Health-care cuts in GOP tax bill will cost people and states more long-term

The Senate Republican tax bill seeks to repeal the Affordable Care Act’s individual mandate provision. The will do this by using the proceeds to partially offset over a trillion-and-a-half-dollar deficit that the bill would create.

While it sounds nearly painless that repealing this health-care provision would save taxpayers money — without the incentive from the mandate, some 13 million people, most of whom currently receive reduced-cost insurance, are expected to fail to take up that coverage, saving the government from making those coverage payments — it isn’t.

In the health insurance market, people who fail to take up coverage not only harm their own health and access to care, but they also shift costs and coverage burdens onto the rest of us who pay for health care.

{mosads}There comes a point when the pains incurred from destabilizing the health care markets outweigh the savings to the government. Repealing the individual mandate will surely lead us to that point.

Without a mandate or incentive, people who don’t buy coverage they can afford get a free ride from the rest of us in two ways. First, if they get very sick and can’t pay for care, they often get treatment anyway — shifting costs onto hospitals, state governments, and those of us who purchase health insurance. Not buying insurance is no protection against heart attacks, drug overdoses, appendicitis, car accidents, and cancers. It simply means that when catastrophe unexpectedly hits, people can’t pay the bill for the care they receive.

Before the ACA and the Great Recession, in 2006-2007, the median uninsured American family who qualified for health-care subsidies had less than $400 savings in the bank. Even higher-income uninsured families typically had below $5,000. So given that the average hospital bill faced by an uninsured patient in 2017 shakes out to $34,953 (reflecting $8778 in incurred hospital costs), families without health insurance simply aren’t prepared or able to pay most, if not all, of their unexpected hospital bills, causing those of us who do buy into health insurance to bear the costs. This is how it was before the ACA, and repealing the individual mandate will take us back to that time.

Recently released data show that, as expected, as millions gained coverage through the Affordable Care Act, the number of uninsured hospital visits drastically declined — leading to care and cost savings for Americans who already had insurance. Nationwide, there were 41 percent fewer uninsured drug overdoses, 25 percent fewer uninsured heart attacks, and over 32 percent fewer uninsured appendectomies in 2015 compared to 2013. The total percent reduction in inpatient uninsured hospitalizations across all conditions was 28 percent lower in 2015 than in 2013. Between 2013 and 2015, Arizona saw a 25 percent reduction in state uninsured hospitalizations, Nevada a 75 percent reduction, Tennessee a 17 percent drop, and West Virginia an 86 percent decline.

While hospitals and health care facilities are neighborhood lifelines, they too must pay their bills to keep the lights on. If they can’t collect payment from uninsured patients, they will have to cut back on services or seek revenue elsewhere. Whatever they do, the effects will go well beyond the individual person who failed to take responsibility for adequately insuring against the cost of unexpected illness. It could affect the community’s care.

The second way that people who turn down coverage can take advantage of the system and shift burdens to the rest of us is by waiting until they need coverage to buy it. Thanks to the Affordable Care Act, most US insurers cannot deny coverage or charge people with pre-existing conditions more than those who are healthy. As a result, healthy people “pay it forward” — they pay more than their current expected costs of care in return for a guarantee of coverage that doesn’t penalize them for a pre-existing condition when they need it in the future.

Unfortunately, when healthy people are given the choice to not buy coverage and they don’t make those forward payments, this system of mutual benefit breaks down. The immediate impact of those reductions in coverage will be to raise premiums in the individual market, particularly for those who don’t receive subsidies. Current assessments estimate that eliminating the individual mandate would raise already-high premiums by an additional 10 percent.

Recent estimates from the Commonwealth Fund show that a 60-year-old not receiving health-care subsidies would pay $1,781 more in premiums next year in Alaska, $1,469 more in Arizona, $1,371 more in Nevada, and $1,504 more in Maine if the mandate is repealed.

In the longer run, insurers may become even more reluctant to participate in the non-group market, and that may ultimately spell the end of the pre-existing condition protections — leading to ballooning premiums that will crush millions of families.

Eliminating the individual mandate may shift costs off the federal government’s ledger and help Republicans claim a lower financial burden of their tax plan. But the costs generated by people who go without insurance won’t go away — they’ll be picked up by those who continue to buy coverage, through higher premiums, more limited service, and greater uncompensated care demands.

Richard G. Frank, Ph.D., is the Margaret T. Morris Professor of Health Economics in the Department of Health Care Policy at Harvard Medical School, and Sherry Glied, Ph.D., is Dean of the Wagner School of Public Service at NYU.