Can Repealing the ACA Give us Affordable Care?
We look at the question, “can repealing the ACA or its key provisions bring down the cost of health insurance and healthcare?”
Introduction to the ACA, the HealthCare Economy, High Deductible Plans, and the Effects of Repeal
All Americans want affordable health care (even if they don’t want to buy health insurance), yet very few are happy with the high costs of health insurance and healthcare.
The ACA provides access to insurance and says that all policies have to offer essential benefits; it does not create insurance policies. Health insurance companies create their policies, and we need to remember that they are in business to make money.
Our healthcare economy is doing well. It isn’t in a death spiral; in most cases, it is in a “profit spiral.” See Health Insurers are In A Profit Spiral for details. Healthcare is about 1/6th of our economy, and the U.S. economy is the largest economy on earth.
We have two choices. Either we reduce the market-cap of healthcare, and it stagnates, or we make it grow. If we go for growth, we either need to increase prices or increase the number of transactions. That can only be done by subsidizing people and generating tax income, or we stand back, and hope for the best. If we stand back we will probably see the market diminishing and many people being uninsured.
The ACA was designed to try to help the market using a combination of subsidies, regulations, taxes, and cost-curbing measures. The idea was to keep the market going, increase demand by decreasing the number of people who were uninsured, and helping people afford insurance with basic benefits by giving them assistance.
The indirect trade-off under the ACA was that insurers started offering more High Deductible Health plans. High deductible plans were being sold before the ACA but have become even more common since.
By focusing on deductibles, people have an incentive to pay attention to the cost of their care. Since the plans with high deductibles are cheaper than more comprehensive plans, they theoretically provide an entry point that people can afford with assistance based on income.
The result of all that is that the ACA reduced the number of people left uninsured, but, at the same time, 46% of uninsured adults still find coverage prohibitively expensive. Their coverage that isn’t subsidized enough, healthcare costs are high, and high deductible health plans require a large out-of-pocket payment before they pay anything.
Because of the ACA:
- Low-income people have access to inexpensive coverage.
- Sick people have access to affordable care.
- Employed non-elderly people who used to have access to affordable coverage, may now make too much to receive subsidies but not enough to pay for insurance plans or medical costs.
- Employees often spend a large portion of their income on health insurance cannot afford other necessary things.
- Meanwhile, many other demographics struggle with costs and benefit as well.
- The healthcare economy is booming, and uninsured rates are low.
The question we have is, “do we have to trade off the benefits we got from the ACA to offset the negatives like higher costs?” If the answer is yes, we ask, “will reducing cost assistance and deregulating the market reduce costs for those left in the market?”
The answer is yes; everything is a trade-off. Reducing assistance and deregulating does little more than shifting winners and losers; it doesn’t solve our core problems.
How Does the ACA Affect Costs?
First, before moving on, let us review what the ACA (ObamaCare) is and isn’t and how it affects costs.
ObamaCare is a nickname for the healthcare law The Patient Protection and Affordable Care Act (also called Affordable Care Act or ACA for short). The ACA contains hundreds of provisions. Some, like improving Medicare, allowing those with preexisting conditions to purchase medical insurance without a penalty, allowing children to stay on their parent’s policies until they are 26, and ending insurance company caps on lifetime deductibles have been popular.
Likewise, most insured people have been happy to be able to have free preventive care, OB-GYN services, out-of-network emergency room services, and birth control without cost (see New Benefits, Rights, and Protections in the Affordable Care Act for more details about the ACA’s key benefits.)
Further, many who qualified for Medicaid expansion, cost assistance, expanded employer coverage, or tax breaks for small businesses under the ACA got a great deal. They got better coverage or coverage for the first time, and in many cases, lower costs and better benefits.
On the flip side of this, all those government mandated perks came with a cost. Covering sick people is part of what drove up the price of insurance although rates were rising since the 80’s on their own and there are many factors beyond the ACA to look at. Subsidizing health insurance distorts the market and allows for price hikes even in years where they don’t make sense. Additional benefits mean higher deductibles and more costs, etc.
