Editor’s Note: Lanhee J. Chen is the David and Diane Steffy Research Fellow at the Hoover Institution at Stanford University. He served as the policy director for Mitt Romney’s 2012 presidential campaign and was a senior aide at the US Department of Health and Human Services during the George W. Bush administration. The views expressed in this commentary are his.
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Lanhee J. Chen: Senate Republicans' biggest job will be to find ways to chip away at the estimated 23 million people who would be left uninsured
The latest Congressional Budget Office (CBO) analysis of the American Health Care Act passed by the House of Representatives suggests that Republicans in the Senate have some work to do – but should focus on distinct opportunities as well – as they seek to repeal and replace Obamacare.
Their biggest job will be to find ways to chip away at the estimated 23 million people who would be left uninsured by the AHCA, as compared to Obamacare, in 2026.
Fortunately, the CBO estimate did reveal that they have some fiscal wiggle room (over $100 billion in deficit reductions over 10 years) to help address this challenge. Specifically, senators should look to increase the financial support given to low-income Americans ages 50-64 making less than 200% of the federal poverty level to purchase private health insurance.
This group, in particular, faces significant affordability challenges in the transition from Obamacare to the AHCA.
Republican senators are also touting automatic enrollment as a means to bolster coverage. Under this proposal, people who are eligible for a tax credit to purchase health insurance under the AHCA would be automatically enrolled in a no-premium health plan that would provide coverage against catastrophic medical expenses.
Those who are auto-enrolled would, of course, be given the chance either to opt out of that coverage or eventually to select different coverage. But the basic premise of auto enrollment is to push more people toward insurance coverage, which will be especially important under the AHCA, given the penalty it imposes on those who experience lapses in their coverage.
At the same time, it’s important to note that, while important, the CBO’s analysis is not data that exists in a vacuum. From the CBO’s perspective, for example, it would be nearly impossible to substantially close the gap between those who do and don’t have coverage without an individual mandate (to which the agency attributes powers to compel coverage that are strongly contradicted by real-world data).
Moreover, previous CBO estimates have dramatically overestimated the number of Americans who would gain coverage through Obamacare’s marketplaces. As recently as March 2015, the CBO estimated that 24 million additional Americans would be covered on the law’s exchanges in January 2017; according to an analysis by the Foundation for Research on Equal Opportunity; the actual number was closer to 10 million.
Another critical issue for the Senate to address is how to extend affordable coverage to those with preexisting health conditions. Obamacare deals with this, in part, by mandating that insurers offering plans on the law’s marketplaces not account for health status in determining premiums and mandating the set of health benefits that must be offered.
But these requirements have also driven up premiums in many cases. The AHCA gives states the ability to opt-out of both of these requirements through the use of waivers. Unfortunately, for those with preexisting conditions in states that seek waivers, the CBO offers a pessimistic assessment of the AHCA’s impact on premiums and coverage.
It will be up to the Senate parliamentarian to determine whether the rules governing the budget reconciliation process, which is the legislative procedure Republicans are using to advance the AHCA, will permit the kinds of regulatory waivers found in the House-passed bill. (In order for legislative provisions to be advanced through budget reconciliation, they must have a direct impact on federal spending or revenues. It is unclear whether the waivers would have just that impact.)
If the AHCA’s waiver-style approach has to be scrapped, Republicans will be unable to pursue the kinds of regulatory reforms that will drive down health insurance premiums. By extension, Obamacare’s regulatory requirements (and broad protections for those with preexisting conditions) will largely remain intact.
However, if the Senate parliamentarian rules that states are permitted to waive out of many of Obamacare’s rules, as the AHCA currently provides, Republican negotiators should consider bolstering the financial assistance provided to those with preexisting conditions who reside in states that pursue the waiver.
The AHCA already provides up to $123 billion in benefits to help states make coverage more affordable. This will be particularly helpful for those with preexisting conditions in states that waive Obamacare’s so-called community rating requirement, which essentially prohibits insurers from pricing plans based on an insured person’s health risk.
The House-passed bill also includes an additional $8 billion in targeted funding to states that waive this requirement. The law also separately allocates $15 billion in funding to states to help offset the cost of prenatal, mental health, and addiction recovery services. This is particularly relevant in states that choose to waive Obamacare’s essential health benefits requirement. Senators should use the fiscal cushion highlighted by the CBO score to spend additional dollars to help deal with these specific issues and, in particular, bring down health costs for those with preexisting conditions who live in waiver states.
The debate over health reform still has many twists and turns ahead. Senate Majority Leader Mitch McConnell will have the daunting task of coalescing his conference around some set of reforms that can make it back through the House and onto President Donald Trump’s desk.
The CBO report highlights concerns around coverage – and, for some, cost – that Republicans will need to address if their seven-year quest to repeal and replace Obamacare is to end well.