ACA Repeal: The Latest


The Senate proposal is out. The proposed law is 142 pages of (perhaps unnecessary) complexity, and, given the rushed nature, probable errors. But it’s out.

It’s not out in time to prevent damage for 2018.

  • Withdrawal of insurers: Aetna notified agents that it will be withdrawing from individual markets in 18 states. Notices to policy holders will be sent on or about July 1st. Other firms have announced withdrawals from a few states, most particularly Iowa and Indiana.
  • Heavy rate increases: Insurers in the individual market in Virgina have asked for a 30% rate increase for 2018, based on uncertainty about whether the Federal government will continue subsidies for health insurance. Insurers in NY State have asked for a 16.6% increase. Most other states will be in that range.

The proposal represents a mixed signal for consumers.

  • Pre-existing conditions: The Senate version conforms with the House version in requiring insurers to cover people with pre-existing conditions. HOWEVER . . .
  • Coverage: States can apply for waivers allowing insurers to reduce the coverage they provide. Services required by people with pre-existing conditions may not be covered.
  • Medicaid: The bill supports a contraction of Federal Medicaid funding, but delays the start of cutbacks until 2021. The House version started cuts in 2020, an election year. The Senate version of the cuts are later and deeper.
    • The Medicaid expansion was an increase of the income limit for eligibility from 100% of poverty level to 138%.
    • Under the Senate version people making more than 100% of poverty level would be prevented from enrolling in Medicaid starting in 2020.
    • All Federal funding for the expansion would be limited in 2023.
    • The impact on the Medicaid program for children, CHIP, is unclear at this time.
    • Inflation adjustments for Medicaid funding would be changed from an index based on medical costs to the overall Consumer Price Index (CPI), which would reduce annual increases in funding in all future years. (See graph.) (4) The focus of this change is strictly on reducing Federal spending, not helping consumers. Federal payments would lag behind increases in medical costs — who pays the difference?fredgraph
  • Tax credits to help pay for insurance: The House version based subsidies on age; the Senate version reverts to income as the basis, consistent with the existing ACA rules. However,
    • The Senate version reduces the maximum income eligible for these subsidies, making some people now receiving subsidies ineligible for them in the future. On low low end, the Senate version makes subsidies available for people earning below below poverty level who might not be eligible for Medicaid in their state. The Senate version maintains cost-sharing subsidies for insurers through 2019.
    • The Senate version reduces the amount of subsidy people receive, increasing out of pocket costs for everyone, and especially for those between age 50 and 64.
  • Planned Parenthood: Both House and Senate versions remove funding for Planned Parenthood.
  • Tax reductions for affluent households: The Senate and House versions are in agreement on this; the reductions remain intact.
  • Individual mandate: Penalties for not having insurance are eliminated.

Sticking points:

  • For conservatives: Treating healthcare as a human right. They would rather see the ACA eliminated without replacement.
  • For moderates and those in competitive districts

Collateral damage:

  • Insurance coverage: There’s a debate as to how many people will not have insurance coverage with this law.  Estimates vary between 13 and 23 million.  The reasons for the variance in estimates include:
    • Time frame — loss of coverage will build over time as insurance costs increase and subsidies don’t.
    • Medicaid — how many people will lose coverage under Medicaid. That impacts more people than you would expect. Most people don’t have Long Term Care insurance, and Medicaid has become the prime vehicle for paying for home health aides and nursing home costs. Since nursing home costs average nationally more than $9,000 per month and Medicare pays for only the first 100 days, there are a lot of middle income families that will be in trouble. Even some moderately affluent families will be affected, and the poor . . . forget about it.
  • Tax increases: Healthcare for the uninsured will fall back on emergency rooms, largely of public hospitals. That will drive costs and budget increases and increases in local taxes. Tax savings for the rich will mean tax increases for everyone else.
  • Economic stagnation: The US is a consumer economy. I’ve argued previously that money siphoned from consumers for education, housing and healthcare is money they can’t spend for anything else. One analyst sees 1.1 million jobs disappearing by 2020 with passage of the AHCA. (3)



  1. M. J. Lee, Tami Luhby, Lauren Fox, Phil Mattingley, “Senate GOP finally unveils secret health care bill; currently lacks votes to pass,” CNN, 22 June 2017.
  2. Stephanie Armour, Kristina Peterson and Louise Radnofsky, “Battle Lines Drawn on Health Care,” The Wall Street Journal, 23 June 2017, P. A1.
  3. Josh Bivens, “Millions of people have a lot to lose under the AHCA,” Economic Policy Institute, 21 June 2017.
  4. Federal Reserve Bank of St. Louis, Economic Research. Chart downloaded 25 June 2017.,
  5. Bob Bryan, “Unveiled: The Secret Senate Healthcare bill,” Business Insider, 22 June 2017.

