A Deep Dive on the American Health Care Act

The biggest question with any bill is addressing what problem it's trying to solve. With the Affordable Care Act (Obamacare), the problem was easy to identify: Too many people are uninsured. Of course, there are many complex and intricate issues stemming from that, but that was the crux of the bill. It was hoped that by reducing the number of uninsured, that overall health care costs would fall. But cost savings were not the primary issue.

So here we are with the Republican alternative, the American Health Care Act (AHCA). On the surface, it's trying to improve upon Obamacare. But that's not really a problem to solve. Are they trying to lower costs? Improve access? Lower the number of uninsured? It's honestly unclear. So you have to look at what the bill does. And what it does, in leaps and bounds, is move the costs of health care away from the rich and healthy and onto the backs of the poor, sick and elderly.

This is not the best nor most in-depth analysis of the bill, but I'll try to split it up into three parts,  What's In The Bill, What It Means and What's Next.

What's In The Bill
For a framework of how to discuss the bill, I want to go back to the seven questions that were splitting the GOP health plans back in February. I'll try to keep it brief, then I'll tack on a few questions at the end.

How much of Obamacare to keep? 
The GOP bill holds on to a few popular Obamacare policies, like keeping children on parents' insurance until age 26. It removes the individual mandate for buying health insurance.

Whose costs need to be lowered: the government's or the people's?
Under Obamacare, the preference was to lower the people's costs at the expense of the government. The AHCA (through things like turning Medicaid into block-grant funding after 2020) tries to lower government costs by $337 billion by putting caps on future Medicaid spending. But if costs rise beyond the government's caps, those costs would have to be made up somewhere — inevitably in premiums and out-of-pocket expenses.

Who should have coverage?
In theory, everyone that has coverage would remain covered. However, because it would no longer be required and because it would be a lot more expensive for others, health care coverage could be lost for up to 24 million Americans. (NOTE: This is based on last month's bill. The newest version hasn't been rated by the CBO yet and will probably be even worse).

How to pay for the plan's changes?
Obamacare paid for itself with taxes on the wealthy and medical industries. The AHCA would use an estimated $840 billion savings on cuts to Medicaid to restore those tax cuts to the wealthy and medical industries. Everything else is largely covered by other means.

Keep Medicaid expansion or no? 
The AHCA would block any further states from expanding Medicaid after its passage. It continues funding the Medicaid expansion as is through 2020, but turns funding of Medicaid AS A WHOLE into a block grant after that. These block grants would rise at a rate of medical CPI + 1%, but that's likely to be below the yearly Medicaid increases (Medicaid tends to have sicker people, so their costs tend to rise faster than medical expenses in general). States would be forced to make hard decisions in either what Medicaid covers in their state or who is eligible for Medicaid in their state.

Does this affect the Obamacare "age bands" — the difference between what you can charge older and younger people? 
Obamacare capped the ratio at 3:1 — you could charge older people no more than three times the cost of a younger person. The AHCA raises that ratio to 5:1 — shifting more of the cost burden back on to older Americans.

Does this change Obamacare health care subsidies/exchanges?
The AHCA doesn't directly affect the Obamacare exchanges, but it would replace the Obamacare subsidies entirely. The Obamacare subsidies were based on income level, in that the poorer you were, the more of the cost was covered by subsidies. The AHCA changes it to a flat tax credit — $2-4,000 depending on how old you are, not how much you make. These tax credits are less generous than Obamacare for the poorest Americans.

OK, let's revisit the pre-existing conditions issue and the "10 essential health benefits" issue.
Under the AHCA, states can ask for a waiver to both on one condition: they set up a high-risk pool or set up some other system to help those with pre-existing conditions get coverage. This was given $130 billion in funding over 10 years. One of the last big concessions to get the last few votes was $8 billion more to this fund over 5 years. (High-risk pools were tried in 35 states before Obamacare, and none of them worked out because they were all underfunded, too expensive for its members, etc.) That sounds like a lot, but one expert put the cost of a 10-year program at $180 billion. Because the AHCA is almost certain to not be enough, the costs will be made up somewhere, likely in premiums and deductibles for the sickest Americans.

Anything else?
If you lose coverage, you can be charged a 30 percent premium for up to a year to get it back. For the poorest Americans, that's a high hurdle to overcome when getting back on board in case disaster strikes.

What It Means
It's surprising to me that Obamacare was attacked for being "shoved down our throats," when it took nine months from proposal to approval. The AHCA has one major hurdle to pass, but has even more been shoved down our throats — there's not even a current form of the bill available online when it was passed today because changes have been made even to the original bill introduced just two months ago.