Those who don’t get assistance but are not very well off pay the price.
So, what does the ACA provide?
- cost-curbing measures of regulations that reduce cost.
- cost assistance that reduces costs for some
- patient protections through regulations that improve access but raise costs
- expanded coverage which helps reduce cost in some ways by stabilizing and expanding the market
- increasing demand and reducing uncertainty for some and helps increase costs for others, as some of those who got coverage are sick or low-income
- this is all offset by consumer costs and taxes, mostly on those who benefit from health care expansion
One solution to the rising costs for taxpayers and insurance consumers is to take away as much government help and regulation as possible at the expense of expanded coverage. Another solution is to reduce assistance and increase regulation at the expense of expanded coverage.
Our questions thus become, 1. “will any of that work?” and 2. “will it reduce costs?”
The answer to the first question is simple and was already offered. It will work for some people who aren’t low-income or sick or elderly, but not for others.
The second question’s answer is also simple and is essentially the same answer. That is, it will reduce costs for those who don’t depend on the ACA (those who aren’t low-income or sick or elderly), but not for others.
The waivers for essential health benefits will bring prices down for plans that don’t offer those benefits, but only those who don’t need the benefits will see a lower price.
Charging seniors more, as TrumpCare (the Senate Plan) does, means younger people pay less while older people pay more.
Reducing assistance means those with lower incomes pay less but have reduced access to care. It may reduce costs for those with higher incomes by pushing the sick and poor out of the market. The same is true for defunding Medicaid.
Unfortunately, the situation is more complex than this, as we also have to consider the decrease of demand (which drives up costs and creates uncertainty). That adds another factor which may result in even less cost reduction for the sick and higher-income people. See the CBO report projections for the Senate plan. They don’t predict that costs will be lowered by a significant amount, but they do show tens of millions losing coverage and greater costs for many.
FACT: Trump has taken the teeth out of some unpopular parts of ACA. For example, the mandates that required everyone to get insurance or pay a fee and forced large employers to provide medical insurance for their employees. They were critical in funding the program but were a point of contention. Trump’s move might be popular, but it also loses America hundreds of billions of tax dollars. That is the reality; the trade-off.
We don’t yet know which of the provisions of the ACA Trump might repeal, so we will update as specifics become known.
The ACA Hasn’t Helped Everyone
There is no single answer to our questions because there is no one single type of American.
Individual experiences under the ACA have varied widely. For some, the premiums have hurt, for some it is the high deductibles, for others it is a lack of assistance (like Medicaid expansion), for others, it saved their life!
The problem here is again the same, keeping everything exactly as it is isn’t exactly working, making small changes won’t change much, and making big sweeping changes means picking winners and losers or causing chaos.
If we deregulate, costs will go down for some, but others will lose coverage. If we take away subsidies and offer tax breaks, that is great for the wealthy but help low-income or middle-income Americans. If we take it all out on insurers, we risk collapsing the world economy (the healthcare system is that big, and in terms of innovation the U.S. is at the forefront).
What About Healthcare Providers?
Healthcare providers are the core of healthcare in America. They deliver the drugs and treatments and cures. The Senate’s bill focuses on tax breaks, but it does little to address the needs of providers. The problem with a repeal and replace plan that comes in tiny steps is that it risks overlooking entire sections of the healthcare economy. Insurers get a tax break, drug makers and device makers do, the wealthy do too, but providers lose tens of millions of patients and get instability. This is one of many factors that makes one doubt we will truly see lower costs under a repeal.
TIP: The most subsidized group in American heath care is composed of workers and employers. One thing we often miss is that private subsidies only account for a portion of all healthcare spending. Medicare and employers are the biggest markets, and with tax breaks considered they cost the U.S. the most. The focus of reform is always on Medicaid and private coverage, but any serious reform needs to look at the whole pie.
