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The Senate tax bill is really a health care bill with major implications for more than 100 million Americans who rely on the federal government for their health insurance.
The bill reaches into every major American health care program: Medicaid, Medicare, and the Obamacare marketplaces.
These are expected outcomes based on two significant policy changes in the bill. First, the bill repeals the individual mandate, a key piece of Obamacare that requires most Americans get covered. Economists expect its elimination to reduce enrollment in both the Affordable Care Act’s private marketplaces and Medicaid by millions. The money saved will be pumped into tax cuts for the very wealthy.
The bill also includes tax cuts so large that they would trigger across-the-board spending cuts — including billions for Medicare. The last time Medicare was hit with cuts like this, patients lost access to critical services like chemotherapy treatment.
This tax bill deserves a broader name. Its policies will cause millions of vulnerable Americans to lose coverage, disrupt care for the elderly, and potentially change the health care system in other ways we can’t fully predict.
Repealing the individual mandate would cause premiums to spike, millions to lose coverage
The Senate bill includes a provision to repeal the Affordable Care Act’s requirement that nearly all Americans carry insurance coverage, known as “the individual mandate.”
Republicans see it as a winning move. The individual mandate is very unpopular. And repealing it will save more than $300 billion — which can pay for big tax cuts for corporations and the very wealthy.
The best economic evidence we have shows that if the individual mandate disappears, premiums go up and millions of Americans lose coverage. The Congressional Budget Office pegs the decline in the number of insured at 13 million.
Some Republican senators have protested this number, arguing that the CBO attributes too much impact to the mandate and saying that fewer people would actually lose coverage if it went away.
Some economists I spoke with agreed — they thought the CBO might be on the high end with its estimate. Others thought the number sounded right. But all agreed that the fundamental outcome isn’t up for debate: Millions of Americans would lose coverage. It’s not a question of if; it’s a question of how many millions.
“I think CBO might be on the high end, but there certainly would be a coverage drop,” says Harvard economist Benjamin Sommers, who has studied health insurance mandates.
Economists generally expect that premiums would rise without the individual mandate in place, leaving many people who would like to purchase insurance unable to afford the monthly premiums.
Most of what we know about the power of the individual mandate comes from research of the Massachusetts health insurance expansion in 2006 — the law that was the model for Obamacare.
The state phased in the new policies. First, Massachusetts provided subsidies to make health insurance affordable for low-income residents. Then six months later, the state began to charge a fine for remaining uncovered.
A 2011 paper in the New England Journal of Medicine found a big spike in enrollments after the mandate took effect, suggesting that the financial help wasn’t enough to entice uninsured Massachusetts residents to enroll in coverage. The threat of the penalty also played a big role.
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“There was a phase-in period, and we found that for healthy people, the subsidies were not sufficient inducement to buy health insurance,” says Amitabh Chandra, a Harvard economist who led the NEJM study. “There was a subsidy, and if people are rational actors, maybe they buy insurance, but people are irrational actors and they might just play on Bumble or Tinder and put off buying coverage until tomorrow.”
Separate evidence from the Brookings Institution suggests similar outcomes nationwide.
The CBO estimates that repealing Obamacare would reduce enrollment in the marketplaces by 8 million and in Medicaid by 5 million. That last finding can be a bit puzzling: Why would a mandate have any bearing on whether people enroll in a free health insurance program like Medicaid?
But it turns out, economists who study these issues have decent reason to expect that Medicaid enrollment would decline without a mandate.
One of the things they’ve observed with the Affordable Care Act is a “welcome mat” effect for Medicaid: people who were previously eligible for the program suddenly signing up when the Affordable Care Act took effect. They think some of that is due to the increased advertising for Obamacare, and some of it due to the fact that people heard it was now required by law to get coverage.
“If the main effect is that people collectively have the sense that ‘I have to sign up for coverage,’ that can have a big impact,” says Sommers. “It’s reasonable that CBO is projecting some people in Medicaid might not stay, or new people who might be eligible might not go to the trouble of applying.”
We’re not talking about Medicare in tax reform. But we should be.
The Senate tax bill is expected to trigger a $25 billion annual cut to Medicare, the CBO estimated earlier this month.
The Medicare cuts aren’t part of the tax bill itself. Instead, they are mandatory spending cuts that would occur because of the tax bill’s $1.5 trillion increase to the deficit. These spending cuts are known as a sequester — and we know what happens to Medicare in a sequester, because it happened just a few years ago.
Across-the-board cuts often have outcomes that are tricky to predict. Because they aren’t targeted, they often hit programs no legislators would want to cut.
The last sequester in 2013 unexpectedly caused cancer clinics to turn away thousands of Medicare patients. I wrote about it at the time, when I worked for the Washington Post:
Oncologists say the reduced funding, which took effect for Medicare on April 1, makes it impossible to administer expensive chemotherapy drugs while staying afloat financially.
Patients at these clinics would need to seek treatment elsewhere, such as at hospitals that might not have the capacity to accommodate them.
In that particular case, Congress had actually tried to shield Medicare from some of the deepest cuts. But because of some quirks in how Medicare pays for cancer drugs, it didn’t work — and clinics were left with incredibly difficult choices.
I talked to one Long Island oncologist who said he and his staff held an emergency meeting earlier this week and decided they would no longer see one-third of their 16,000 Medicare patients. “It’s a choice between seeing these patients and staying in business,” Jeff Vacirca, chief executive of North Shore Hematology Oncology Associates, told me.
The Senate could pass separate legislation to skirt these rules that would require the automatic budget cuts — but as my colleague Tara Golshan notes, the politics of Republicans voting to undermine a deficit-management law won’t be easy.
And if they don’t, the fears of cancer clinics turning patients away could become real again. The tax bill could, for some seniors, become a bill that sharply limits their access to health care.
The Senate tax bill is also a health care bill
As the tax bill slides to a vote (with the expectation that it will clear the Senate), we should also be talking about health care. When Obamacare faced repeal this spring, many groups mobilized to demand clarity on what the bill would really do. We need those answers now too.
Because the tax bill isn’t just a tax bill. It is a bill that has sweeping consequences for the American health care system — that could stand to affect the health care of vulnerable and elderly citizens.
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