By William Zheyuan Shi (CMC ‘20)
Health care was one of the first severe battles for the Trump Administration. Disgruntled with the Affordable Care Act (ACA) expanding the budget deficit and threatening individual freedom, the GOP has long sought to replace ACA with new legislation. In March 2017, the American Health Care Act (AHCA) was proposed but lacked enough votes to pass in the House of Representatives.[1] In May, the House passed the second iteration of AHCA by a vote of 217-213.[2] On July 28, however, Senator John McCain casted a decisive “no” and killed the bill by a vote of 51-49.[3] Dissecting why the bill died in the Senate may involve too much analysis at the individual level, so this article mainly focuses on why the House welcomed the second draft rather than the first one. The answer arguably lies in the support of the freedom caucus, the most Conservative members of the GOP. While the first draft did not get voted on in the Senate due to the opposition of the Freedom Caucus, the second entered into the Senate because it incorporated more provisions in accordance with the GOP’s party line and aims to replace the ACA in a more thorough way through the depth and breadth of health care reforms, changes in premiums, and budgetary issues.
Before delving into the difference between these two bills, one needs to briefly review the background of the ACA. Facing skyrocketing insurance prices and insufficient coverage, the Obama administration passed the ACA in 2010, aiming to solve or at least mitigate these issues by having two objectives in mind: (1) Lowering premiums by the individual mandate, a mechanism that requires that every citizen to purchase health care or face a fine in order to keep numerous healthy people within the health care market and (2) Investing in the expansion of Medicaid by providing eligibility for people with income level lower than 133 percent of the Federal Poverty Level.[4] Although the number of Americans without health insurance has dropped by 6.2 percent due to the ACA,[5] the GOP continuously critiqued the ACA’s disregard of individual freedom through the individual mandate and its exacerbation of the budget deficit through endless governmental expenditure. With a significant Republican majority in the Congress under the Trump administration, the GOP would not miss the opportunity to tear down the ACA. Nevertheless, some redlines have become too established to be crossed. For example, directly abolishing the individual mandate has the unintended consequence of driving up the price of some medical services to an inhumane level because healthy people would have no incentive to purchase health care and stabilize the price.
Given this background, it is clear that although the GOP’s first draft attempts to destroy every pillar of the ACA, it could only reform it in a moderate way that did not satisfy the Freedom Caucus who considered the reforms far from enough. There were two motives behind the first drafts of the AHCA: upholding individual freedom and reducing the budget deficit. First, under the AHCA, an individual would be no longer required to buy health insurance, but if an individual is uninsured for 63 days and decides to become re-insured, he or she will face a penalty of a 30 percent higher premium for one year.[6] Although the individual mandate would no longer exist under this circumstance, it was still worrisome that millions of healthy individuals could just exit the health care market and then re-purchase the health care only if they become significantly ill; thus the average price of healthcare would rise again.[7] Second, the AHCA would eliminate the expansion of Medicaid by reducing the federal matching rate for adults eligible for Medicaid after the ACA took effect to “equal the rate for other enrollees in the state.”[8] This move would trigger Democrats’ outrage by trying to reduce the budgetary burden for the federal government by reducing the funding. Third, the tax credits for premiums, or the price for a person to purchase health care, would now be determined by age.[9] People of the same age would receive the same subsidy, so people with a higher risk of illness would likely pay more. This change stems from GOP’s emphasis on market efficiency: people who demand services the most should pay the most, therefore, the disabled, elderly people, and low-income groups would suffer the most under the AHCA. For example, a 64-year-old would be charged premiums five times as much as those charged to a 21-year-old.[10] Thus, the number of older people who have higher risks but are no longer able to pay for health care would become more burdened.[11] This is one of the reasons why the Congressional Budget Office (CBO) estimated that more than 24 million fewer people would be uninsured under the AHCA, though this number includes those healthy people who would voluntarily leave the market to avoid more payment.[12] Democrats would certainly be enraged by the tremendous number, which they regard as blatant negligence of social fairness. However, the Freedom Caucus regards these reforms necessary but far from enough to effectively lower premium and budget deficit.[13] Thus, with the substantial disapproval of Democrats and the Freedom Caucus, the first draft of the AHCA died before it entered the door of the House.
