NOTE: Back in January, Sens. Bill Cassidy (R-La.) and Susan Collins (R-Maine) put forth an Obamacare replacement plan that wasn’t perfect, but provided some reasonable bases for compromise with Democrats. With the House GOP repeal plan blown to smithereens on Friday, I’m reoffering the analysis I did at the time of Cassidy-Collins.
If you’re following the health insurance debate—and since the coverage of more than 20 million Americans is under threat from the Trump White House and the Republican congressional majority, you should be—you’re going to be hearing a lot in the coming weeks about Cassidy-Collins.
That’s an Obamacare replacement plan just introduced by Sens. Bill Cassidy (R-La.) and Susan Collins (R-Maine). Dubbed the Patient Freedom Act, It’s the first such proposal that indicates that the GOP is becoming increasingly panicked about the political price of repealing the Affordable Care Act outright, and increasingly desperate to reassure voters that the provisions of Obamacare they actually value can be retained without a break.
These include Obamacare’s protection of coverage for pre-existing conditions, its ban on lifetime and annual limits for benefits, and coverage of certain preventive services without co-pays. It also keeps coverage of mental health services and guarantees black-lung benefits for coal miners. The federal exchange, healthcare.gov, will continue to operate. Dependents still will be permitted to stay on their parents’ employer-sponsored plans until age 26. The measure kills the employer mandate and individual mandate, though it substitutes a “continuous coverage” system for the latter, which we’ll explain in a bit.
The goal of Cassidy-Collins is to shift the the decision of whether to keep Obamacare, dump it entirely, or come up with an alternative system to the states. (A three-page section-by-section summary is here.)
“When you speak to Americans,” Cassidy said Monday on the Senate floor, “they want their state capital to be the principal force behind how their insurance is administered, not our nation’s capital.” It’s uncertain where Cassidy got this notion, since the last governor of his own state, Republican Bobby Jindal, left 192,000 constituents, of whom 64% were black, without coverage by refusing to expand Medicaid; they couldn’t all be hailing his policy as a boon. (He was reversed last year by his successor, Democrat John Bel Edwards.)
Under Cassidy-Collins, states in which the ACA works, like California, could keep it or fashion a new system that looks very much like it. Those whose leaders have made hostility to the ACA a watchword, like Mississippi, can abandon it or create a system that provides junk insurance to residents at lower cost, while claiming they’ve saved everyone. States that expanded Medicaid to cover their neediest residents, with a federal contribution of 90% of the cost or more, can continue the program; holdout states can join in.
“The other [Republican] bills have said, ‘Let’s just get rid of Obamacare,’” says Karen Pollitz, a health reform expert at the Kaiser Family Foundation. “This one seems to be offering options.” The bill appears to maintain the ACA’s roster of taxes, including the medical device and “Cadillac” taxes and surcharges on high-income taxpayers. That’s wise, because it also maintains individual subsidies and Medicaid payments to the states, and those have to be paid for somehow.
But for the most part, Cassidy-Collins is a mess. Its initial 73-page draft brims with so many ambiguities and inconsistencies that healthcare experts who have worked their way through it still aren’t sure what some provisions mean or how they will work. Its goal of keeping some parts of Obamacare and dropping others has yielded a Rube Goldberg contraption that adds new layers of complexity to a system that should be getting simpler. Indeed, healthcare expert Timothy Jost of Washington and Lee University finds that its complexity “exceeds that of the ACA.” As a result, he says, adopting the bill would need a much longer transition period than the Jan. 1, 2018, deadline written into the text.
The most interesting aspect of Cassidy-Collins may be that it dispenses with many of the usual GOP nostrums that are useless for improving healthcare for most Americans; that’s a sign of its sponsors’ good faith and high seriousness about healthcare that shouldn’t be overlooked. There’s nothing in the bill about tort reform or selling insurance across state lines, and only a vague reference to high-risk pools. The bill does broaden health savings accounts in a way that might chiefly benefit the wealthy, but that’s unclear.
