Here & Now

First Look: UW Healthcare Expert On Obamacare Replacement

Paul Ryan:

It repeals Obamacare's taxes. It repeals Obamacare’s spending. It repeals Obamacare's mandates. It creates a vibrant market where insurance companies compete for your business, where you have lower costs, more choices and greater control over your health care.

Frederica Freyberg:

House Speaker Paul Ryan. A “First Look” tonight at the GOP repeal and replace plan for Obamacare. Here’s a statement on the bill from the other side of the aisle from Wisconsin U.S. Senator Democrat Tammy Baldwin. She says quote President Trump promised insurance for everybody, but Trumpcare breaks that promise by putting millions of people she says at risk of losing health care coverage and forcing millions to pay more for less care. Here are the major provisions of the American Health Care Act: it gets rid of mandates to have insurance, replacing those with a 30% surcharge on policies if plans have lapsed. It replaces income-based subsidies with tax credits mostly based on age. For example, those aged 20 to 29 would get a $2,000 credit. Those 60 and older would receive $4,000 to help cover insurance costs. It maintains allowing dependents to stay on parents’ insurance plans until age 26, bans coverage denial based on preexisting conditions and bans caps on coverage. On Medicaid, it gives states a per capita amount based on how much they spent in 2016. Now, the GOP plan also repeals a tax on high-income earners that helped pay for Obamacare. So who are the winners and losers and how does the new plan treat Wisconsin? We turn to expert Donna Friedsam, policy director at the Population Health Institute at UW-Madison. Thanks very much for being here.

Donna Friedsam:

Good to be with you.

Frederica Freyberg:

So as to that first question, who are the winners and losers in this?

Donna Friedsam:

Well, I should start out by saying that we don’t have the definitive evidence right now because we’re awaiting the congressional budget office to score the bill. That’s a standard procedure with legislation. Generally, when we have legislation in Congress, the Congressional Budget Office, which is a nonpartisan agency, will go through a bill and do its scoring procedure and we’ll learn from them what the bill will cost and how it will have various impacts. This is a little unusual in the fast track that we’re on right now, that the house is going ahead and voting on the bill without having the CBO score. So we can only go, given that we don’t have a CBO score, we’re expecting it to come out around March 13, right now we can only go on the various estimates out there from a range of different analysts that are affiliated with different groups or think tanks and the like. So I’m just going to preface my comments with that. From reading across the various spectrum, partisan spectrum and from different academic analysts and the like, it looks like the way the tax credits are structured and the various other provisions of the bill will have different impacts on different people. So that certainly young people will benefit from this relative to older people. People in urban areas where the premiums might be lower than rural areas might benefit. And people with higher income will benefit relative to lower income. If you want to talk about winners and losers, that’s a way of framing it. Younger people, people with higher incomes and people in areas where premiums are lower, usually urban areas, are going to so-call win and people who are older or sicker and people who are in rural areas and with lower incomes will so-call lose.

Frederica Freyberg:

So with that said, how do you think it treats Wisconsin?

Donna Friedsam:

So Wisconsin is going to be no different than other states in that regard. Wisconsin happens to have quite a large number of people relative to many other states enrolled in the Affordable Care Act or Obamacare. So we have about 230,000 people enrolled right now in Affordable Care Act plans. And that’s throughout the state. So in — our rural counties actually have larger percentages of their population enrolled in Obamacare policies than do our urban counties. So we have a fairly significant investment in our state in the Affordable Care Act as it stands today. About — of the 230,000 people that are enrolled in Obamacare, about 84% of them are currently able to enroll in Obamacare plans because of the availability of the premium subsidies, which are tax credits. So those people, the 190,000 people who currently get those tax credits in our state, are going to be at some risk with the change in tax credit structure.

Frederica Freyberg:

Because, as we described in the introduction, the tax credit structure, and, again, looking at older people and younger people, let’s say for somebody over 60, income $75,000 or less, it’s a $4,000 tax credit. How does that compare to what someone in Wisconsin in that demographic would be getting if they were enrolled in an Obamacare plan?

Donna Friedsam:

So keep in mind that the bill in the House currently, the subsidies are not linked to income. They’re linked to age.

Frederica Freyberg:

Right.

Donna Friedsam:

But it’s capped at $75,000 for an individual and $150,000 for a family. So the $4,000 credit would be available to a person over age 60 and $2,000 credit for a younger person around age 20. So $2,000, $3,000, $4,000. That’s much less in subsidy than what’s currently available under the Affordable Care Act. So while a $2,000 credit might be fairly significant for a young, healthy person to be able to buy a fairly thin health insurance coverage because that’s all they need, so maybe it will cover most of their cost, but $4,000 for a 60-year-old low-income person is not going to come near what they would need to purchase their policy. It may not even cover a third or a quarter of what they would need to purchase a health insurance policy.

Frederica Freyberg:

And then meanwhile kind of tacked onto that this GOP plan would allow insurers to charge older people five times more than they charge younger customers and that’s more also than the Affordable Care Act.

Donna Friedsam:

Right. The Affordable Care Act has what we call rate bans that allow insurers to vary the rate three to one. So a person that’s the same in every other way except age, they can charge three times more. And this bill changes it to five times more. Now, that’s not necessarily a bad idea if you provide proper subsidies for lower-income people to afford that. But the challenge here is that these subsidies are linked to age but not to income. So you could have a 60-year-old who’s making $75,000 a year getting the same $4,000 that a 60-year-old that makes $10,000 a year. And so it’s very unlikely that that low-income older person is going to be able to afford that coverage.

