We’re keeping a close eye on how the Congressional Republicans’ newly proposed American Health Care Act (AHCA), introduced on Monday, would impact Colorado. The measure would effectively repeal many aspects of the Affordable Care Act (ACA) through a budget process. The plan contains major threats to the health care status quo in Colorado.
The early signs point to higher costs for low- to moderate-income people, older people and sicker people. The AHCA would dramatically shift Medicaid costs to states, under the guise of “greater flexibility” and “modernization.”
If health insurance premiums soar, 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 non-partisan Congressional Budget Office (CBO) has not released its analysis of the AHCA. Even though we lack this crucial, unbiased information about what the plan will cost taxpayers and how many people stand to lose health coverage, the House is rapidly pushing this bill through the legislative process.
While we policy analysts wait, here are some educated guesses about the three ways the GOP plan will erode many of the health care gains that our state has made.
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. According to an analysis from the Colorado Health Institute (CHI), Colorado policymakers would have to find an extra $907 million to pay for the expansion population if this occurred in the next fiscal year – more than the cost to our General Fund budget for the Colorado Department of Higher Education.
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. 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
AHCA repeals 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 surmise 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 are in a riskier financial situation, which can lead to debt.
At a recent meeting of the National Governors Association, 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. Tax Cuts Leave Questions
The AHCA repeals $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.
It repeals the fee that people who don’t purchase insurance must pay to the government (the individual mandate). To try to compel people to remain insured, it requires insurers to penalize people who fail to retain health insurance coverage over time. People would pay that financial penalty to the insurers.
While we don’t have a CBO score for this bill, in early 2017 the office analyzed aspects of a similar Republican plan from 2015. It found that repealing the taxes and penalties in the law, but keeping its marketplace reforms in place, would result in 32 million people losing coverage and a doubling of premiums over 10 years. We can also look to the Brookings Institution, which 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.” Both Brookings and the AARP point to the added problem that the payroll tax cut will “hasten the insolvency” of the Medicare Trust Fund.
As Congress rushes to approve a replacement bill, we will keep analyzing how working people in Colorado will be affected. CHI will be putting out a series of reports analyzing different aspects of the proposal as well – including high risk pools and health savings accounts. The Protect Our Care Coalition and the Colorado Health Policy Coalition (the Bell is a member of each) are also working to inform the conversation on protecting Colorado’s health gains.