ObamaCare replacement critics miss how it is actually a good idea

Since the 2016 election, Democrats have been united in opposing anything proposed by Republicans. Hence, when House Republicans announced the American Health Care Act (AHCA) to repeal and replace the Affordable Care Act (ACA) the immediate and intense Democratic opposition was to be expected.

More surprising though has been the opposition by conservative legislators and advocacy groups. They have labeled the AHCA as ObamaCare Lite or ObamaCare 2.0 and complained that it creates a new entitlement. These conservative criticisms are misguided and don’t take the structure of the American healthcare system into account.

{mosads}About half of Americans get insurance coverage through their jobs. More than a third of Americans are covered by the government under Medicaid (20 percent), Medicare (14 percent) or military and Tricare insurance (2 percent). Despite all the attention and debate over the ObamaCare exchanges, only about 7 percent of the population is covered through the individual and small group markets and only half of them (3.5 percent) obtain insurance on the ACA health exchanges. Nine percent remain uninsured.

Conservative critics have focused on AHCA tax credits dealing with a subset of expenditures in the small individual market and ignored the AHCA’s provisions to rein in runaway costs in the Medicaid program.

Employer-paid health insurance premiums are tax-exempt for employees and tax-deductible for employers. This tax preference costs the federal government over $250 billion a year in foregone revenues and gives the average family a 30 percent discount on its health insurance. Political considerations have made it impossible to change this tax expenditure. Meanwhile, individuals buying insurance on their own do not receive any tax assistance.

White House reports more than 12 million people signed up for ObamaCare during 2017 enrollment https://t.co/lv7xIkj8un pic.twitter.com/R6zenxqdKH

— The Hill (@thehill) March 15, 2017

The ACA partially addressed this imbalance by providing premium tax credits, based on income, to people earning up to 400 percent of the Federal Poverty Line: $48,240 in 2017. But the ACA system was complex and difficult to administer. The AHCA replaces those ACA income-based subsidies with easier to administer refundable tax credits, to individuals and families, that rise with age since premiums rise as enrollees become older.

The credits are aimed at low and middle income people and phase out over $75,000 in income, leaving wealthier people with no credits. Tax credits have been a part of all major Republican repeal and replace plans including the one sponsored by now Health and Human Service Secretary, then representative, Tom Price, which was co-sponsored by 13 members of the House Freedom Caucus. Yet the Freedom Caucus now opposes the ACHA credits.

Medicaid — the joint federal-state insurance program created in 1965 which provides health coverage to low-income families and individuals, including children, parents, pregnant women, seniors, and people with disabilities — has grown to become the largest entitlement by enrollment in the country. Spending exceeded $550 billion in 2016, driven higher, in part, by the ACA’s Medicaid expansion.

Medicaid costs are shared as determined by a state-specific federal matching rate which results in the federal government paying between 50-75 percent of the states’ Medicaid costs. The average federal matching rate is 63 percent. The federal obligation is open-ended, limited only by how many people are enrolled by the states, how many programs traditionally financed with state-only funds are moved by states into the Medicaid program, and how many extra services states choose to provide. Needless to say, when you are only paying a third of the costs there is little incentive to limit expenditures.

The growing list of GOP lawmakers opposing the ObamaCare repeal bill: https://t.co/DOAbsLiVWj pic.twitter.com/CnADQW15AF

— The Hill (@thehill) March 15, 2017

The AHCA maintains funding for the ACA Medicaid expansion until 2020 at which point the program transitions to a system of block grants to each state based on per-capita payments for their Medicaid population. States will be given increased flexibility to structure their Medicaid programs and make them more efficient, with any savings accruing to the state. After 2020, annual increases in the per capita grants are expected to be less than current projections of future federal Medicaid expenditures resulting in significant savings for the federal government.

Simply repealing the ACA as many conservative groups are proposing gets rid of its Medicaid expansion but leaves in place the expensive, open-ended federal Medicaid commitment. The AHCA is the first and best chance to actually slow Medicaid’s growth. If it fails to pass, conservatives may not get another chance.

The AHCA is attracting fire from both the left and the right, suggesting that it may be a good idea. It isn’t perfect but it could be very good with some adjustments. And as Speaker Ryan has pointed out, it is not the final word on healthcare regulation. HHS Secretary Price will have the opportunity to rescind or modify hundreds of healthcare regulations and additional legislation dealing with issues that can’t be addressed in a reconciliation bill.

Unless and until detractors on the right come up with a better plan, providing tax credits to help a small group of Americans purchase health insurance seems a small price to pay for limiting our largest healthcare entitlement and replacing most of the much reviled ACA.

Joel Zinberg, M.D., J.D., F.A.C.S., a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine.

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