In 2009, President Obama signed into law his signature health care reform, the Affordable Care Act (ACA), which has since taken center stage in debates over health policy and the future of American medicine. The Republican Party, following through on their 2016 election promise to repeal and replace the ACA, drafted the American Health Care Act (AHCA), which passed the House and was revised in the Senate to become the Better Care Reconciliation Act (BCRA). Majorities in both chambers must approve one of the Republican proposals (or something in-between) before it arrives on President Trump’s desk.
Below, our health policy student-leaders Aishwarya Rajagopalan and Adam Barsouk dissect the major policy changes of the ACA and the AHCA, offering their perspectives on the state of American health care. The BCRA mirrors many of the AHCA’s provisions, and therefore will not be mentioned separately unless necessary.
On Preexisting Conditions:
Aishwarya Rajagopalan: The mandate of the Affordable Care Act stated that new insurance plans on the marketplace could no longer deny coverage on the basis of preexisting conditions, ranging from childbirth to cancer. Furthermore, patients could not be charged more for their treatments and could not be denied essential benefits. This was lauded by public health officials because it reduced discrimination on the basis of health status. While this did not apply to grandfathered plans or plans established before the passage of the ACA, it nonetheless provided a theoretical framework for health care equity. Prior to the passage of the ACA, 43 out of 50 states allowed charging higher premiums to people with so-called preexisting conditions. Its intent was to encourage cost sharing commensurate with one’s usage of the health care system. Critics argued that by eliminating preexisting condition denials, the ACA discouraged healthy people from participating in the insurance market because of increases in the price of their premiums to share costs evenly.
The AHCA eliminates the mandate preventing insurance companies from denying care on the basis of preexisting conditions because it does not necessarily support the argument of insurance. What does this mean? Insurance is meant for risk to be shared across the pool of all participants. If the cost increases for individuals who are not availing themselves of the services, then they are disincentivized from participating in the system. Therefore, the AHCA removes this, and the burden of increased costs falls largely on those who have conditions ranging from asthma to childbirth. The average increase for a patient with asthma has been estimated to be about $4000 per year, which can be crippling for families. The burden of asthma, in particular, is heavier in lower income and minority groups. Furthermore, reinstituting lifetime caps on health care usage can be devastating for a person with a diagnosis such as cancer. Many chemotherapy agents and experimental agents can cost hundreds of thousands of dollars for curative treatment.
Lastly, it is important to keep in mind that the AHCA’s changes in preexisting conditions and the like would primarily apply to individuals who participate in the marketplace for individual care. Those seeking insurance through their employer or other means would likely not experience immediate effects of these changes.
Adam Barsouk: The ACA’s most widely celebrated achievement was guaranteeing insurance to millions who previously had been denied coverage due to a preexisting condition. While the concept may make for a good talking point, in reality, it undermines the entire insurance business model. The preexisting condition clause created an illogical consumer incentive to wait to buy health insurance until it became necessary. Although Democrats paid the political price for the ACA’s shortcomings, the Supreme Court had relegated the penalty for going without insurance to a small income tax, believing that a more forceful insurance mandate would be unconstitutional because it would constitute the government compelling participation in a market.
The disastrous results were seen right away. The patient population enrolled through the ACA marketplace was far sicker than expected, forcing insurers to pull out of markets across the country or raise premiums. In Iowa, the last remaining ACA insurer is considering leaving because of a single patient who cost upwards of a million dollars in treatments a month, whom they now cannot legally refuse.
The AHCA takes a step towards addressing voluntary lapses in coverage by allowing insurers to charge a 30% surcharge on a year’s premiums (which is preferable, for many, to that money lining Uncle Sam’s pockets) and gives insurance companies more liberty in varying rates depending on how well a consumer maintains their health (studies show that over 50% of one’s health outcomes can be attributed to environmental factors). On the flip side, such penalties could simply cause more people, especially the healthy, to forgo health insurance altogether. The BCRA aims to address this concern, while still incentivizing continuous coverage, by requiring a six month waiting period for those with a 63-day lapse in coverage. Health legislators must learn from the car insurance industry, which rewards safe drivers and mandates anyone who drives to own insurance, thereby eliminating the notion of “pre-existing conditions” entirely. As for its constitutionality, unless a person relinquishes their right to seek help in an emergency room when they get sick, I think it’s safe to say that everyone does at some point participate in the health care market, and therefore can legally be required to purchase insurance.
AR: Medicaid Expansion is intended to increase access to health care among vulnerable populations, in particular those who not only do not receive insurance to their employers, but also may not be able to afford insurance through the individual marketplace. Per the ACA, Medicaid expansion has significantly decreased uninsured rates in participating states and has contributed to increased rates of use of behavioral health services. This is critical because those of lower socioeconomic status are disproportionately more likely to have severe mental illnesses and require access to health care, such as that supplied by Medicaid. Many studies have also found an overall decrease in inability to pay medical bills with expansion of Medicaid. There are, however, a number of drawbacks to Medicaid expansion, particularly for physicians. The payment and reimbursement structure are unfavorable, especially for specialists, which means that Medicaid can limit a patient’s options in the insurance market. At the same time, little has been done to increase the flow of residency trained physicians who can meet the rise in newly insured patients.
AB: The Medicaid expansion under the ACA is a perfect example of why having insurance is not equivalent to receiving health care. When Obama entitled Medicaid to anyone within 133% of the poverty line, he hammered the final nail in Medicaid’s already well-furnished coffin. The stretched-thin physician reimbursement rates, combined with an incredibly sick and demanding patient population, has led over half of US physicians to refuse Medicaid patients entirely. One study even found that those who have Medicaid actually fare equally or worse than those who don’t have insurance at all.