Frederica Freyberg:

As long as we’re talking about young and old and kind of the insurance pool, I know that the GOP talks all the time about how Obamacare is in a definite death spiral. Is that true?

Donna Friedsam:

Most — I would say that most objective observers would say that it’s not the case that Obamacare is in a death spiral. Certainly there were and are challenges with regard to trying to get more younger and healthier people into the insurance pool and there are fixes that can and should be made to either the existing law or a change in the law to get more younger, healthy people in. But a death spiral would be if we were observing a decline in enrollment, which we are not. We saw more people in Wisconsin enroll this year than we did last year. And it would say that there’s an increase in premiums that we were unable to identify reasons why and unable to fix those reasons. And that is not the case.

Frederica Freyberg:

All right. I want to ask about another prong of this and there are many more I want to ask about, but it is this issue of high-risk pools envisioned in this plan.

Donna Friedsam:

Right.

Frederica Freyberg:

Would you expect those to work?

Donna Friedsam:

So we did have a high-risk pool in Wisconsin before Obamacare. I do want to say I use Obamacare and the ACA interchangeably. And it was called HIRSP and it was a very successful plan by most accounts for what it did do. It served people who could not get insurance elsewhere and who had various conditions. The issue with HIRSP was that at the height of its enrollment, it enrolled about 21,000 people and it was still fairly expensive for people to enroll and there was a six-month waiting period for people with preexisting conditions.

People still found it fairly expensive even with some available subsidies by the state to purchase that insurance. So think about at the time that HIRSP existed and reached its peak enrollment at 21,000, we still had over half a million people in our state who were uninsured. And those people just couldn’t find available or affordable options for themselves for various reasons. So it was not a solution at the time. People do talk about various ways to make high-risk pools more tenable, but it would by most analyses require a lot more money to make it work for the population than what is contemplated in the current bill.

Frederica Freyberg:

Let's talk about, speaking of a lot of money, talk about Medicaid. The new plan would give states a per capita amount based on 2016 spending. Does that hurt Wisconsin, which didn’t take the expansion?

Donna Friedsam:

So it’s a rather complicated answer. There are provisions in the bill to allow an extra amount of money to states that did not participate in the Affordable Care Act’s expansion and to allow them to do various things to bring them toward some kind of equity with states that did take the Affordable Care Act expansion. So it’s not a direct hurt, as some people might characterize it. The bigger concern, I think, is that the per capita caps would pin the amount that the federal government is going to pay the state to 2016 outlays and whatever we’re paying now per individual, according to five different groups: children, parents, elderly, et cetera. And it would say whatever we’re paying now plus the rate — the CPI and 1%, that’s what the federal government is going to contribute going into the future regardless of what the expenses turn out to be for these different populations. And I think most, many analysts would suggest that the rate of cost for these populations is very likely going to exceed that rate of inflation, number one. And for Wisconsin right now, we actually are at the low end of what we pay per capita for several of these populations relative to other states. So we’re going to start out at a baseline getting a lower per capita payment than many of these other states and in that regard we may end up being relatively disadvantaged.

Frederica Freyberg:

Let's take a listen to another soundbite from Speaker Paul Ryan who was talking specifically about how states can manage their Medicaid.

Paul Ryan:

Our problems in Wisconsin are a whole lot different than the problems they have in New York or in Nevada or in Utah or California. So we propose more efficient spending, bring the spending on Medicaid to something that is sustainable so it doesn’t go bankrupt and have a safety net for the most vulnerable. Give local control to our states and our governors so they can craft and customize Medicaid to work for their populations.

Frederica Freyberg:

When he says bring the Medicaid to something that is sustainable, does that sound like a cut?

Donna Friedsam:

Well, I mean, people use the word differently, but certainly it may be sustainable for the federal government. It will certainly provide some control and large cuts in the amount of federal spending toward the Medicaid program. The states are going to be left having to manage with a lot less federal money in their pockets. For the current Medicaid program and going forward, they will have a declining amount of federal share and will have to figure out how to work with much less federal contribution. The only way to handle that, there’s three ways. They can reduce the eligibility, so the way that people can get enrolled in the program. They can reduce the benefits in the program. Or they can reduce payments to providers. But they’re going to have to figure out as the rate of costs in the Medicaid program increase more than the federal contribution, states are going to be left having to handle that within their own budgets, unless they’re willing of course to allocate more money to the Medicaid program.

Frederica Freyberg:

Now overall does this new plan in your estimation result in fewer people being insured, as Tammy Baldwin would say?

Donna Friedsam:

From what we know today — and again we’re waiting for the Congressional Budget Office to weigh in so I don’t have definitive estimates, but the various estimates that are out there suggest that anywhere from 10 to 20 million people will lose insurance under the current plan. And if you listen to the House leadership talking about the plan, they’re not trying to suggest that that isn’t the case. They’re saying we’re not trying to measure the plan by the amount of people covered under insurance. We’re measuring the plan by a number of different factors. And so I think that we need to decide are we interested in maintaining the level of insurance coverage per se or are we interested in some other policy goals?

Frederica Freyberg:

All right. We need to leave it there. Thank you very much for your expertise on this.

Donna Friedsam:

Thank you.