The obvious problem with eliminating the Affordable Care Act’s suite of “essential health benefits” that any plan is required to provide (as Republican leaders are reportedly considering) is that it will leave people without access to reasonable-quality health insurance. The less obvious problem is that it’s going to end up costing the government a bundle in subsidies handed out for what amount to scams — possibly increasing overall spending.
As Slate’s Jordan Weissmann explains, the issue is that millions of Americans will be given essentially free money in the form of tax credits they can use to buy health insurance. The free money won’t be enough to buy good health insurance, but without the essential health benefits in place, there will be no requirement that insurance companies offer good insurance. You can just craft a cheap, totally worthless plan, spend a ton to market it, and scoop up government money.
In states that have lax rules about what must be covered, carriers are going to craft plans that cost just under the value of subsidies
— Jordan Weissmann (@JHWeissmann) March 23, 2017
A lot of them will be useless in terms of care ($20k deductibles here we come). But they'll be FREE to consumers.
— Jordan Weissmann (@JHWeissmann) March 23, 2017
So the federal government is going to end up shoveling tens of billions of dollars every year towards worthless catastrophic coverage...
— Jordan Weissmann (@JHWeissmann) March 23, 2017
Meanwhile, older Americans are gonna have to pay out the fucking nose for plans that cover anything remotely near their needs.
— Jordan Weissmann (@JHWeissmann) March 23, 2017
While plans sold this way might be totally useless as health insurance, they don’t need to be entirely worthless. You could market them with some throw-ins that are likely to appeal to a relatively young and healthy population — a free copy of the latest Zelda game or coupons for some yoga classes — even while providing basically no value to someone with extensive health care needs.
As Larry Levitt of the Kaiser Family Foundation argues, this means that given the American Health Care Act’s benefit design, you could actually end up raising federal spending rather than cutting it by eliminating the essential benefits.
It's counter-intuitive, but repealing benefit requirements doesn't make the AHCA cheaper. Tax credits vary by age, but not actual premiums.
— Larry Levitt (@larry_levitt) March 22, 2017
In fact, with no benefit rules, premiums would come down and more people might buy insurance and get tax credits, raising federal costs.
— Larry Levitt (@larry_levitt) March 22, 2017
The original Ryancare framework, let’s recall, offered tax credits to a fairly broad number of people. But because the tax credits aren’t that generous and Ryan would allow premiums for older customers to rise sharply, in practice the uptake of the tax credits would be relatively low. Millions of people would lose insurance, and the federal government would end up subsidizing a small group of people.
Eliminate the essential benefits and that’s reversed. Absolutely nobody will have access to a quality plan, but the unfettered market will come up with something for everyone to buy, so spending might end up rising quite a bit.
That’s not an outcome that anyone in Congress genuinely wants, but it may wind up being the one they end up voting for. Which is what happens when you insist on rushing major substantive changes to an already rushed bill rather than taking time to consult with stakeholders and outside experts and get thorough analysis of your ideas before you commit to them.
