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The House of Representatives passed the American Healthcare Act (AHCA), commonly known as Trumpcare, making the bill now eligible for review by the Senate. The Senate is however planning to come up with its own version of the AHCA. The AHCA is meant to replace the Affordable Care Act (ACA), more popularly termed as Obamacare. There are essential similarities and differences between these two acts, and this study will critically compare these two acts mostly in the hope of establishing a better understanding of the two healthcare policies and the issues as well as the benefits the policies bring and have brought to the table. The AHCA is one step away from being passed as a healthcare bill, effectively repealing Obamacare. Estimates indicate that during Obamacare, the Congressional Budget Office noted that where the ACA would persist in being the ruling health law of the US, there would be no change in the number of uninsured Americans for about 10 more years.
At present, there are 28 million uninsured Americans, but following the implementation of Trump’s AHCA, the CBO estimates that by 2026, there would be 54 million uninsured Americans. In terms of the individual mandates, under Obamacare, all Americans have to have an insurance policy, or else a tax penalty would be imposed upon them. Under the AHCA however, the tax penalty mandate is repealed, but those who would not have insurance for more than 63 days are to be penalized a 30 percent surcharge for a year on their insurance premiums.
As for employer mandates, the ACA calls for companies having more than 50 employees to secure health insurance for their workers, or else be penalized; but Trumpcare, rejects such a mandate. In terms of taxes, under the ACA, Medicaid taxes were increased in order to support the new health system, mostly for those who have higher than $250,000 income. There is also an imposition of new taxes on those manufacturing medical devices, on drug companies, on tanning salons, on those providing high-end health insurance coverage, on health insurers, as well as on investment income providers. ACA has provided tax credits for middle-income earners in order to assist in out-of-pocket payments. The AHCA seeks to repeal such taxes.
In discussing essential health benefits, the ACA requires all insurance plans to cover various health issues and to provide all types of services including yearly physical exams, mental health services, health services for women, and the cost of prescription drugs. The AHCA on the other hand, allows each state to waive these requirements. In relation to Medicaid, the ACA provided an expanded coverage, mostly to benefit the lower income individuals, but the AHCA is planning to end federal funding for expanded coverage by 2020. The ACA also does not allow for health insurers to deny coverage of individuals with pre-existing medical conditions including heart disease or asthma. For the AHCA, states are allowed to waive their rules in terms of stopping insurers from indicating more changes for new customers because of a pre-existing medical condition. In other words, states can choose not to implement the requirements of the ACA if they secure high-risk insurance plans for those who are unable to afford traditional insurance packages. New changes to insurance in American indicate about $8 billion as a subsidy in support of insurance for pre-existing conditions.
Some provisions of the ACA were retained by the AHCA. Both the ACA and the AHCA allows for coverage for children by their parents up to the time they are 26 years of age. Insurers are also allowed not to indicate an annual or lifetime limit on the amount they would reimburse to the insured for their essential health benefits, including their doctor’s services, inpatient as well as outpatient hospital care, mental health services, and coverage for prescription drugs.
The report from the Congressional Budget Office presents a huge issue for the AHCA and the Congress’s eventual efforts to have the law passed by the Senate. About 23 million would likely lose their insurance due to the passage of the current version of the AHCA, and those who would likely be affected the most are the low-income Americans, those who are older, including those who are sicker. The reduction in Medicaid according the AHCA is equivalent to about $834 million and once again, those who would likely suffer this reduction would be the low and moderate income Americans. The expanded coverage of the Medicaid would also be put to an end and its funding structure is also set to change.
In the context of the ACA, the federal government and each state shared insurance costs for the poor and federal funding for each state is often based on the amount received by each state in terms of Medicaid. The federal government under ACA covers practically the whole cost in Medicaid for 30 states (plus the District of Columbia) for low-income adults who had no children, where these states did not choose to expand their Medicaid coverage. In more specific terms under the AHCA, there would be a fixed “per-capita cap” or “blocked grant” to be set in place with the different states indicating a specific amount for each year and such amount increasing with each year based on inflation rates. Any additional federal support for expanded Medicaid coverage would be discontinued by 2020.
