The Better Care Reconciliation Act is a mix of good tweaks, bad provisions, and ugly politics.
THURSDAY MORNING, Mitch McConnell, the taciturn Senate majority leader, bequeathed his health-care solution to the American public after a period of suspense and bated breath. Mr. McConnell’s bill, the Better Care Reconciliation Act (B.C.R.A.), makes some gestures toward a better health-care system but remains deeply flawed—both because of its substance and the way in which the legislation was drafted.
“It is of great import to shelve partisan warfare and approach this bill, which may well become law, with a level head.”
Liberals—including Obamacare’s eponymous proponent, former President Barack Obama—have already begun to decry the B.C.R.A. as a “mean” bill that would hurt the most vulnerable in favor of giving tax cuts to the rich. Drew Altman in The New York Times went as far as to call the B.C.R.A. a “Jekyll-and-Hyde health care plan.” Broadly speaking, the liberals have a point. But it is of great import to shelve partisan warfare and approach this bill, which may well become law, with a level head.
The Good
The Affordable Care Act (A.C.A.), otherwise known as Obamacare, was as all compromise legislation inevitably is: imperfect, clunky, but fundamentally fixable. The B.C.R.A.—which, to the dismay of some hard-right senators, is not a full repeal of the A.C.A.—picks up some of the slack where Obamacare fell short.
The Republican health plan establishes a $112 billion “Patient and State Stability Fund” to prop up the A.C.A.’s ailing health-care exchange markets, which is slightly less than the $130 billion previously appropriated in House Republicans’ American Health Care Act (A.H.C.A.). The money would be doled out incrementally between 2018 and 2021 and would aim to reimburse loss-making insurers. With insurance providers like Anthem fleeing the Obamacare exchanges, some kind of stability fund is desperately needed. It must be noted that in 2015 congressional Republicans, led by Florida Senator Marco Rubio, crippled the A.C.A.’s “risk corridor” provision, which could have helped prevent today’s unstable Obamacare exchanges by spreading year-to-year risk amongst all the insurance providers in an exchange.
The A.C.A. included an “age variation ratio” that aimed to rein in health-insurance costs for the elderly by capping the prices insurance companies could charge people over a certain age. We believe that this ratio should be widened from 3:1 to 5:1. Between Medicare for the oldest, Medicaid for the poorest, and means-tested (i.e. income-adjusted) subsidies for all the rest, such a change would “allow insurers to charge the old, who receive larger compensatory subsidies, higher prices, which drives down costs for the young,” as we argued in March. Obamacare exchanges are, of course, healthier with more young and healthy people, who are less risky and therefore less costly to insure, allowing insurance providers to keep prices down for everyone else. The B.C.R.A. makes exactly this change, and we commend it.
One of the biggest miscalculations of the Obama administration in drafting the A.C.A. was to assume the law’s expansion of Medicaid—which was broadened to provide care to everyone below 138% of the poverty line, instead of only certain groups like the disabled—would be accepted by the courts. So, when the Supreme Court ruled that the Medicaid expansion was an illegal exercise of federal power (N.F.I.B. v. Sebelius), the administration was caught off guard. They settled on an odd legal regime wherein some states opted into the Medicaid expansion, as thirty-one have already, but others refused additional federal funds to expand the health-care program on principle.
However, this legal regime came with an unfortunate oversight. The Obama administration had made the assumption that able-bodied people below the poverty line would be covered by the Medicaid expansion and, as such, didn’t allocate subsidies on the exchanges for these people. But following the Supreme Court ruling, an entire segment of the population—poor, able-bodied individuals in the nineteen states that haven’t expanded Medicaid—was left out to dry. The B.C.R.A. corrects this omission—and rightly so.
A few other provisions of the B.C.R.A. look promising as well. It expands tax-exempt health savings accounts, which were capped under the A.C.A. at $6,750 for families, letting people put money up to their legal maximum for out-of-pocket costs (which is based on a percentage of income). It preserves the highly popular Obamacare provision that allows dependents to remain on their parents’ health-care plan until age 26. Lastly, it allocates $2 billion for combating the opioid epidemic, which has rapidly metastasized into a full-blown public health crisis.
The Bad
Despite its few upsides, the B.C.R.A. has a litany of problems, many of them deep-seated.
The House’s A.H.C.A. replaced Obamacare’s “individual mandate,” which requires all Americans to obtain insurance or pay a fine, with a “continuous coverage” provision, inflicting a punitive 30% surcharge on individuals who let their coverage slip and then try to re-enter the exchanges. There are a lot of shortcomings in that approach; for one, continuous coverage creates lopsided incentives by punishing individuals with short lapses in insurance coverage the same as those with long lapses. In other words, people who have let their coverage slip are incentivized to wait as long as possible to re-enter the exchanges, since the surcharge is the same either way.