The AHCA: Warren Buffett’s view


If you haven’t seen this, Bloomberg quotes Buffett as saying:

The AHCA bill is a “huge tax cut for guys like me. And when there’s a tax cut, either the deficit goes up or they get taxes from somebody else.”

Mr. Buffett said healthcare’s high costs put the United States at a disadvantage relative to other countries.


The Definition of Idiocy


Been there. Done that. Tried it. It failed. So let’s do it again!

To paraphrase Einstein’s famous quote, stupidity is doing the same thing over and over again and expecting a different result.

In surfacing the concept of “high risk pools”, Congress is reusing an idea that has failed repeatedly in the past when used with either auto insurance or healthcare.

The idea of the high risk pool is to group people who are very ill and provide a special pool of funding for their insurance. With government subsidy, the pool would in principle provide “affordable” rates for these people.

The ACA in fact used a high risk pool for people with pre-existing conditions (PCIP) during the transition period between 2010 and 2014. It produced the result that high risk pools have always produced:

  • Excessive costs to consumers
  • Cost overruns requiring bailouts
  • Fewer people being insured.

As Kaiser comments:

PCIP was operational in all 50 states by the fall of 2010.  By late 2012, just over 100,000 individuals were enrolled and program expenses had consumed nearly half of the $5 billion appropriation.  For the final 12-month period for which PCIP expense data were reported, net losses for the program were over $2 billion. (1)

State health insurance pools restricted access to only a small fraction of those needing coverage, and even then require huge bailouts from taxpayers.

New Jersey tried a high risk pool for auto insurance. It failed to prevent rates from soaring, and went bankrupt.

My interpretation: Basically, what Congress is doing in the AHCA bill is “passing the buck” either to future Congresses or to taxpayers.



  1. Karen Politz, “High-Risk Pools For Uninsurable Individuals.” Updated 22 February 2017.

ACA Repeal, Again


According to Bloomberg, the White House wants Congress to vote on a revised bill next week.  There are some proposed amendments to the bill that failed in March in an effort to try to unify GOP House members to support the bill, but nothing has been finalized.

One item being considered is a proposal by Representative Tom MacArthur (R, NJ):

The amendment, reported earlier by Huffington Post, would allow insurers to charge higher premiums to people with pre-existing conditions in states that get a waiver. To obtain the waiver, states would have to provide sick people priced out of commercial insurance access to a so-called high-risk pool run by the federal government, or establish their own, and satisfy other conditions. (1)

A separate commentary on the same issue goes further:

According to a draft of the tentative deal obtained by POLITICO, the latest proposal would allow states to apply for “limited waivers” that would undermine Obamacare’s protections for pre-existing conditions. Under these waivers, states could opt out of Obamacare standards setting minimum benefits that health plans must offer and a requirement — called community rating — forbidding insurers from charging different prices to people based on health status. Both are provisions that the GOP’s ultraconservatives have pushed to eliminate as part of the repeal effort, contending that these coverage mandates drive up the cost of insurance.

What this means in practice is a two-tiered health system based on where people live. People in places like Mississippi and Kentucky that have relatively poor healthcare now, will have less access to healthcare and higher costs in the future. Conversely, states that offer better healthcare will maintain existing benefits. That’s a compromise that could pass, or could just make everyone unhappy.

Overall, this attempt keeps the negatives associated with the bill, and adds one more. Historically, risk pools haven’t worked. They’ve been budget-breakers when they’ve been tried for auto and health insurance in several states. If anything, more people will lose health coverage and costs will escalate as predicted by the CBO.


  1. Billy House, Jennifer Jacobs, “White House, GOP leaders at odds over plans for Obamacare vote,” BenefitsPro, 20 April 2017.
  2. Adam Cancryn and Josh Dawsey, “White House plans Obamacare showdown next week,” Politico, 20 April 2017.


AHCA Outcome: questions?


As described in my previous post, the AHCA was a bad bill that would have hurt most Americans.  The damage became worse in the late night negotiations, will traded away deficit reduction for more tax breaks for the rich and less care for everyone else.  That trade was to woo members of the ultra-conservative “Freedom Caucus” to vote for the bill, and it failed.  However, it forced GOP moderates to abandon the bill.  The final vote would have been ugly, so Trump opted to pull the bill.

What I don’t understand is why Trump supported this piece of legislation at all.  It didn’t match with his public statements about what he wanted to do.  He could have had his staff assemble the bill he said he wanted instead of wasting his efforts on this mess.

Frankly, I’m not sure Trump ever read this bill.  His tweets never were in sync with the content of this legislation.

Very strange.

ACA Repeal — Where We Are Tonight, Update


17456_1269532813224_1076952025_30803996_7657050_nThe GOP House bill is designed to hurt most Americans. The House committees involved are rushing to vote on this before the nonpartisan Congressional Budget Office (CBO) can weigh in on its economic impact. There’s a reason.

