One of the major hang-ups of the Senate GOP’s stalled health bill is how the legislation approaches Medicaid and insuring low-income populations. The Better Care Reconciliation Act overhauls the state-federal program so dramatically that many individuals who want insurance and otherwise might have been covered by…
One of the major hang-ups of the Senate GOP’s stalled health bill is how the legislation approaches Medicaid and insuring low-income populations. The Better Care Reconciliation Act overhauls the state-federal program so dramatically that many individuals who want insurance and otherwise might have been covered by the government would have to look to the private market. The Republican measure provides those in poverty with financial help to do this—a feature not included in Obamacare. But how useful is that assistance?
First, some housekeeping for the context of the word “cut”: The Senate bill cuts the growth of Medicaid spending. That’s not as catchy or as stark as claiming it “cuts Medicaid, ” as Democrats and m a n y m e d i a have reported. But observing that Medicaid spending still increases under the Senate legislation doesn’ t remove all doubt about how Medicaid would change. The measure shrinks projected expenditures on Medicaid by $772 billion during the next decade, according to the Congressional Budget Office. And with those savings comes smaller enrollment. Relative to current law, the CBO forecasts that 15 million fewer individuals will participate in the program by 2026.
Much of this would be attributable to how the Republican bill addresses Obamacare’s Medicaid expansion. That aspect of the law reimburses states at a higher level than the norm and makes more people eligible for coverage. The Kaiser Family Foundation puts it simply: Traditionally, “For every $2 that states pay for a Medicaid-covered service, they receive at least $1 back from the federal government, ” or the bare minimum 50 percent required by law. Expansion temporarily pumped that level as high as 100 percent, and the rate stabilizes at 90 percent long-term. Additionally, Obamacare makes almost all low-income persons up to 138 percent of the federal poverty line eligible—much more generous criteria than what have existed historically, including in the 19 states today that have not expanded Medicaid. (Because of the Supreme Court’s decision in NFIB v Sebelius, this threshold applies only in the 31 states plus the District of Columbia that voluntarily have expanded.)
The GOP legislation locks in a relatively higher income threshold for Medicaid eligibility. But over a seven-year period, it reduces the federal reimbursement rate in existing expansion states to between 50 percent and roughly 75 percent, depending on the state. This would mark a return to past practice. But it also would dissuade states from taking on additional enrollees in the future. And the measure also specifies that any state expanding in March or after of this year would not receive any enhanced matching rate. This provision, in combination with a change the bill makes to how the government calculates Medicaid’s spending growth, is what mostly accounts for the CBO’s estimate of 15 million fewer Medicaid participants.
Republicans aim to offset the consequences of these Medicaid changes by offering tax credits for private insurance to people under the poverty line, which Obamacare does not do. The current law’s credits go to people between 100 percent of the poverty limit and 400 percent of it. By contrast, the range in the GOP plan runs from 0 percent to 350 percent.
So the question then becomes: Would a specific portion of low-income people be better off obtaining coverage through Medicaid, or trying to do so through the Republican tax credit scheme? Now Medicaid is free to the end user. But it’s long been a contention of conservative thinkers that healthcare outcomes improve with private insurance rather than Medicaid. “Everybody knows that access to physicians is far poorer in the Medicaid program than it is for other programs, especially private insurance. So offering these individuals to buy private insurance, that alone has an important effect on health outcomes for this population, ” conservative health care policy advisor Avik Roy told Vox this week.
Offering such people tax credits to purchase coverage on the open market is one thing. Whether they would choose to take advantage of them is another. The key is whether they could afford to do so. (In addition to whether or not the private insurance is, in fact, superior to Medicaid.)
The CBO provides one estimate of premiums for individuals earning 75 percent of the poverty limit in 2026 (75 percent is estimated to be $11,400 in income a year) . Across all adult age groups, the yearly amount owed for a “bronze plan” after factoring in tax credits would be $300, or 2.6 percent of income. Such plans would be the new benchmark for determining the credit amount, as opposed to Obamacare’s “silver plans, ” for which insurers foot a higher percentage of the costs for covered services. The after-credit premiums for the higher-quality silver plans are projected to be much more: $1,200 for a 21-year-old, $1,700 for a 40-year-old, and $4,800 for a 64-year-old.
Opponents of the Senate healthcare bill find these numbers damning. What good is coverage for the poor if they have to foot high out-of-pocket costs and face high deductibles with the so-called bronze plans? Roy offered a rebuttal: Because the GOP bill makes it cheaper for young people to obtain coverage than Obamacare does, more of those individuals will enroll, lowering the average risk in the insurance market. Lower average risk will lead to lower average premiums—and lower deductibles—from insurers. “If the premium goes down enough, ” Roy told Vox, “the dollar value of the deductible will be lower.”
The disagreements between the Senate bill’s proponents and detractors are slivered almonds, and this is but one narrow slice. There are concerns, for instance, about how older consumers in the individual market—who stand to face the brunt of higher costs because of a tweak to an age ratio in Obamacare—could pay for insurance.