But at least the A.H.C.A. attempted to replace the individual mandate. The B.C.R.A. has nothing—no retention mechanism whatsoever for keeping people in the exchanges. This is extremely problematic. The individual mandate is meant to nudge lower-risk young people into the exchanges. Without healthy, young people there to offset, companies are less able to absorb the cost of insuring older, sicker people. So, without any provision at all for keeping the young in the exchanges, we start heading into “death spiral” territory, where a lack of healthy people in an exchange pushes up costs for everyone and thus edges out more healthy people—and so on.
Unless the bill is amended, the B.C.R.A. appears to set the exchanges on a direct course toward collapse. Mr. McConnell & Co. are astute legislators and are surely aware of the reality of the situation. Senate Republicans’ refusal to include any mechanism—even a bad one—for keeping people in the exchanges is as baffling as it is irresponsible.
The B.C.R.A. would introduce a new, looser waiver system, under which states could opt out of federal health-insurance regulations. This would lead to many states shedding key A.C.A. regulations, such as “essential health benefits” (E.H.B.) and the ban on annual and lifetime limits. Obamacare’s E.H.B. clause mandates all health plans cover a list of ten essential benefits, including maternity care and hospitalization. Annual and lifetime limits, which Obamacare banned, placed caps on annual and lifetime spending for the most expensive patients. By doing away with these limits, Obamacare ensured patients with costly chronic illnesses are not priced out of coverage.
One of Obamacare’s most important successes was setting a standard for how much health care needs to be provided under a plan to qualify as a health-care plan. This was done by setting an “actuarial value minimum”—the percentage of total costs a plan must cover to qualify as health insurance. The B.C.R.A. bumps the actuarial value minimum for mid-level plans, to which federal subsidies are tied, from 70% to 58%, effectively providing lower quality health-insurance plans for the same cost. Between lower actuarial value minimums and an opt-out program for E.H.B., the B.C.R.A. poses a major threat to the quality of health coverage nationwide. Without a set of federal standards for care quality, health care could return to the pre-A.C.A. free-for-all. To underscore the point, consider the reductio ad absurdum: America could find itself in a paradigm where state borders determine whether health-care plans provide health care.
In today’s Wall Street Journal, one analyst was quoted as praising the Senate health bill for including temporary funding for cost-sharing subsidies, which help insurance companies recoup losses on the lower co-pays and deductibles paid by low-income Americans under the A.C.A. Such praise is misplaced. The swirling uncertainty around the future of cost-sharing subsidies has been a major impetus for health insurance companies pulling out of the Obamacare exchanges. By not making an open-ended commitment to funding these subsidies, Senate Republicans are demonstrating an indifference to the future stability of the exchanges, which would inexplicably undermine the aforementioned stability fund established in this very bill.
The B.C.R.A. continues the right’s holy war against abortion rights. It defunds Planned Parenthood for one year and bars Americans from using federal tax credits to pay for health plans that offer abortion services. This siege on women’s liberty is and always has been a disappointing display of insouciance from the party that once nobly advocated individual freedom and choice. A growing body of evidence suggests that abortion restrictions are ineffectual and harm women’s health outcomes. It appears as if these provisions have little to do with health-care policy and all to do with placating the pro-life crusaders in the Republican Party.
The B.C.R.A. significantly downsizes the sliding-scale subsidies provided in the Obamacare exchanges to make coverage more affordable. It would then use the money saved on funding these subsidies, as well as from Medicaid cuts (discussed below), to repeal several Obamacare taxes, many of which disproportionately impact the rich. Such a trade-off is hard to reconcile. One A.C.A. tax in particular, a 3.8% levy on capital gains, may have depressed investment, but the revenue from this tax was used to get tens of millions onto health-insurance plans, largely through the expansion of Medicaid. Even if Mr. Obama’s approach was flawed, how exactly does a $33 billion tax cut improve health outcomes or stabilize the exchanges?
Many on the left are beginning to skewer Mr. McConnell for, as they see it, increasing health-care costs for the poor to fund a capital gains tax cut for the rich—a reverse Robin Hood of sorts. The liberals are right. If Mr. McConnell is unable to successfully explain to the public why this trade-off is a good one—and it is not—he will be setting his party up for a 2018 landslide.
