We’re keeping a close eye on how the Congressional Republicans’ proposed American Health Care Act (AHCA) would impact Colorado. While the first attempt to repeal the Affordable Care Act (ACA) flamed out in spectacular fashion, House Speaker Paul Ryan insists that “health care isn’t dead.” So how would the current proposal affect Colorado?
The AHCA would raise costs and cut coverage for Coloradans while giving tax breaks to wealthy individuals and the health care industry. Under the plan, tens of millions of Americans would pay higher premiums and deductibles – and the number of uninsured Americans will skyrocket. The bill’s attempted repeal of many aspects of the ACA is especially damaging to low- to moderate-income people, older people and sicker people. The AHCA would burden states with significant additional costs under the guise of “greater flexibility” and “modernization.”
The Congressional Budget Office (CBO), which provides unbiased analysis for Congress, found that the AHCA would lead to an additional 24 million uninsured Americans and would reduce the federal deficit by $337 billion by 2020. The CBO analysis does not factor in the impact of the bill on state and local economies.
If health insurance premiums soar and if people don’t get help with paying higher costs, or if they lose Medicaid coverage, hundreds of thousands of Coloradans will lose health coverage because they can’t afford it. That puts us right back to where we started before the ACA.
The AHCA has the potential to erode many of the health care gains that our state has made. Here are three of the biggest looming threats.
1. Threats to Medicaid
Colorado is one of 31 states that expanded Medicaid, now called Health First Colorado. The expansion through the ACA gave health care coverage to an additional 400,000 people, grew employment and our state GDP and increased annual household earnings. For a few years, the ACA covered 100 percent of the costs for people who qualified for Medicaid through the expansion. The federal share of that funding will lessen over time but will still cover 90 percent of costs in 2020 and beyond. Colorado is paying for its share through the hospital provider fee.
The Republican health plan repeals the expansion in 2020 and requires states to pay a much higher percentage of the cost. The AHCA also ends enhanced funding for Medicaid expansion as early as next year. According to recent analysis by the Colorado Health Institute (CHI), Colorado would see a $340 million cut in funding in 2020, the first year that the Medicaid reforms would take effect. By 2030, 600,000 people who would have been eligible for the ACA expansion would not be covered at the enhanced federal match under the AHCA.
It’s not just our expansion that’s at risk. The plan changes the way the federal government finances its share of Medicaid costs. Currently, federal funding ebbs and flows based on how states spend to meet the health needs of enrollees. The AHCA would move away from this system to one that gives a fixed amount per enrollee in the form of a “per capita cap,” the growth of which is tied to the medical care piece of the Consumer Price Index. The Center for Budget and Policy Priorities estimates that states will need to find an extra $370 billion over the next ten years under per capita financing.
Check out the Colorado Center for Law and Policy’s analysis of what this would mean for the nearly one in four Coloradans who are insured by Health First Colorado, and for our state in general. The upshot: it results in dramatic losses to Colorado’s state budget and its economy. CHI’s analysts find that we will face a total loss of $14 billion in federal funding over the first decade of the AHCA’s Medicaid changes.
It will force our state into making very tough choices about who to cover and to what degree. And because of the Taxpayer Bill of Rights, Colorado lawmakers have very little flexibility in how we can find more funds to cover bigger expenses.
2. Threats to the Individual Market
The AHCA would repeal the monthly subsidies that help people buy health insurance and pay certain out-of-pocket costs. However, it replaces them with refundable tax credits. The big difference? Current law ties financial relief to income and price based on location, whereas the new Republican proposal ties it to age. The effect, as recently analyzed by the Kaiser Family Foundation, is that those who are “lower income, older, or live in high premium areas would be particularly disadvantaged” but people making over 400 percent FPL would get tax credits. Be sure to see the interactive, KFF map that shows what would happen at a county level.
