Pre-Game Review for House Vote on American Health Care Act

House Speaker Paul Ryan (R-WI) is poised to bring to a vote the American Health Care Act (AHCA), the Obamacare replacement plan backed by President Donald Trump. Opposing the bill are Democrats intent on preserving the Affordable Care Act (ACA), as well as conservative and libertarian Republicans critical of the bill’s similarity to Obamacare.

Here’s what ordinary Americans should know about the politics and policy soon to result in Congress’s approval or rejection of AHCA:

Politics. If they vote as a bloc, up to 40 members associated with the House Freedom Caucus could stop Ryan from getting the votes necessary to pass AHCA. A loss of 21 Republicans would kill it in the House unless enough Democrats cross over. If the bill passes the House, it may fail in the Senate, where Sen. Mike Lee (R-Utah) and Sen. Rand Paul (R-KY) oppose it. If the bill fails in either chamber, the GOP may turn to the Obamacare Replacement Act backed by Paul and the House Freedom Caucus.

Filibuster. Most libertarians and conservatives in Congress want a bill that truly repeals the Affordable Care Act (ACA) and replaces it with greater market-based reform. Passing such a bill would probably require the Senate GOP to “go nuclear,” i.e., repeal the filibuster. Most mainstream Republicans don’t want to go nuclear, so they have drafted AHCA, which retains much of the structure of Obamacare. AHCA could be passed through the House’s budget reconciliation process and is not subject to filibuster in the Senate.

Credits. AHCA would subsidize the purchase of health insurance by giving $2,000 to $4,000 tax credits to insurance buyers (up to $14,000 per family), based mostly on the buyer’s age and family size. Many Republicans, including conservatives Republicans, would say this is a necessary evil—i.e., that there’s no way the GOP can replace Obamacare without giving the people health insurance subsidies they have come to expect.

Insurance vs. Care. AHCA improves upon Obamacare in many ways, but for substantial health care reform, Congress must disband the notion that “health insurance” is “health care.” Insurance proves an efficient payment model in emergencies, but it is an inefficient payment model for routine and preventive care, which is 80 percent of all patient care. Like Obamacare, AHCA would use federal subsidies to reinforce confusion that health insurance should be the preferred means of paying for health care.

Alternatives. Unfortunately, AHCA still herds people toward health insurance instead of toward health care, and gives them tax-credit incentives to buy insurance. This ensures insurance will remain expensive, because insurers won’t need to compete with cheaper models that provide better value and patient care. Alternative models include direct primary care, health care sharing ministries, or negotiating cash discounts. (For more information, see The Heartland Institute’s “10 Health Care Reform Options for States.”)

Penalty, Pre-existing Conditions. AHCA repeals the Obamacare individual mandate and tax penalty but replaces it with a (weaker) requirement that insurers charge 30 percent more to patients who experienced a lapse in health care coverage. So, the tax penalty becomes a premium penalty. This was written into the bill because the GOP wants healthy people to buy and keep buying insurance, to help insurers afford AHCA’s continuance of Obamacare’s “guaranteed issue” mandate. Guaranteed issue prevents insurers from charging buyers more or deny them coverage for pre-existing conditions. This keeps insurance expensive.

HSAs. An AHCA amendment released this week removes a clause that would have allowed people to deposit leftover tax-credit funds (i.e., funds left over after buying health insurance) in pre-tax health savings accounts (HSAs). The removal of this clause removes a huge incentive for patients to make smart purchases of insurance and health care. Instead, the credit is now “use it or lose it,” which means patients have every incentive to buy the most expensive possible insurance plan they can with the taxpayer credit. Before, patients had an incentive to spend as little of the credit as possible, so they could put the rest in their HSAs until spending the money on actual health care (as opposed to on insurance). With the amendment, patients have an incentive to spend as much of the credit as possible on health insurance (as opposed to on care). Worse, insurers will make credit amounts the price floor, selling policies costing not less than $2,000, $3,000, or $4,000, depending on a buyer’s age.

Medicaid Cap. AHCA would cap federal Medicaid spending per enrollee. This is good, because states will have an incentive to spend wisely, knowing the gravy train will run out if they don’t. Currently, by contrast, the more a state spends on Medicaid, the more it gets from the feds. This is true of regardless of whether states expanded Medicaid under ACA.

Medicaid ‘Contraction’? AHCA would return to the pre-Obamacare federal match rate for state Medicaid spending. The match rate varies among states from 50–82 percent. Obamacare required federal taxpayers to pay 90 –100 percent of the cost of newly eligible Medicaid expansion enrollees. Under AHCA, states could still expand their Medicaid rolls to allow anyone, including the able-bodied, earning up to 138 percent of the federal poverty level to enroll. States that do so under AHCA would pay the 18–50 percent of the cost of new enrollees, compared to 0–10 percent of these costs under ACA.

Michael T. Hamilton ([email protected], @MikeFreeMarket) is a Heartland Institute research fellow and managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.