The B.C.R.A. is part of a long-running effort by the right to pare back Medicaid and, more broadly, entitlement spending. While simultaneously rolling back the Medicaid expansion over four years, it would change nature of Medicaid funding from the current system, wherein the federal government makes an open-ended commitment to cover a percentage of each state’s spending on Medicaid programs. Instead, the B.C.R.A. would dish out Medicaid funding through “per-capita grants,” allocating a fixed amount of money based on a state’s population. Additionally, it would tie the growth of this fixed, per-person amount to an inflation index (technically, medical C.P.I. plus 1%).
New research from the Brookings Institution indicates that an inflation-linked spending formula would amount to a massive cut in Medicaid spending over time. Putting aside the fact that the money saved by cutting Medicaid would be used to fund tax cuts for the wealthy, Medicaid has an excellent return on investment, as Dr. Aaron Carroll explains in The Times. It is true that entitlement spending is out of control, but this is the wrong solution. Increasing the retirement age as it pertains to Medicare and Social Security would be a better way to curb entitlement spending without throwing the most vulnerable members of society into a health-care limbo.
A few other notable provisions: the B.C.R.A. kicks the can down the road with the long-overdue “Cadillac tax” on generous—i.e. high premium, low deductible—employer-sponsored health plans. It delays the implementation of this key tax until 2026—when it will doubtless be delayed again. The Cadillac tax is an imperfect but necessary measure to help correct the economic distortion caused by a federal tax exclusion for employer-sponsored health insurance. We would prefer a full repeal of the tax exclusion, as put forth in our May editorial, but given its popularity, the Cadillac tax is a reasonable compromise. The B.C.R.A. also repeals the employer mandate, which required companies of certain sizes to provide health insurance to its employees. The employer mandate was a mixed bag, helping the employees of large companies but placing an undue burden on small businesses. We would rather see the employer mandate reformed to be less constricting to small businesses than repealed outright.
The Ugly
We now find ourselves in an American moment where narrow political goals supersede the good of the country. Mr. McConnell drafted the Better Care Reconciliation Act in a closed-door setting, where even senators who were supposed to help draft the bill didn’t know what was in it. The B.C.R.A. was released Thursday; a Congressional Budget Office (C.B.O.) “score” (i.e. estimate) is expected on Monday; and a vote on the bill could take place as early as next week.
By his own admission, Mr. McConnell doesn’t believe he can get the 50 votes necessary to put the bill into law. So then, why is he pushing so hard to rush the B.C.R.A. onto the Senate floor for a vote? Ostensibly, Mr. McConnell is running up against the July 4th congressional recess; yet, no rule exists saying he must get a health-care bill done in this particular session of Congress. If the goal was to get a solid piece of legislation passed, the process would allow for feedback from Democrats, industry players, and think tanks. The media would be given time to inform the public, and opinion polls would give the Republicans pointers on which provisions would and wouldn’t be popular.
But none of this is happening. From what we can distill, Mr. McConnell is engaging in an astounding exercise of political cynicism. The whole of the Republican Party ran their 2016 campaigns on a “repeal and replace” mantra, spearheaded by Donald Trump’s quixotic, often contradictory promises on health care. As such, Mr. McConnell has made the political calculation that he would rather take a vote on any health-care bill—even if it were to fail—than go home to constituents having not even tried to repeal Obamacare. Republicans would then be able to hide behind hollow excuses—something along the lines of “we tried, but the Democrats obstructed.” There is a pervasive sentiment among Republican leadership that health-care reform is a dead end; many in the House and Senate believe it’s time to move on to tax reform. It is therefore clear that Mr. McConnell and his cadre of Senate Republicans are not fully serious about repairing the health-care system.
“If partisanship has become so caustic that legislation becomes secondary to re-election campaigns, then we have lost our way.”
Mr. McConnell’s dereliction of duty on health care bodes poorly. American democracy is founded upon a shared desire to make the country better through smart legislation and compromise. If partisanship has become so caustic that legislative successes become secondary to re-election campaigns, then we have lost our way.
The right, as well as this blog, believes that single-payer health care would be a policy mistake. But as The Wall Street Journal editorial board noted, “If Republicans fail, the next stop is single payer.” So, if the B.C.R.A. fails in the Senate, as it seems it will, one hopes Republicans will continue to support the Obamacare exchanges by funding cost-sharing subsidies and enforcing the individual mandate.
We would endorse a thought-out conservative health-care solution that combined health savings accounts, high-risk pools, and tax credits to let the power of markets, guided by the federal government, build upon Obamacare’s successes and learn from its failures. But until the day that the Republican Party starts treating health care with the gravitas it deserves, we wait still longer.
