Dec 21, 2017

The ACA is smaller, weaker and more liberal than Obama intended

Years of sustained political attacks and self-inflicted wounds have left the Affordable Care Act a lot smaller than anyone — from its drafters to its harshest critics — ever anticipated. It doesn't cover nearly as many people as Democrats hoped, and its new federal controls have turned out far weaker than Republicans feared.

Why it matters: Although a diminished ACA might seem like a clear victory for the law's opponents, the law as it exists today is in many ways more liberal than the one Democrats passed in 2010. Its benefits are more concentrated on a smaller group of sicker, poorer people, while the middle class has gotten an increasingly bad deal as the law's scope has shrunk.

How it works: Think of the ACA's core coverage provisions like a comet with a tail.

  • First, there's the Medicaid expansion — a truly government-run program, available only to the poorest consumers.
  • From there, the law shifted into subsidies for private insurance, which get smaller as your income goes up.
  • Eventually the subsidies taper off altogether, but Democrats still wanted those wealthier, unsubsidized consumers to benefit from structural changes to the broader insurance market.
  • The theory: Simply creating an organized insurance exchange in each state, and using subsidies (along with other tools) to coax insurers into those exchanges, ought to create the kind of market competition that would benefit even the consumers who didn't get direct financial help.

What happened: As the ACA has evolved, the tail — the benefits that extend further up the income ladder — keeps taking the biggest hits. The parts of the ACA that offer comprehensive benefits to poor people are safe. Its efforts to build a more competitive market for the middle class are the parts that keep failing.

Some provisions have disappeared completely. The ACA aimed to create three new health insurance products. None of them stuck.

  • The CLASS Act was supposed to provide long-term care. Experts suspected even before the law passed that CLASS would be unworkable. It was. The Obama administration abandoned it in 2011.
  • It established new, non-profit health care co-ops, designed to bolster competition through lower premiums. All but a few of the co-ops ended up failing.
  • It also established two new multi-state insurance plans — again, to bolster competition in places that didn't have much. That effort is now down to one plan, in one state.

Others just didn't live up to expectations.

  • The exchanges simply haven't been as popular as initially expected. The Congressional Budget Office has been steadily rolling back its projections of how many people would ultimately sign up, even before President Trump took office.
  • CBO has also said it's revisiting its assumptions about the individual mandate, suggesting the policy hasn't been as strong a motivator as initially expected. (That's why part of the reason Republicans repealed it now, before CBO formally finishes scaling back its view of how big a deal the mandate really is.)
  • The law also took a hit from the Supreme Court ruling in 2012 that allowed states to opt out of its Medicaid expansion.

Politics → Policy → Premiums: The ACA, as written, had some pretty big shortcomings. But congressional Republicans and the Trump administration are also on the hook here.

Perhaps no single policy change has illustrated this shift in benefits as much as Trump's decision to stop making payments for the law's cost-sharing subsidies.

  • As a result of that decision, many of the the poorest consumers can now get cheaper insurance than they could before, because their subsidies go further. Unsubsidized consumers, however, are on the hook for some enormous premium hikes.

Congressional Republicans also cut off federal funding for a program designed to help insurers adjust to this new market, in which they didn't have much prior experience to help them set accurate premiums. And in dozens of little ways, over more than seven years — GOP governors refusing to set up their own exchanges, Congress rolling back various funding streams, etc. — the party has tried to stop the ACA from functioning as intended.

It worked.

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