The health reform bill proposed by the White House and Speaker Paul Ryan is predicated on the political assertion that Obamacare is a “disaster,” characterized by collapsing insurance markets and soaring premiums.
Some states have had problems, to be sure – and the Affordable Care Act (ACA) could stand some tweaking. But if your income is low and your age is high, the real disaster is the proposed American Health Care Act (AHCA).
The official congressional report card on the AHCA was released this week, and it concludes that older, low-income Americans will be its biggest losers – ironically, many of the households that supported Donald Trump’s bid for the White House.
The AHCA will jack up premiums for older low- to middle-income users of the commercial insurance exchanges, and roll back Medicaid coverage for very low income households, according to the nonpartisan Congressional Budget Office (CBO).
Just as important, the AHCA proposes massive Medicaid funding cuts that would reduce available financing for nursing home care in the years ahead – just as demand for care is due to explode.
Overall, the CBO found that 24 million Americans would lose health insurance coverage in 2026, if the plan being considered by the House of Representatives to replace the ACA were adopted. The coverage loss would fall disproportionately on older people with low income, the report found. The bill would remove the individual mandate requiring people to buy insurance – and it would make exchange-purchased insurance plans more expensive.
First, it would loosen current restrictions on “age rating” – the extra amounts that insurers can charge older customers. Under the ACA, insurers can charge older enrollees three times as much as younger ones. Under the AHCA, they could charge five times as much.
Second, the AHCA repeals the Obamacare subsidies that offset premiums for many lower- and middle-class buyers based on income, and replaces them with flat tax credits based on age. The change will not impact higher-income and younger buyers much – and it could even reduce premiums in some cases, the CBO found.
But premiums for a 64-year-old earning $26,500 would increase by an eye-popping $12,900 in 2026, from $1,700 a year now to $14,600, CBO reports. Going beyond the CBO analysis, analysis by AARP shows that a 60-year-old income of $25,000 would pay $5,605 more annually, and $3,636 at age 55 (see chart).
Meanwhile, the AHCA proposes a fundamental transformation of Medicaid that would slash resources available to states to help cope with aging populations.
Currently, Medicaid is jointly funded by states and the federal government, with funding determined by actual healthcare spending need. Under the AHCA, federal funding to states would be capped on a per-beneficiary basis, based on what they spent in 2016, with specific targets for each category of Medicaid enrollees (the elderly, disabled, children and low-income adults), plus an inflation adjustment. The Center on Budget and Policy Priorities estimates that this provision would shift $370 billion in costs to the states over the next ten years.
Medicaid is the nation’s largest funder of long-term care – in 2014, combined federal and state spending was about $152 billion, dwarfing the $9 billion paid out by private long-term insurance underwriters, according to AARP research. Capping the available dollars to meet long-term care need would force states to cut back spending or fill the gaps without federal assistance.
The AHCA also threatens Medicaid funding for a program that helps low-income seniors on Medicare pay for their healthcare. The Medicare Savings Program helps pay for Part B premiums and out-of-pocket costs. Although federal Medicaid dollars for the program are exempted from AHCA cuts, 12 states and the District of Columbia have opted to expand the program’s benefits by loosening asset or income eligibility tests, and those expansions could be threatened under AHCA, possibly impacting 2.4 million Medicare enrollees, according to an analysis by the Medicare Rights Center.
Meanwhile, Tricia Neuman of the Kaiser Family Foundation (KFF) notes that the AHCA’s repeal of the Medicare payroll tax on high-income earlier would hasten the insolvency of the hospital insurance trust fund, which finances Medicare Part A:
— Tricia Neuman (@tricia_neuman) March 15, 2017
KFF has posted an interactive tool that compares the tax credits available in the insurance exchanges under the ACA and the AHCA for specific geographical areas. If you’re worried about how you might be affected should this become law, check it out.
Learn more about how the AHCA would affect older Americans in my column this week at Reuters Money.