Three new health care reform initiatives -- from the political right, left, and center – are developing in the Senate. Earlier this week I joined CNBC's Nightly Business Report to discuss the proposal up first for consideration: the Graham-Cassidy bill, which would turn the ACA into a system of state grants. You may watch the video of my appearance here.
Here is our description of the initiatives that we provided to CNBC:
Right: A bill sponsored by Senators Graham and Cassidy would keep in place virtually all of the taxes and fees imposed by the ACA and transfer those funds to the states proportionally. Each state then would use the funds to adopt its own health care program. The bill would keep in place the requirement that people with pre-existing medical conditions may purchase insurance on the same terms as healthy people, but would do away with the individual mandate penalty that requires everyone to obtain health insurance.
By allocating money proportionally among states, the bill would reduce funds received by states that expanded Medicaid and give those funds to state that didn’t. Thus, some low income residents of the former states likely would lose insurance coverage. In addition, the elimination of the individual mandate could result in fewer healthy people purchasing insurance, leaving the insurance pool with a greater proportion of sick people. With fewer healthy people to spread the risks among, insurance companies likely would have to raise premiums to cover the greater proportional outlays.
These concerns – less coverage and higher premiums – doomed the prior Republican attempts to reform the ACA. But the CBO says it will not be able to estimate the comparable effects of Graham-Cassidy before that bill comes to the floor. The Senate must consider the bill this month to use arcane procedural rules that allow passage with 51 votes. After then, the Democrats could filibuster the bill to prevent its passage. The question is whether the Republican senators who voted against the prior attempt will maintain their objections in the absence of a CBO estimate. An early guess (difficult without knowing more) is that obtaining the necessary votes will be a challenge.
Left: Bernie Sanders and other Democrats are agitating for a “single payer” system in which the government would cover virtually all medical expenses, without the need for private insurance. Essentially this proposal would expand Medicare to cover everyone, not just the elderly. The proposal stands no chance in a Republican-controlled Congress, but could be a factor in next year’s election campaigns.
Middle: A bipartisan group is considering legislation to stabilize the ACA. At issue are ACA subsidies that defray the cost of deductibles and expenses imposed on lower-income families. The subsidies are discretionary with the administration, and President Trump has not yet decided whether to pay them. Without those subsidies, insurance companies must raise premiums, as much as 20% according to the CBO. In addition, the administration could choose not to enforce penalties imposed on people who do not purchase insurance. If the administration announced such, then fewer healthy people might purchase insurance, causing an increase in premiums to cover a pool with a higher proportion of sick individuals.
Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance, and retirement products. They may be reached at www.TheWashingtonUpdate.com.
The authors of this paper are not providing legal or tax advice as to the matters discussed herein. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities). Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.
Copyright Andrew H. Friedman 2017. Reprinted by permission. All rights reserved.
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