GOP leadership is still trying to rally moderate and conservative members to support the bill.  Among the concessions to conservatives being discussed is the elimination of requirements for mental health care, drug addiction treatment and maternity care from health insurance policies.(8)

The bill keeps three elements of the Affordable Care Act:

  • Insurance companies can’t deny coverage based on pre-existing conditions.
  • No lifetime cap on benefits.
  • People can stay on parents’ coverage until age 26.
  • The revised bill would reduce the Federal deficit by $150 billion over 10 years. That’s less than half of original projections, after amendments were attached increasing tax benefits for the wealthy.

That’s the good news.

The good news for those with high incomes:

  • Tax credits for buying health insurance.
  • Elimination of health insurance related taxes on people with high incomes.
  • No requirement for having health insurance.
  • No tax penalties for not having it.
  • Double the amount they could contribute to Health Savings Accounts (tax benefit).

The bad news:

  • Large employers would no longer be required to offer health insurance.
  • A 30% rate increase is your health insurance lapses.
  • Income tax credits for health insurance based on income are replaced by smaller tax credits based primarily on age and family size. The amount of these credits would be reduced for individuals making more than $75,000 per year or couples making more than $150,000, but even the affluent would receive credits.
    • The credits range from $2,000 to $4,000 per person, with a cap of $14,000 for a family.
  • Rate increases:  According the the nonpartisan Congressional Budget Office, the cost for individual insurance will increase by between 15% and 20% for each of 2018, 2019 and 2020.
  • The special hit for those over 50:  The price range by age will increase from a factor of 3 to a factor of 5.  Under the ACA, people between the ages of 50 and 60 could be charged no more than 3 times what a healthy 20 year old would be charged.  Uncer the bill that changes to a multiplier of 5.  Assuming a 20-something pays roughly $300 for health insurance, here’s the math:
    • Under the ACA. a 60-year-old faced a monthly cost of $900 before subsidy, which could be as much as $500. That’s a net cost of $400 per month.
    • Under the new rules, with a conservative 18% base rate increase, the cost for a 60-year-old would be $1,770 per month, with a maximum subsidy of roughly $330. That’s a net cost of $1,440 per month.
    • Because Trump acted to abolish subsidies for purchasing health insurance before the bill was drafted, the 20% increase for 2018 will probably happen regardless of whether the bill passes.
  • The Medicaid rollback.  Obama extended Medicaid to those who couldn’t afford health insurance; the current bill reverses that, leaving up to 24 million with no health insurance coverage.
  • Reduced cancer screening:  Elimination of funding for Planned Parenthood — which impacts cancer screening for less affluent women.

The bill creates a huge financial burden for Americans.  To put this in context, median weekly income for American workers is $849 (2016, Bureau of Labor Statistics). With deductibles and copays, more than one week of each month’s earnings would go to healthcare. For some Americans in the 50+ age group (pre-Medicare), the cost of health care could approach half of monthly take home.

We have to say “could” because the final rates for health policies for 2018 haven’t been approved by state insurance commissioners yet.  However, the CBO estimates are in line with the increases the insurance industry has said it will request.

That’s a huge dent into household budgets, and into consumer spending for other products and services. So much for economic growth.

The CBO is required by law to assess the economic impact of major legislation. However, backers are trying to rush this bill through Congress before the CBO has time to complete this analysis.(6)

As stated in other posts, part of the purpose of the Affordable Care Act was to allow for early detection of disease and reduced reliance on ER services for healthcare.  Both of those goals would actually reduce total spending on healthcare.  The GOP bill largely undoes both of these.

The mixed news:

  • The elimination of requirement that everyone have healthcare means that the “risk pool” for calculating rates will be smaller, and the cost per person will be higher.
  • The bill would give block grants to the states that could be used to help consumers pay for health insurance. But that would be up to state legislatures.

At this writing, the fate of the bill is uncertain.  Some extremists want the elimination of any government support for healthcare for Americans.  For them, the current bill offers too much to consumers.  The AARP has gone to war because of who the bill will impact people over age 50. GOP congressmen who are worried about re-election are nervous about supporting this bill.  Seniors are much higher rates of voting than other Americans and can swing close elections.  The vote on the bill in the House has been postponed as backers don’t have enough votes to pass it.

To gain additional support, the bill was changed this week to add more tax benefits for the wealthy. These changes may undo potential reductions to the Federal deficit from the Act.(7)

Even if the bill passes the House, the ability to get it through the Senate is questionable.

Apart from extreme conservatives, opponents to the bill include:

  • The AARP.
  • The AMA and all other associations of medical professionals.
  • Hospitals and clinics, who don’t want and can’t afford an influx of clients without insurance.
  • Democrats who don’t want to see people lose coverage.