By 2020, the average premiums for insurance plans would be cheaper based on Obamacare; however on average, such plans would have a lower coverage with more out-of-pocket payments as reported by the CBO. The winners or losers in the AHCA proposal are likely based on different factors. In general, the AHCA is likely to cover less health insurance for those with lower income as well as those in the higher cost levels. In a study by the Kaiser Family Foundation, they established that for an older American, with lower income rates and living in areas which have higher premiums (Alaska or Arizona), he or she is likely to lose out where the ACA is repealed. The younger Americans who are in the higher income levels and are living in areas with lower premiums (Washington, for instance), they are likely to be beneficiaries to added assistance under Trumpcare.
In Obamacare, those in healthcare settings, earning less than $48,000 annually are beneficiaries to subsidies which help them afford insurance. The subsidy is associated with their income and is associated with insurance cost in the area where he or she lives. Subsidies are immediately applied to their monthly insurance payments and there is no need to wait for a rebate. In the AHCA plan, Americans would still be able to benefit from subsidies, and these subsidies would be gradually be phased out where incomes are at $75,000 annually. The amount would be associated with the individual’s age, not his income. In effect, the low income individuals would not be able to access as much health assistance. The subsidies would also not be different in relation to the cost of insurance. As a result, those in high cost areas would not be able to secure as much assistance.
In further reviewing the policy related to preexisting conditions, those with preexisting conditions would be able to experience a major difference in the coverage they would be receiving. Originally, insurance coverage would still apply even if there are pre-existing conditions. This policy was meant to end the practice of insurers not allowing coverage for those who had preexisting conditions. The insurers were also not allowed to increase their charges if the insured had a preexisting condition. These insurers were also not allowed to indicate limits to coverage. The insurers also had to be able to provide numerous benefits including mental health benefits, maternity care, as well as prescription drug access. Older consumers could also not be charged higher as compared to the younger consumers. In the context of the AHCA policy, guaranteed coverage was not explicitly eliminated but the act allows states to waive consumer protection claims. States are also allowed to hold back or reduce benefits which insurers had to cover. Due to the structure of the law, insurers may allow the re-imposition of annual or benefit limits on specific items of coverage. States, under AHCA could also charge those who are more sick higher costs in insurance. This means that insurance can be very expensive for some individuals; moreover, insurers can actually impose higher insurance charges for the older individuals, up to five times higher than those who are younger.
While the insurance market would still be very much in place under the AHCA, major changes would be implemented. Originally, Obamacare provided for some insurance marketplaces like the HealthCare.gov and such marketplaces allowed for individuals who do not enjoy health benefits in their work to compare available insurance plans online. These marketplaces present different set benefits, including hospital care, coverage for the cost of prescription drugs, including mental health services. Under Trumpcare, there is no clear indication about marketplaces; moreover, insurers may prefer to present health plans which do not provide similar benefits.
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As for women’s health, Trumpcare imposes new policies on abortion, not allowing for abortion coverage and also effectively removing fund allocation for Planned Parenthood. Under this planned change, lower income women are likely to be the most affected. The ACA actually indicates that insurance companies are not allowed to charge women more than they are charging for the men for similar health plans; also, insurers are called on to provide specific benefits including maternity care, pediatric care, and the cost of contraceptives. Under Obamacare, Planned Parenthood has been allocated federal funding, mostly for families supporting family planning including related medical services from Medicaid beneficiaries. Abortion is also not covered under the ACA. Under the AHCA, the insurance companies are still not allowed to charge women higher insurance premiums. States are also allowed to avail of waivers, ensuring that insurers can choose to remove some basic benefits, including maternity care and the cost of contraceptives. Medicaid, under AHCA would not anymore have to cover such benefits, and this can significantly affect lower income women. A good 80% of Planned Parenthood patients are considered low income patients, or very much below federal poverty levels.