Over 104,000 people in Colorado currently qualify for financial help purchasing insurance on the marketplace. Others don’t qualify and are feeling squeezed by rising health care costs, particularly in rural and western Colorado. Colorado policymakers, including the Lieutenant Governor, are proposing state solutions to help, which you can read more about here. Analysts at CHI project that the change under the AHCA would shift tax benefits from the high-cost rural areas to the Front Range, where insurance is not as expensive.
Another part of the proposed measure would allow insurance companies to charge older consumers up to five times the amount they charge younger customers – a shift from the current three to one ratio. AARP, in its letter of opposition to the bill, states that it would create “skyrocketing premiums” for adults age 50-64 without dramatically increasing the participation of younger people in the marketplace.
A recent analysis by health policy experts and economists from Harvard, the Center for American Progress, and California’s insurance exchange looked at the net financial impact of the bill for consumers. They crunched the numbers not only on premiums and tax credits, but also on the increased out-of-pocket costs that would hit consumers. They found that the AHCA would increase costs for the average enrollee by $1,542 in 2017. Three years from now, those costs rise by $2,409. By 2020, it could get even more expensive for families, whose costs would increase by just over $4,000 three years. Lower income families or those with older family members would be faced with costs that rise by about $10,000. This research also makes the important point that when you decrease premium spending but increase out-of-pocket costs, you put families in a riskier financial situation, which can lead to debt.
The Republican proposal would destabilize the insurance market and punish people for gaps in coverage. It repeals the fee that people who don’t purchase insurance must pay to the government (the individual mandate). But it also requires insurers to penalize those who fail to keep health insurance coverage over time. That financial penalty would be paid to the insurers. This creates a barrier for people who have been uninsured and creates a system in which the young and healthy are more likely to go uninsured, driving up health insurance costs.
Governors got a preview about what could happen in the marketplace under an earlier version of the bill. Colorado, as a Medicaid expansion state, may see at 30 percent decline in enrollment and a 65 percent decline in federal funding. The numbers are even worse for non-expansion states.
3. Costly Tax Breaks
The AHCA would repeal $600 billion in taxes on the healthcare industry and high-income earners – taxes that help pay for provisions of the Affordable Care Act. This includes Medicare taxes for high-income earners, taxes on investment income, and taxes on makers of pharmaceuticals and medical equipment. It also removes a cap that prevents health insurance companies from writing off more than $500,000 of what they pay in executive salaries and bonuses. The bill does not create a new funding mechanism.
The Brookings Institution wrote in December that paying for a replacement if the tax increases are repealed would be “near impossible.” Its report found that the tax cuts being proposed in the budget reconciliation process will make it “much more difficult to achieve a sustainable replacement plan that provides meaningful coverage without increasing deficits.”
The AHCA would be “fiscally harmful” for Medicare, according to the Committee for a Responsible Federal Budget (CRFB). The ACA, largely through a tax on high-income earners, extended the solvency of Medicare funding which pays for certain services related to stays in hospitals, skilled nursing facilities, and hospices for people over age 65 with a history of contributing to Medicare. Because the AHCA repeals this tax, it accelerates the point at which the fund will be unable to pay 100 percent of beneficiaries’ costs.
The AHCA moved at a rapid pace through House committees in early spring. However, the full Congress has not voted on the bill due to a lack of consensus among Republican members. Discussions about how to move the bill forward continue.
Some proposed changes would create even worse outcomes for the Medicaid program. They would include work requirements, less generous state funding and an even quicker repeal of the expansion. They would add financial assistance for older adults and the disabled (which the CRFB says will in part lessen the bill’s deficit reductions). Vice President Pence recently offered to scrap provisions that govern private insurance plans, such as “guaranteed issue,” which requires insurers cover everybody; “community rating,” which requires insurers charge everyone the same price for coverage; and “essential health benefits,” which mandates which services insurers must cover. They say these changes will lower premiums – but they also result in skimpy insurance plans and high out-of-pocket costs, especially for sick people.
The Bell will keep analyzing how working people in Colorado will be affected.
(Please note. We updated this piece in April, 2017.)