Even more surprising is there is direct evidence that the AHCA is "shoved down our throats" — the GOP didn't even wait for its own three-days-available rule or even the usually required CBO report. The nonpartisan Congressional Budget Office produces a report on major legislation. Its report was pretty brutal against the AHCA two months ago, and this revised version will almost certainly be worse. Yet because the bill remained in flux and because the GOP hurried it along, the CBO didn't have time to file a report. They will be forced to do so per Senate rules before its consideration there.

Overall, I keep trying to look at the goal of this bill. I keep trying to figure out what problem it's trying to solve.

With less generous subsidies, poorer people will drop their health insurance — and face a high hurdle if they ever want to get it back again. Either on one way (less generous subsidies) or another (high re-entry hurdle), poor people will pay more.

With increased age bands, older people will pay more.

With a shift into high-risk pools, sicker people will pay more.

By removing the Obamacare tax hikes, rich people will pay less.

Without the individual mandate, healthy people who don't want insurance will drop it — leaving the relatively sicker people to pay more. If you're healthy and your insurance drops, there's no incentive to get it back — you're going to have to pay a 30 percent penalty for a year to get it back, so... wait until you need it, right?

Most Americans, with private insurance provided through their workplace, may not be affected much. But those with insurance from companies across state lines may see a change: Obamacare banned insurance companies from placing lifetime limits on benefits and capped out-of-pocket spending, but these only applied to the essential health benefits as defined by law, letting the company choose which state's benefits it preferred (since the 10 essential health benefits were in Obamacare, federal law rendered this a six-of-one, half-dozen-of-another thing). But if the "10 essential health benefits" federal law is overwritten and the option is left to each state, large companies could pick the skimpiest state benefit and apply it companywide, even across state lines. In theory, a national company could apply narrower health standards from one state to its employees across the country and mean that lifetime limits no longer meant anything.

Finally, this means the GOP can say they've put a plan out there and done something. Granted, it's not a law yet — it still needs to make it through the Senate. But they can tell their constituencies that they kept their campaign promises.

What's Next
Before I even get into the analysis machine, let's get something out of the way quickly: I don't care which side of the aisle you are on — today is not a day for singing. Reports came out that the GOP was singing the Rocky theme song. Do you know what your bill does? Did you spend even the hour or two that I did thinking through its ramifications? The CBO says 24 million people will lose their insurance! But sure, you're the underdog with control of both houses of Congress and the White House celebrate your victory over 24 million poor people with health insurance. And Democrats, you're not off the hook, either: You were caught singing "Hey Hey Hey Goodbye!" because you think this means the GOP is going to lose their seats — and the House majority — in 2018. NO. You don't get to sing, either. You don't get to sing unless you've won something. You haven't won anything. Your last flag bearer's major accomplishment just got potentially undercut and you're busy singing? Go out and win a damn election. This was tacky on both sides.

So now it moves to the Senate, but there is almost assuredly a deadline. If you're a Republican, you cannot let this last to 2018. If you want to repeal and replace Obamacare, it has to be done before primaries (spring 2018) and definitely debates against the opposition party in summer/fall 2018. If you're a Republican, you do not want to be fighting the Obamacare repeal on both sides and in Washington. So the deadline is probably the end of the year, and since Congress wraps up early, it's probably mid-November this year (Merry Christmas!)

The most powerful person in this whole debate you might never have heard of is Elizabeth MacDonough. She is the Senate Parliamentarian. To get this bill through Congress, the GOP had two paths: regular or reconciliation. The regular path, Schoolhouse Rock-style, would require enough Democrat votes to overcome a filibuster. Seeing that wouldn't happen, the GOP used reconciliation, which allows the GOP to get by with just a majority vote. Here's the problem: some of the things we've talked about may run afoul of reconciliation rules. For example, anything above that mentions "state waivers" may not work out.

That's why Republican Senators have already come out and started saying things like "We need to take it slow" and that they might need to start from scratch. I loved this quote from Sen. Lamar Alexander, R-Tenn.: "I congratulate the House on the passage of its bill. The Senate will now finish work on our bill, but will take the time to get it right." That's some shade being thrown at the junior chamber by the very people that are key to its passage in the Senate.

Five moderate Republicans (or: enough to kill the House bill) have signed on to a compromise plan (Cassidy-Collins) that would actually expand upon Obamacare. Honestly, I think Democrats could even come around to that proposal.

There are two paths here that I see: A) The Senate delays, delays, delays, delays and suddenly it's the 2018 House elections! That outcome would determine if Mitch McConnell lets it see the light of day. B) The Senate sees that anything that would pass the Senate could not pass the House. That's because anything that pleases moderate GOP Senators like Susan Collins would be detestable to the Freedom Caucus in the House. So they delay it, obfuscate, and eventually let it die a silent death in committee or something.

There are too many moderate Senators to let THIS bill pass before the mid-terms. Thanks to this bill, there also may be too many House Democrats for ANY bill to be approved after mid-terms.