The AHCA is expected to significantly decrease the federal government’s deficit up to $118.7 billion by the year 2026, mostly by reducing Medicaid and decreasing subsidies which assist individuals in settling their insurance payments (CBO). The decrease in deficit is not as much as the earlier expectations of the framers of the AHCA which they set at $337 billion. As for taxes, the taxes developed under Obamacare to help subsidize the ACA were also repealed and the AHCA does not indicate new taxes or sources of taxation to support revenue loss. The ACA, insurance companies including those making medical devices are charged more taxes and taxpayers at annual incomes of $250,000 were charged higher incomes. The AHCA indicates that those making and manufacturing medical devices including the wealthy Americans and the insurance companies would be given a major tax cut as the charges indicated under ACA would no longer be collected. This tax cut is actually equivalent to about $663 billion (10 year period).
One of the questions raised under the AHCA is whether the US would have functioning markets where the people can buy health insurance after the ACA is finally repealed and then replaced. About 20 million Americans depend on such functioning markets for their insurance and therefore their access to healthcare is also very much important to secure a good future for the US healthcare system. To fully appreciate the persistent issues relating to the individual, group, non-groups as well as insurance markets, it is important to recognize that first, the insurance markets were already distressed even before the ACA was passed; second, the ACA was able to perform better, but its improvements were still not sufficient to stabilize the existing insurance markets at that time. Lastly, the AHCA also does not seem to offer a way to stabilize the insurance market. The reforms being suggested for America’s health insurance include a better balance between the premium subsidies as well as penalties when coverage is not taken up, applying effective tools in managing risks – reinsurance, more immediate efforts to manage higher health care costs. At present, the US is still lacking in political will to apply these measures and reforms.
Individual insurance markets were already going through some issues even before the ACA was passed in 2010. Premiums were rising about 10% annually without the policies being improved or expanded. These premiums did not include individuals with pre-existing conditions, and those with higher health risks including women were charged higher. There were also limits imposed on annual as well as lifetime benefits and individuals who later became sick were not allowed to renew their policies. By 2010, there were 9 million individuals who were turned down insurance from the available individual markets; some were charged higher rates or were excluded in specific conditions due to developing health issues.
With the prospect of unsubsidized premiums as well as problematic insurance policies, most consumers who tried to actually avail of insurance plans remained uninsured. Under these conditions, only healthy ones and those with high incomes were able to access health insurance premiums. New Jersey experimented at one point with the practice of requiring all insurance companies to take all those who wanted to buy insurance, regardless of any preexisting conditions. They however experienced a gradual decrease in enrollees and increasing premiums as this state did not secure essential reforms which should have included subsidies to support enrollment by healthy individuals. Reverting to the conditions before the ACA is not a good option for specific individual markets.
The ACA was able to secure major changes to the individual insurance market by developing federal rules which would manage insurance sale polices, calling all Americans to buy insurance and giving them tax credits to help them pay for such insurance. Insurers were called on to provide comprehensive care plans to all who sought insurance with changes in premiums only allowed based on age, tobacco use, as well as geographic location.
The impact of the ACA has been significant with the individual market including the ACA marketplaces doubling since 2010 figures. There were now less people reporting difficulties in availing affordable plans and majority of those with insurance indicating satisfaction with the insurance marketplace plans. Most of those availing of this market have indicated that they have applied their plans to secure healthcare services which they could not access or afford before. However, gaining stability in the insurance market within the ACA framework has called for strong and robust enrollment. National enrollment numbers using the insurance marketplaces were much less than projected forecasts. This relates to the fact that numerous consumers did not know that they could access subsidies and there was opposition to the law and this caused various states to reject outreach as well as enrollment. There were also major affordability problems for those enjoying high incomes, higher than 400% of federal poverty levels who did not reach eligibility in tax credits. Penalties for not securing insurance have not been substantial, in some instances lower than the cost of actually purchasing insurance.
