The GOP Should Provide Health Insurance for All Americans
Beginning in January, the Republican-controlled Congress, working with the incoming Trump administration, will have the opportunity to roll back the Affordable Care Act (ACA) and replace it with a plan that is less driven by federal control and regulation. The starting point for this effort ought to be that everyone in the United States should have health insurance, protecting them against major medical expenses.
It should be self-evident that health insurance is a necessity of modern life in an advanced economy. Improvements in medical care over the past century have made it possible to cure many diseases and correct or minimize many ailments that previously would have been debilitating or fatal. These advances are not inexpensive. The cost of health care has risen dramatically and steadily for many years. Patients diagnosed with cancer or suffering from injuries caused by an accident will quickly run up medical bills totaling tens of thousands, and sometimes hundreds of thousands, of dollars. Only the very rich could pay for such care without health insurance. For most Americans, even for the modestly affluent, health insurance is necessary to ensure ready and uninterrupted care when a major problem arises.
Some in the GOP are wary of embracing broad enrollment in health insurance as a primary goal of their effort because achieving it might require supporting policies that are difficult politically. For instance, it will not be possible to ensure lower income households can get affordable insurance without providing them some level of financial assistance to replace the premium credits available under the ACA. That assistance will almost certainly need to be provided in the form of reformulated health insurance tax credits that are refundable to persons with little or no tax liability. The refundable aspect of the credits means much of the cost of these tax credits will be recorded in the federal budget as a spending increase, not a tax cut. Some Republicans are uncomfortable with embracing these credits for that reason.
Others in the GOP argue that enrollment in health insurance does not guarantee improvement in health, which should be the real goal of reform. But to say that health insurance does not automatically improve health is not the same as saying people can go without health insurance and not create risks for their health. Health insurance provides financial protection when a person needs extensive medical care. It also ensures ready access to care in a crisis, which can be very important in improving the prognosis of the patient.
Republicans in Congress and the incoming Trump administration must also recognize that it will not be possible to repeal the ACA and replace it with something different while avoiding all politically difficult decisions. They have a once-in-a-generation opportunity to advance a market-driven approach to health insurance reform that provides secure and affordable insurance to all Americans. They should embrace the challenge. They must also understand that voters and history will judge them to have failed if the end result is millions of people becoming uninsured again.
Making broad enrollment in health insurance a primary goal of an ACA replacement plan will necessarily mean embracing some policies that do not always come naturally to the GOP. Here are four of the more important steps that the GOP should take in its replacement plan to increase the numbers of Americans enrolled in health insurance:
Grandfather Coverage Provided by the ACA. The GOP should take the approach that it is not necessary, or desirable, to push people out of the insurance they have as a result of the ACA. If Congress, working with the Trump administration, establishes a new system of insurance coverage, it can make the switch from old to new effective on a prospective basis. Over time, there would be a natural transition from the ACA to the replacement plan. A transition of this kind would mean allowing all persons who are now enrolled in an insurance plan offered on the exchanges to continue to be eligible for those plans, with premium subsidies provided under the rules of the ACA. It would also mean allowing all those who became eligible for Medicaid because of the expansion of the program in the ACA to stay enrolled in the program, even if a replacement plan eventually lowers the income eligibility levels for prospective Medicaid applicants. Allowing people to keep what they have today on an indefinite basis will help stabilize the marketplace and allow for an orderly, rather than a chaotic, transition.
Accept and Clarify Medicaid’s Role as the Safety Net Health Insurance Program. There are 61 million non-disabled low-income adults and children enrolled in the Medicaid program. Medicaid needs reform, to give states more flexibility to run the program efficiently and to integrate Medicaid insurance more carefully with the private insurance market. But, even with reform, Medicaid will always serve as the nation’s safety net program for people who have incomes too low to pay for any portion of their health insurance premium. Republicans in Congress must recognize that under a replacement plan for the ACA they will need Medicaid to continue to play this role. Moreover, 31 states, including many with Republican governors, have expanded Medicaid as allowed under the ACA. It will not be possible to return Medicaid to pre-ACA coverage levels because of what that would mean for the budgets of these states. The GOP should seek to establish a new, uniform eligibility level for Medicaid nationwide that is somewhere between the ACA expansion limit (138 percent of the federal poverty line) and the levels prevailing in the 19 states that did not expand the program (approximately 70 percent of FPL).
Impose Cost-Discipline and Generate Revenue with an Upper Limit on the Tax Preference for Employer-Paid Premiums. A critical component of a replacement plan will need to be a refundable tax credit for health insurance for those households without access to employer-provided coverage. These tax credits will be expensive, although less so than the premium credits provided under the ACA. An important source of revenue for financing the credits should be an upper limit on the tax preference for employer-paid premiums, which are currently exempt from all income and payroll taxes. This new upper limit on the tax preference would replace the Cadillac tax of the ACA. Limiting this tax preference will be politically difficult; business interests and labor groups will both oppose it, just as they have opposed the Cadillac tax. But Republicans must press forward with it anyway, as the policy is critical for establishing more cost discipline in the employer-provided market and for the revenue that it will generate to finance an adequate tax credit for everyone outside of the employer system.
Build an Effective Auto-Enrollment Program to Achieve Higher Levels of Coverage. If the GOP replacement plan provides refundable tax credits to all households without access to employer coverage, and if those tax credits are seen as reasonable relative the premiums associated with higher deductible insurance plans, Republicans will be able to say that their plan provides a ready pathway to coverage for all Americans. Of course, there will always be some number of people who fail to enroll in a plan even though they could if they wanted to. That’s true under the ACA. There are 16 million people who are uninsured today even though they are eligible for an employer plan, for premium credits in the exchanges, or for Medicaid. A GOP plan could reduce the number of people who are “eligible but not enrolled” in insurance by automatically enrolling them in coverage and then giving them the opportunity to disenroll if that is their wish. In other contexts, particularly pensions, auto-enrollment dramatically increases coverage and is not controversial among program participants. In the context of health care, an ACA replacement plan would need to establish a system of data collection around insurance enrollment to determine who is eligible for a refundable tax credit but has failed to use it to buy coverage. That data could then be used to enroll people who haven’t used their credits in coverage in which the premium charged by the insurance plan would be set exactly equal to the value of the credits (the insurance deductible would be adjusted as necessary to ensure this is the case). No one would be required to have health insurance, but auto-enrollment would ensure that lack of information or inertia would not prevent many millions of people from getting, at a minimum, protection for major medical expenses.
A plurality of voters is unhappy with the ACA because of its high expense and reliance on governmental control. They are hoping the next Congress and the incoming Trump administration will put in place a better plan. But it is doubtful that most voters will think that a plan that leads to many more people going without insurance is “better” than the ACA.
Republicans have a rare opportunity in 2017 to make big changes in health policy, but they must understand that providing secure insurance for everyone in the country needs to be a central feature of what they do. That is not an unreasonable demand, nor is it an impossible task. What’s needed is determined leadership from those who are about to become responsible for governing the country.