How was the second draft changed so that it mustered enough support? The second bill added several amendments that mostly satisfied the Freedom Caucus. The logic was simple: if the federal budget and premiums are issues at stake, the federal government can just shift its burdens to state governments. A simple and direct way to do so is to disallow the entry of people with pre-existing conditions who generate uncertain medical expenses and quench the incentive of insurance companies to provide relevant services. However, doing so would be seen as unfair and even cruel to those who are unfortunately burdened with pre-existing conditions because they would face mountainous medical expenses without any support. The GOP could not propose a bill that directly disregards the Democrats’ priority of social fairness, so the new AHCA attempted to do so indirectly. Under the AHCA, every state can weaken or waive the “essential health benefits,” a certain set of services including emergency, maternal care, prescription drug coverage, etc.[14] A smaller number of health benefits provided would make health care services cheaper, lower premiums, and mitigate budgetary problems. However, some critiqued that because states want to get rid of their financial burdens, they will waive the services that cost the most. As a result, patients with catastrophic costs would have little protection that was otherwise guaranteed under the ACA.[15] Moreover, under the AHCA, states would have the option to charge individuals with pre-existing conditions more due to high-risk pools, a mechanism that insulates individuals with pre-existing conditions and establishes specific health care plans for them.[16] This mechanism is designed to lower premiums and encourage more purchases by excluding people who most likely generate expenses. Nevertheless, since pre-existing conditions cost money, whether there is enough money to subsidize depends on many factors like the adjustment of premiums, customers’ responsiveness to the 30 percent penalty for having a 63-day lapse of health care insurance, and the elimination of Obamacare’s Medicaid expansion.[17] Because the second draft fulfills the expectation of the Freedom Caucus in light of essential health benefits and high-risk pools, 27 out of 30 members of the House Freedom Caucus voted to secure the bill’s ticket to the Senate.[18]
The approaches above changed the attitude of the Freedom Caucus and shifted the direction of the health care policy. The GOP’s goal was to dismantle the ACA and delegate the discretion from the federal to state governments over issues of essential health benefits and pre-existing conditions. Despite its final demise, the AHCA’s odyssey to pass through the House shows insight into Republicans’ thoughts and priorities of health care policies.
[1] Fred Dews. “What Brookings experts are saying about the American Health Care Act (AHCA).” The Brookings Institution. May 9, 2017 https://www.brookings.edu/blog/brookings-now/2017/05/09/what-brookings-experts-are-saying-about-the-american-health-care-act-ahca/. Accessed June 26, 2017.
[2] Ibid.
[3] Ben Jacobs, Lauren Gambino and Lois Beckett. “John McCain sinks ‘skinny repeal’ of Obamacare health act.” The Guaridan. July 28, 2017. https://www.theguardian.com/us-news/2017/jul/28/healthcare-bill-us-senate-votes-down-obamacare-skinny-repeal-revolt-by-john-mccain?utm_source=esp&utm_medium=Email&utm_campaign=GU+Today+USA+-+Collections+2017&utm_term=237022&subid=23648134&CMP=GT_US_collectio.nAccessed August 2, 2017.
[4] “Eligibility | Medicaid. gov.” https://www.medicaid.gov/affordable-care-act/eligibility/index.html. Accessed June 25, 2017.
[5] “US Uninsured Rate Holds at Low of 10.9% in Fourth Quarter.” Gallup. January 9, 2017. http://www.gallup.com/poll/201641/uninsured-rate-holds-low-fourth-quarter.aspx. Accessed June 25, 2017.
[6] “Congressional Budget Office Estimate: American Health Care Act.” House Committees on Ways and Means and Energy and Commerce. 27. March 13, 2017. https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/americanhealthcareact.pdf. Accessed June 25, 2017.
[7] Caitlin Brandt, Margaret Darling, Marcela Cabello, and Kavita Patel. “9 questions Americans are—and should be—asking about the American Health Care Act and its projected impact.” The Brookings Institution. March 21, 2017. https://www.brookings.edu/blog/up-front/2017/03/21/9-questions-americans-are-and-should-be-asking-about-the-american-health-care-act-and-its-projected-impact/. Accessed June 25, 2017.
[8] Congressional Budget Office Estimate: American Health Care Act. 4.
[9] Ibid.
[10] Jessica Glenza. “Elderly Americans would pay more for healthcare under new bill – and get less.” The Guardian. March 15, 2017. https://www.theguardian.com/business/2017/mar/15/elderly-americans-healthcare-new-bill-republicans. Accessed June 25, 2017.
[11] Congressional Budget Office Estimate: American Health Care Act. 27.
[12] Ibid. 10.
[13] Fred Dews.
[14] Ibid.
[15] Matthew Fielder. “Allowing states to define “essential health benefits” could weaken ACA protections against catastrophic costs for people with employer coverage nationwide.” The Brookings Institution. May 2, 2017. https://www.brookings.edu/2017/05/02/allowing-states-to-define-essential-health-benefits-could-weaken-aca-protections-against-catastrophic-costs-for-people-with-employer-coverage-nationwide/. Accessed June 25, 2017.
[16] Richard Popper. Do high-risk pools work? It depends. The Washington Post. May 8, 2017. https://www.washingtonpost.com/opinions/do-high-risk-pools-work-it-depends/2017/05/08/586b95f4-319c-11e7-8674-437ddb6e813e_story.html?utm_term=.637bd219046d. Accessed June 26, 2017.
[17] Ibid.
[18] Kim Soffen, Darla Cameron and Kevin Uhrmacher. “How the House voted to pass the GOP health-care bill.” The Washington Post. May 4, 2017. https://www.washingtonpost.com/graphics/politics/ahca-house-vote/?utm_term=.f4dc13e2f5cf. Accessed August 3, 2017.