The carriers have also been supported by unstable regulations and the changing political climate. Numerous legal issues relating to the ACA and subsequent changes in the market as well as in the policies created issues for carriers in securing appropriate prices. With lower enrollment as well as regulatory issues, carriers experienced problems in indicating corresponding prices. With fewer enrollment and issues in regulation, financial losses were experienced by carriers and some became less effective in responding to price-sensitive consumers. Participation in plans reduced in the 2016 up to the current year after an increase in 2015 was noted. Trends are different for various states. Premiums for instance for some states increased significantly this year with adjusted premiums noted for high risk patients. Such increases were also related to a phase-out in the temporary insurance program for this year. Even with these issues, Standard & Poor’s insurance estimated that by December, insurers overall performance in the individual setting would actually be better than in previous years with some insurers earning profits or atleast breaking even. S&P saw this year’s insurance premium increase as pricing corrections and the next years would actually note a decline in premium enrollees. The CBO also noted this year March that individual markers would experience instability. Still, the current levels of enrollment are optimal and for some markets, limited participation for insurers is affecting effective competition as well as related choices.
The current AHCA which was passed by Congress is likely to cause losses in enrollment in the individual market. It would also not support enrollment as it would replace the tax credits with more stringent and age-based tax credits. This would mean a rise in what the lower and middle income population is paying for coverage. The AHCA also implies a rejection of the cost-sharing subsidies which the ACA has set in place. The AHCA also discards individual mandate, replacing it with sustained coverage requirement which would increase premium by 30% for those who have allowed their insurance to lapse in the year previous. The CBO admits that the AHCA would decrease the number of individuals accessing the individual market (9 million by 2020). However, the office also indicates that premiums would be lower for young adults, but higher for older adults. This would imply that the pool of uninsured would be a healthier marker but the number of older adults who are uninsured is likely to increase. The AHCA also allows for states to manage their markets better and the CBO predicts that there would be reinsurance. Such factors would imply an increase in enrollment by 2026 however the number of those enrolled would stay lower as compared to when the ACA was in place where the unenrolled was projected to be at 2 million. CBO predicts that the insurance market would likely be more stable in the AHCA context however the way the AHCA will set out to achieve stability within the individual market would be by decreasing the use of insurance for those who actually need it.
The repeal of the ACA is likely to cause significant reductions in federal funding for healthcare, possibly leading to numerous issues including unemployment as well as serious economic problems for most states. Such losses would not only be confined to hospitals, clinics, or event patients; businesses, workers and various sectors of society would also be affected. As economic benefits including losses cross state lines, states which did not undergo expansions in their Medicaid would also likely go through losses where the expansions were to be reversed. The findings in the study by Ku and colleagues are very much significant partly due to the perception (which has been debunked) that Obamacare has contributed to job losses. The results indicate that job growth was experience since the ACA took effect with the economy also experiencing some gains. The economic issues felt by states and other health providers are set to be very much burdensome issues; numerous safety-net facilities including hospitals and community health centers are serving many of the uninsured and Medicaid patients and the repeal of the ACA would mean that these facilities would be hard hit. Studies also indicate how the expansions made in Medicaid have brought about benefits in terms of ensuring that there are less uncompensated burdens for hospitals; such expansions have also translated to improved capacities for community health centers. The repeal of the ACA practically translates to negative consequences for these expanded benefits. Consequently, states may be prompted to consider either reducing the vital services they are offering or increasing their tax rates.
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Analysis and Discussion
A crucial issue following the repeal of the ACA would relate to the type of policies which can be used to replace the repealed provisions. The more conservative policy-makers have opted for an expanded application of deductions in health insurance, to replace tax credits and ensure health coverage to prop up health savings accounts. Although tax deductions are able to decrease costs among those with higher income, those at higher marginal tax rates, and those who are already insured, they do not provide much assistance to those at lower or moderate incomes.