The most important questions raised by the bill are whether healthcare policy really can be set state-by-state, and whether the measure provides enough funding to the states and their residents to make the system work.
Let’s take a look at how Cassidy-Collins is structured.
States have three options. They can keep the ACA as is, eliminate it entirely, or create their own system, within limits. No matter the choice, the ban on exclusions for pre-existing conditions, the ban on lifetime and annual benefit limits, and the guarantee of insurance for those under 26 would stay.
Under the grow-your-own choice, states—call them “option states”-- could dump such ACA mandates as the minimum essential benefits required of all individual insurance plans in the country. These include mental health and maternity coverage, vision and dental care for children, hospital care, and outpatient services. The only exceptions are childhood immunizations without co-pays, a mandate for “adequate” doctor and hospital networks, and generic drug coverage for certain (unspecified) chronic conditions, which must be included even in the default, high-deductible bare-bones plans that every option state must establish.
Those default plans could be skimpy indeed. Health insurance expert David Anderson of Duke describes them as “coverage that is adequate for hit by a meteor events but not for people with actual chronic conditions,” adding, “if this was coverage that I was offered at zero...premium when I was 25, it would be a good deal.” Residents of option states that don’t choose alternative plans would automatically be enrolled in the default, though they could later opt out.
The Cassidy-Collins protection for preexisting conditions is complicated. Applicants can’t be refused or surcharged for medical conditions as long as they haven’t allowed their coverage to lapse for more than 63 days in any 18-month period, and enrolls during open enrollment periods. If the lapse is longer, they can be surcharged or denied coverage only for the same time frame as the lapse, but not for longer than 18 months. During that period they’d be eligible for the default plan.
What about money? In option states, subsidies and the federal Medicaid share would stay; states would get from the federal government 95% of what they would expect from residents’ subsidies and Medicaid funding. Even states that failed to accept Medicaid expansion would receive an amount equal to what they would have gotten if they had, which sounds a bit like a reward for leaving their own poorest residents high and dry for several years. The subsidies then would be funneled to individuals via Roth health savings accounts. These are accounts that provide no tax deduction when money is contributed, but a tax-exemption when it’s withdrawn to pay medical expenses.
The bill expands HSAs so they can be spent not only on deductibles and co-pays but premiums. It’s unclear whether there are limits on individual contributions to these HSAs, but if individual contributions are allowed that’s a big handout to the wealthy, who get a bigger tax break in this system than low-income people. Number-crunching suggests that lower -income people also could be losers because unlike the ACA, which bases subsidies on household income with poorer families getting more, under Cassidy-Collins the distribution of subsidies would be tied less to income.
That’s bad for lower-income families because the total ACA subsidy money is divided “evenly over more people than the ACA,” observes Loren Adler, a health policy expert at the Brookings Institution.
Americans fearful of losing their health insurance to an outburst of ideological zeal in the Republican Congress have reason to find hope in Cassidy-Collins. It falls well short of an evisceration of the Affordable Care Act; in fact, it leaves much of the ACA in place and includes provisions that might discourage states and insurers from racing to the bottom by cutting benefits indiscriminately. On the other hand, it still leaves the door open for some states to leave their residents with only the most minimal coverage guarantees.
Jost thinks the bill reflects Republican anxiety about repealing Obamacare without having a replacement handy. But it still faces immense obstacles. Conservatives will grouse that it leaves the ACA’s taxes in place and isn’t, in fact, repeal at all. Democrats won’t like the ability of states to dismantle the ACA at will; Senate Minority Leader Chuck Schumer (D-N.Y.) already has observed that it’s a nonstarter because of its potential to create “chaos.”
No one disputes that the draft will need a lot of backing and filling. Jost observes that it “appears to have been rushed into legislative language without adequate consideration of how it would actually work and what it would cost.” He adds, “It may form a basis for discussion, but it is not ready for enactment.”
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