Today the Congressional Budget Office (CBO) released their non-partisan analysis of the American Health Care Act, which is the Republican replacement for the Affordable Care Act. In it, they outlined the economic, budgetary, and human effects of this legislation if enacted as is, and what they said was quite startling. It basically takes apart Obamacare and then leaves the most popular parts, with some significant changes.
The first big change is the individual mandate of the Affordable Care Act, the mandate was one of the most unpopular parts Obama’s law and will be the first on the chopping block when this law goes to the floor for debate. At first glance, even by me, it seems that requiring someone to purchase health care or else they will be fined seems authoritarian and overbearing for the sake of being overbearing. But there is a good reason for it.
When sick people enter the market for health care, premiums rise. That causes healthy people, who don’t need health care as much, to leave the health care market because it’s too expensive. So now all we have buying health care is sick people, sick people who use their health care frequently and cost companies more money than healthy people. They cost everyone money, and with the healthy people out of the market, all there is is a ‘dead spiral’, which is when prices soar out of control as a result of a vast majority of sick people populating the market.
So now the costs are too much for people, and we can’t do anything about it. What the individual mandate does is it stops all of those healthy people from leaving the market, and it says to them “hey, if you don’t buy insurance you will pay a small fine”, and since now these healthy people are back in the insurance market buying coverage, they balance out the sick people and premiums go down.
But as we all know, premiums have gone up recently, something I’m sure you’ve heard Mitch McConnell talking about on Meet The Press whenever he gets the chance. That is because the individual mandate is too weak to keep the premiums down, it’s not performing as well as it is supposed to. The logical solution would be to strengthen Obamacare, which would have been the plan of Hillary Clinton.
So as a response, Republicans are saying no, you don’t need to buy coverage, and no we aren’t going to subsidize your coverage the same way Obamacare did anymore. Now, if you are sick and you want to buy health care, you can be charged a 30% premium because you are re-entering the market. I’m just going to lay it out plainly for you: That will never work. ever.
On the topic of subsidies, there are big changes to the structure of how they are given to people under this legislation. Instead of income-based subsidies that were given under Obamacare, the Republican plan uses age-based subsidies to make health care more affordable for poor people. Basically what that’s telling us is that, if you are young and poor, well too bad for you because we aren’t going to subsidize you the same because of your age as we would say a 40-year-old.
This totally takes income out of the equation, which is really the only logical driving force behind subsidies and distributes them based on how old you are, not by how much money you have in the bank. That makes no sense at all.
How subsidies are given, based on age under the new law.
- $2,000 for those under 30
- $2,500 for those between 30 and 40
- $3,000 for those between 40 and 50
- $3,500 for those between 50 and 60
- $4,000 for those over 60
See a trend?
the number under current law would rise to 21 million in 2020 and then to 24 million in 2026.
-Congressional Budget Office
At first glance, you’d think that the oldest people get the best deal under this plan. To compare, someone in their 20’s gets half as much as that of someone in their 60’s. But that is not quite the case. Under this plan, insurers would be able to, wait for it, charge the oldest Americans five times as much as the youngest ones. So yes they get more subsidies, but their premiums would probably outweigh the subsidies.
You’re both jacking up the prices and giving people less of a subsidy, which is a damaging combination
-David Certner, AARP
The subsidy plan would also hurt low-income Americans who would find their subsidies from the federal government fall substantially. Estimations by the Kaiser Family Foundation find that subsidies for Americans 60 years old would fall from 31 to 82 percent, assuming they earn $20,000.
Having said all of this about people losing coverage and premiums rising as well as subsidies falling, it seems like a pretty bad bill, right? In general, it is, it is absolutely terrible. But we are comparing a Republican law to a Democratic one, and the ideals of the parties are vastly different in this day in age. Democrats think that everyone should have health care and that it is a fundamental right, while Republicans think it is a fundamental right to be able to choose whether to have or not to have healthcare. This bill heavily reflects the philosophy of the latter. It’s not a failure to Republicans because this is not a bill to get America insured, this is a bill that takes the federal government out of health care in the way that Obamacare put the federal government in health care. The goal of this bill is not for everyone to be insured, at all. And that is what will happen. People will lose their insurance, there will be a death spiral, and Republicans will be left wondering why they put such an effort into replacing a good law instead of taking the good law that is already in place and making it better, and it does need to be made better.
Republicans need to ask themselves, what are they trying to accomplish here? It seems like they are finally in a position to keep a long-held promise, and they are just scrambling to find a solution to satisfy their constituents. The end result of that will be millions uninsured