High-Deductible Plans are Not Part of the ACA
As you’ll notice, all the musing above keeps coming back to one point. That is high deductible plans and the underlying high cost of healthcare.
The cost of insurance has risen, the cost of healthcare has risen, the insured rate has risen, and the only real place to work around all this is by manipulating deductibles.
It is no wonder people are upset at this, but the fundamental problem here is that High-deductible plans are NOT part of the ACA.
Sure, high-deductible plans became more popular under the ACA, and they were affected by it, but there is no provision in the ACA that creates them, and there is no promise that they will somehow go away without the ACA.
Employers like high-deductible plans because the premiums are lower than more comprehensive plans (they cost less in premium dollars). Insurers like them because it saves them from having to pay out much for the average person. Etc.
If you have one of these plans, you probably realize that the out of pocket medical costs of high deductibles has increased 67% since 2010 alone according to the Henry J. Kaiser Family Foundation. You can find the statistics at the Kaiser Family Foundation website.
That is a real problem, but the other problem we have is that repealing the ACA logically does little to fix the problem of high deductible plans.
Why Do We Have High Deductible Plans?
Insurance companies theoretically began offering high deductible plans as a way to encourage consumers to become more careful consumers of medical services. People were expected to save money in Health Savings Accounts (HSA) accounts and use pre-tax dollars to offset medical costs. Some people do, of course, but many more of us live from paycheck to paycheck and do not have the money to save.
People with high deductible accounts have to pay the first several thousands of dollars in medical costs out of pocket before their insurance begins covering any expenses other than the essential benefits. Many have reacted by skipping doctor’s visits or canceling their medical insurance because they feel they cannot afford both the insurance and medical care.
Whose Life Has Been Improved by The ACA?
So, we end where we started, that is knowing healthcare is expensive, knowing there will be winners and losers, knowing that the high deductible plan is an important symptom of our problems, and knowing that repealing the ACA doesn’t have much of an impact on anything outside of who wins and who loses.
Thus, we have to consider what we are getting for our trouble. The answer is found in those who have benefited from the ACA.
If you are one of the many individuals who received subsidies to purchase affordable health insurance, you are likely to have had a positive experience with the ACA. Individuals who received necessary surgery or medical treatment have thanked ACA for saving their lives. The numbers of people left uninsured have dropped to a record low (see our page ObamaCare: Uninsured Rates for details.)
If you are one of the millions of people covered by the expanded Children’s Health Insurance Program (CHIP), Medicare, Medicaid or both (in the case of low-income elderly or non-elderly disabled individuals), your basic medical needs have probably been met although providers may be busy or in short supply. Medical costs under these programs typically have low coinsurance or no coinsurance.
If we have to make a trade, and considering we already did, we can’t just focus on who lost in the trade-off. We have to remember to think about who won. Nothing excuses a major negative impact. We should be working toward eliminating the negatives, but simply shifting the winners and losers again doesn’t do much to truly address this.
TIP: You can find out about the programs noted above on the website for Centers for Medicare and Medicaid Services. Of course, fewer people are covered by these programs in states that chose not to expand Medicaid under the ACA than in states that expanded it.
What Alternatives Do We Have?
We, as a country, might want to consider fixing ACA’s problems instead of repealing it (or doing the half measure repeal that the Senate is trying to pass). Please see our page on What is Wrong With ObamaCare and How Do We Fix It? for a discussion of this topic. That, however, is a separate issue.
It is clear we need to find a better path forward, but repealing the ACA isn’t good enough. Likewise, a few tweaks to shift around winners and losers does little to address the core problems with healthcare. We don’t need a bandaid; we need a 21st-century cure.
- Key Facts About The Uninsured Population
- What is ObamaCare/What is the ACA?
- New Benefits, Rights, and Protections in the Affordable Care Act
- High-Deductible Health Plans: A Brief History
- The Painful Rise of High-Deductible Health Insurance
- ObamaCare: Uninsured Rates
- What is Wrong With ObamaCare and How Do We Fix It?