Shhhhhh. You weren’t supposed to say that part out loud.
Republican efforts to build a more laissez-faire health system are “doomed to fail,” conservative health policy writer Philip Klein admitted in a candid column last month, unless they are willing to state an uncomfortable truth: Republicans must acknowledge that they “don’t believe that it is the job of the federal government to guarantee that everybody has health insurance.”
A handful of GOP lawmakers are now taking up Klein’s charge — with one of them even claiming that a Republican plan that leads to a higher national uninsurance rate would be a good thing.
“If the numbers drop,” Rep. Mike Burgess (R-TX) said Thursday at the Conservative Political Action Conference, “I would say that’s a good thing.” He went on to argue that more people without health care would be a positive thing for the United States because it would mean that “we’ve restored personal liberty in this country.”
Burgess’ prediction that Republican health plans will lead to a drop in the national insurance rate was echoed by Rep. Dennis Ross (R-FL) in an interview with Bloomberg this week. “Not everybody is going to have health care” under a Republican health plan, Ross said. “Some people just don’t care enough about their own care.”
Bloomberg also shares some details about the health policy ideas that are starting to gain traction among Republican lawmakers. While the full contours of the GOP’s “replacement” for Obamacare remain elusive, the details we do know off confirm that yes, Republicans are indeed pushing ideas that would lead to fewer people receiving care.
More expensive plans for people who can’t afford it
The Affordable Care Act tackles two interlocking challenges. Older Americans tend to have more medical expenses, and thus pay higher health premiums that may be unaffordable for many of these individuals. Meanwhile, many Americans simply don’t earn enough income to be able to afford insurance.
Obamacare provides that insurers cannot charge their oldest customers more than three times as much as their youngest customers. Meanwhile, it provides tax credits that help low-to-moderate income individuals pay for their insurance. These tax credits are higher for people with lower incomes, due to the fact that people who are less-well-off will have less ability to pay insurance premiums without greater financial assistance.
Several Republican proposals would increase the amount that insurers could charge older Americans. A bill would increase the age band from 5 to 1 (above the current range of 3 to 1). One of the more comical ideas to emerge from the Trump administration was a proposal to interpret existing law to allow insurers to charge older individuals 3.49 times as much as younger consumers, on the theory that 3.49 rounds down to 3. (This later proposal appears to have been scrapped.)
Meanwhile, according to Bloomberg, Republicans hope to base tax credits on a person’s age rather than on their income. Such a proposal could simultaneously be wasteful and merciless, since an age-based formula could allow wealthy individuals who can afford to pay their own premiums to still receive a government subsidy — while also denying low-income Americans the assistance they need to purchase insurance at all.
Driving up costs and collapsing entire insurance markets
Another idea that is reportedly gaining steam among Republicans is a proposal to “do away with the Affordable Care Act’s requirement that all Americans have health coverage or pay a fine, and replace it with rules that let people choose not to buy insurance, instead paying higher premiums or penalties if they need it later.”
Though the details of such a proposal are sparse — just how much higher would premiums be if someone delays buying health insurance until they get sick? — such a proposal risks driving up the cost of care for people who are already insured, or, worse, collapsing entire insurance markets altogether.
The reason why the Affordable Care Act penalizes people who do not carry insurance is because of the risk that people will wait until they are sick to become insured and then drain all the money out of an insurance pool that they haven’t paid into.
Because Obamacare forbids insurers from denying coverage to people with preexisting conditions, insurers cannot simply refuse to cover people with expensive conditions. If the ratio of healthy people to sick people in a given insurance plan tilts too heavily towards people with expensive conditions, however, then the plan will need to jack up premiums in order to cover the costs of its most expensive consumers.
That risks setting off a “death spiral,” where healthy people leave the plan due to rising premiums, which forces the insurer to raise premiums even more, which causes even more healthy people to leave. Eventually, the entire insurance pool collapses.
Obamacare solves this problem by requiring people who don’t carry insurance to pay higher income taxes, thus giving them an incentive to enter an insurance pool while they are still healthy. Republicans reportedly want to eliminate this provision and, instead, charge a penalty to people who wait too long to buy insurance.
It’s far from clear, however, that such a mechanism would be sufficient to ward off death spirals. Imagine a hypothetical consumer, for example, who has to choose between paying $200 a month now, or to pay nothing now — but with the caveat that they will be charged $1,000 a month if they are later diagnosed with a catastrophic illness. Many people are likely to decide that they should pay nothing now and hope for the best, especially since, even in the worst case scenario, they will still have the option to buy insurance when they need it most.
Alternatively, Republicans could set the penalties for remaining insured so high that insurance would be unaffordable for someone who waits until they are seriously ill to buy insurance. That would have the virtue of helping to ward off a death spiral, but at the cost of many people’s lives.