to combine with their fervor to end the ACA, it is hard to see how these ideas can form a comprehensive healthcare policy that will be equal to or better than the ACA. Therefore, it is in everyone’s interests for the Republicans to foster a robust discussion and not rush through a hasty repeal.