Four Senate Republicans have voiced opposition to the Medicaid rollback.

“We will not support a plan that does not include stability for Medicaid expansion populations or flexibility for states,” Sens. Rob Portman (Ohio), Shelley Moore Capito (W.Va.), Cory Gardner (Colo.) and Lisa Murkowski (Alaska) wrote in a letter to Senate Majority Leader Mitch McConnell (R-Ky.).

However, there are the tone deaf in Washington:

One senior Republican suggested that under his party’s bill, Americans would have to pay a larger share of their own health care costs.

“Americans have choices, and they’ve got to make a choice,” Representative Jason Chaffetz of Utah, the chairman of the Oversight Committee, said on CNN Tuesday. “So rather than getting that new iPhone that they just love and want to go spend hundreds of dollars on that, maybe they should invest in their own health care.” (4)

This is as close to the infamous Marie Antoinette quote, “Let them eat cake,” as we have ever seen in American politics.

What you need to remember

  • Insurance policies/contracts for 2017 will be unaffected. 
  • However, if you let policies lapse this year, that may affect what you pay in 2018, by a lot.


  1. Robert Pear and Thomas Kaplan, “House Republicans Unveil Plan to Replace Health Law,” The New York Times, 6 March 2017.
  2. House Republicans release long-awaited plan to replace Obamacare,” The Washington Post, 6 March 2017.
  3. FoxNews, “House Republicans release long-awaited ObamaCare replacement bill,” 6 March 2017.
  4. Zachary Tracer, Anna Edney, and Steven Dennis, “Aiming to bridge gaps within the party, GOP releases health care reform details,” BenefitsPro, 7 arch 2017.
  5. Robert Lowes, “House Releases ACA Repeal, Replace Bill That Transforms Medicaid,” Medscape, 8 March 2017.
  6. Congressional Budget Office, “American Health Care Act,” 13 March 2017.
  7. Timothy Jost, “What’s in the Manager’s Amendment to the AHCA?” Health Blog, 21 March 2017.
  8. CNN, “Trump team ultimatum: No more talks, time to vote,”

What the CBO Report on the American Health Care Act Actually Says (updated)

Photo Courtesy of Holden Police Department

By now. most people have seen headlines or soundbytes about the report.  The Congressional Budget Office is a nonpartisan group. The head of the CBO was actually appointed by the GOP. The purpose of the office is to provide Congress with a source of “objective” information about the financial impact of legislation that is independent from information provided by the Executive Branch. In a complex world, this actually makes sense.


What the CBO report actually says:

  • Health insurance costs for individuals will under the new act (the AHCA is also known as “Trumpcare”), will increase through the year 2020 and may decrease after that.  The CBO expects increases in health insurance premiums under the new law of between 15% and 20% for 2018 and 2019 under the new law.  However, the CBO argues that by 2026, premiums might be 10% lower than under the ACA.
    • Some professionals refer to these as “hockey stick” forecasts, with a positive result occurring sometime in the remote future.  That could happen, but usually unforeseen events preempt the desired result.
  • Healthcare costs should decline for people in their 20s, but will increase sharply for older Americans.  The proposed tax credits will be insufficient to cover the cost increase.
  • The CBO estimates a $337 decrease in the Federal deficit from the AHCA law, mostly due to the repeal of Medicaid expansion and the end of subsidies for health insurance.  (As noted, the tax credits are smaller than the current subsidies.)  That averages out to about $33.7 billion per year.
    • The current US deficit is $441 billion in the current fiscal year.  Obviously, any reduction is good, but a savings of less than 10% of the deficit isn’t a cause for celebration.
    • The US budget deficit is expected to expand by over $10 trillion over the next decade, after shrinking during the Obama administration.
  • The Medicaid rollback will cost 14 million people their healthcare coverage immediately.  That plus the increase in out of pocket expense will ultimately mean that 24  million people will be forced to do without health insurance.
    • The CBO expects that some states will lose Federal funding for Medicaid in 2020 by their failure to provide the matching funds required under the new law.  That will further reduce Federal spending.
    • The matching funds requirement simply moves part of the tax burden from the Federal government to the states, and may require increases in state taxes.
  • Existing law requires the CBO to provide guidance on the impact of the law on the economy.  However, the CBO claims it has not had sufficient time to do this.
    • My argument is that anything that takes money away from consumers will be a drag on economic recovery.  This law does, by raising health care out-of-pocket expenses for most people.


  1. Congressional Budget Office, “Cost Estimate,” 13 March 2017. I’ve downloaded a pdf of the report from the CBO website, and will share it on request.
  2. Emily Stephenson, “U.S. deficit forecast to shrink in 2017 but climb over next decade,” Reuters, 24 January 2017.