The RAND Corporation analysis indicated that with higher and more expansive tax deductions indicated by Trump’s team, federal costs would increase and not much would be secured in terms of insurance coverage. Savings would likely assist those who have higher incomes. The ACA however focuses its assistance towards the low and moderate income families. With assistance provided to healthcare, the low and moderate income families would be able to increase their spending towards other needs, and thereby helping stimulate the economy.
Another primary issue relates to the question of additional states and whether these would be able to improve their Medicaid programs before the ACA is repealed. So far, such reforms were not implemented before the ACA was repealed. Most states may simply opt to make the reforms under a Republican government if they see that they would have more room to expand. A related problem is on federal funding in expansion and whether it would be sustained when the repeal would be implemented. House Speaker Ryan Paul suggested Medicaid conversion into a block grant which would be able to secure less funding for states. It is presumed that federal block grant funding levels for states would be founded on federal allocations within a baseline period. Whether or not Medicaid expansion allocations would be indicated for state baselines in block grants, allowing states to still has future expanded coverage is one of the issues which have to be answered under the new AHCA. This may help reduce economic damage, but at present, the plans of the AHCA are vague on this matter.
Analyses indicate that the repeal of the ACA would increase the number of uninsured Americans, as well as decrease Americans’ ability to secure affordable and quality health services. Healthcare services would also feel the major burden of delivering health services to the general population. This analysis also indicates how the impact of the repeal of the ACA can impact not just the healthcare system, but also other aspects of governance including the economic activities of America, especially in terms of state and local revenues. These effects can also cross different states as well as various sectors of society.
It is important following the above assessment for America to improve its private insurance markets. First, it is important to secure balanced risk pools to cover the healthy and those who are high risk within the insurance markets. This would call for an increase in subsidies for the young and healthy members of society, without necessarily decreasing the subsidies for older Americans. This would help ensure that the young and healthy Americans would not be turned off by the price of insurance, and the most at risk sector would still be able to participate in the insurance market. However, decreasing the financial barriers for good risks would not be enough. As compared to other purchases, insurance purchases can be difficult and confusing purchases and do not provide much satisfaction in the interim. As a result, the young healthy Americans are likely to not avail of it. This would explain the need to secure healthy risk pools in individual market setting which would call for having individual mandates which has to find support among conservatives. Individual markets may not do well in the long-term setting if notable penalties are not set in place. This would mean financial penalties which would match the costs of purchasing the insurance in the first place.
It is also important to expand subsidies higher than the 400% limit of the federal poverty level imposed by the ACA. This would ensure that more individuals who are burdened with diseases to avail of insurance. Unfortunately, insurance has become an expensive purchase in the US that low and moderate income families are experiencing difficulties in purchasing it without the help of employers who are willing to assist them in paying for it.
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If the US wants private insurers to take part in ensuring that Americans would actually be able to secure insurance, the insurance purchase has to be made a viable product. This would translate to insurance companies actually managing the uncertainties often noted in insurance selling in various unpredictable markets. An effective approach applied in Medicare private insurance market include reinsurance as well as risk corridors. This would mean that there is a need to secure for reinsurance to be available within individual and small group packages. Risk corridors are also there to support unexpected high risks, allowing them to access funds from insurers who are low risks.
Public and private stakeholders have to increase their efforts to manage the costs of healthcare services, which are crucial elements affecting costs in health insurance for various markets, including employer-supported, as well as public and individual. Some countries do not experience much trouble in insuring their entire populations because the costs of their care are much lower than the costs of care in America. A primary tool in controlling healthcare costs in the US is to aggressively secure payment and delivery systems which were covered by the ACA but not often discussed in previous debates. One of these reforms include making providers of care liable for costs and quality services based on value-supported payments which support clinicians and practitioners which are able to offer better healthcare services at more affordable rates. The AHCA has so far left some of the ACA policies intact, but it is difficult to conclude whether the new administration would enforce such crucial provisions aggressively. The facts are very much clear. The US can rejuvenate the individual markers which were actually failing even before the ACA was enacted. These individual markets are important in helping ensure that healthcare would be available to all Americans. However, America has to pay for such improvements within the economic and the political sphere.
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