The AHCA will shift Medicaid from an entitlement program to a block grant, which means each state will be free to experiment with its own implementation within certain federal limits. I believe that reducing the number of people on Medicaid, perhaps by compelling recipients to actively seek work, and mandating those on government assistance to maintain their health by restricting food stamp purchases and requiring checkups and exercise, is the only chance at saving our floundering social safety net.
On Mandated Coverage:
AR: The term “essential benefits” refers to the minimum services each plan is expected to cover. Under the ACA, essential benefits include ten key domains: pregnancy, childbirth, mental health care, ambulatory outpatient services, hospitalization, prescriptions, rehabilitation programs, laboratory services and pediatric complete benefits including vision and dental insurance. Vision and dental insurance are not essential benefits for adults. While essential benefits strive to ensure that all Americans with insurance receive a basic amount of care, critics emphasize the injustice of others paying for care they will never receive (i.e. men paying for prenatal care). This is a point of contention because it potentially continues to drive up costs among individuals who do not use the service(s) in question. At the same time, others find it reassuring that ten essential benefits would be covered so that they know their health care is being provided at some minimal appropriate standard.
AB: The ACA mandated all insurers to cover a gruelingly long list of procedures and pharmaceuticals for all consumers, from mammograms and neonatal care to the controversial contraceptives. This government overreach drove health costs up by redistributing from the young and healthy, who require relatively few services, to the sick or pregnant, who use up a majority of an insurer’s funds. Those who make more expensive lifestyle choices, by failing to maintain their health or choosing to become pregnant, should not burden everyone else to subsidize them.
The AHCA eases certain requirements, but it goes nowhere near pre-Obamacare levels, and thus is likely to result in political disaster for the Republicans. History shows it is always easier to dole out benefits than take them away, and societal redistribution cements the power a government has over the pockets and minds of its citizenry. None of the special interests in health care are particularly keen on relinquishing the control they now have thanks to the ACA. Moreover, certain AHCA cost-cutting reforms may actually prove counterproductive in the long term, e.g. making contraceptives less accessible will increase the rate of even costlier abortions.
In an ideal world, consumers would have complete choice in how comprehensive they want their insurance coverage to be. In fact, the more services that consumers have to pay for out of pocket, the cheaper medical services would become, because patients would become price-sensitive and force physicians, hospitals and pharmaceuticals to compete for business.
A genuinely valuable government policy would help consumers hold their insurers accountable for coverage denials that constitute a breach of contract. There is an epidemic today of insurances refusing to cover superior, FDA approved medications, instead of compelling patients to use cheaper alternatives in order to cut their own costs.
AB: Obamacare exchanges increased taxes and took money out of the economy in order to heavily subsidize health insurance for low to middle-income Americans. The AHCA intends to keep many of these subsidies and shift the bulk of the benefits to older people, regardless of income. The BRCA, meanwhile, matches the ACA in its income-based distribution. The concept of subsidies, regardless of who receives them, is economically fraught because it incentivizes insurers to charge more, knowing that with government assistance, the consumer is less likely to “feel the difference.” A classic example of this phenomenon can be observed in college tuition, which has grown at an even higher pace than health insurance because government grants, loans, and scholarships have shielded families from the price tag cost. In other words, there is a vicious cycle where the more the government subsidizes, the more insurance will cost.
On Insurance Premiums:
AB: When the ACA dumped millions of literal “million dollar patients” onto insurers, coupled with introducing requirements that insurers cover a plethora of unnecessary treatments, it subjected the rest of us to ever-inflating premiums. Since 2013, insurance premiums have more than doubled, with this past year seeing a growth of 24%.
The AHCA, which promises as its hallmark to reduce premiums, is in fact meant to be passed as a three-stage plan, but seeing as the other two vital stages need Democratic votes to pass the Senate, it is unlikely they’ll ever get passed. And even if it succeeds at easing regulations and slightly lowers premiums (as the latest CBO report suggested), it may be too little too late.
As medical research yields ever more expensive innovations, insurance prices will inevitably follow. The AHCA will fail to deliver on its promises for the same reasons the ACA failed, and the American people will demand a radical revamp of health care, most likely in the direction of a European single-payer system. This will control costs but stall medical innovation and quality, creating a public second-tier system for everyone, and a private first-tier system for the very rich (similar to that of Germany). The American gold standard of physician accountability and equally superior specialist care for everyone will become a thing of the past.
On the Big Picture:
AR: It appears that the fundamental question facing health care is whether access to quality health care is a human right or if it is a privilege. There is no correct or incorrect way to view this question.
AB: Republicans may still win the battle over the AHCA or BRCA, but the Democrats have won the war over the future of American health care. They have expanded benefits and coverage guarantees to a level that Republicans can no longer undo without facing serious political backlash. Such “luxuries” may have won the Democrats a strong political following, but they will cost the American public dearly. As Margaret Thatcher once keenly stated, “the problem with socialism is that you eventually run out of other people’s money.” Whatever current proposal gets implemented — whether it be the ACA, AHCA or BRCA — is likely to collapse under its own weight and eventually lead to a single-payer system in the US.
Editor’s note: The opinions expressed in this article reflect those of the authors and do not necessarily reflect those of in-Training or its Editorial Board.