How Exactly the GOP Healthcare Plan Will Screw You Over

In the day since House Republicans finally exhumed their Obamacare replacement, which had been previously hidden in a literal basement, it has been torn apart by members of both parties. Democrats hate it because the bill, dubbed the American Healthcare Act (ACHA), rolls back most of their most significant legislative achievement in a generation, and conservatives can't tolerate the parts of the Affordable Care Act that it leaves in place. As of Tuesday afternoon, it's hard to find many people who have a reason to love the ACHA.

The GOP's healthcare bill would halt Medicaid expansion and dramatically reduce federal subsidies that have allowed people to buy insurance. It would also end the individual mandate, which would drive up healthcare costs for everyone because healthy people would drop their coverage, leaving only sick people enrolled in plans. (Generally, healthy people's premiums subsidize medical costs for the sick and disabled.) This in turn could prompt some insurers to exit the individual marketplace, meaning you'd have less choice than you did under Obamacare. The only people this bill stands to benefit are the ultra rich, who will no longer have to pay additional taxes to help fund Obamacare.

To understand exactly how much havoc this bill would wreak if it were to become law, and whether it has any redeeming qualities at all, I spoke to Matthew Fiedler, a health economist who is currently a fellow at the Brookings Institution and worked on healthcare issues under the Obama administration.

VICE: Let's start with the basics: What are the major differences between the Republicans' new healthcare plan and Obamacare?
Matthew Fiedler: There are two major differences. Let's first start on the Medicaid side. The Affordable Care Act provided generous federal funding to states so they had the option to expand Medicaid to people with incomes below 138 percent of the poverty line. The American Healthcare Act would eliminate the enhanced federal funding to states that allow them to cover those people, which would lead to certainly no additional states taking up expansion. I would expect some states that have already taken up expansion to roll it back. Then on top of that, the American Healthcare Act would make additional cuts to Medicaid by implementing what's called a per capita cap that would basically limit the total amount of federal assistance that states can get from the federal government for their Medicaid programs. I would expect that this would cause states to make additional reductions in the scope of the benefits they provide to enrollees, but potentially also to reduce the number of people they cover.

The other big difference is on the private insurance side. There are two big changes here. The first is that ACA provided a set of tax credits to help people afford premiums and cost-sharing reductions for low-income people to reduce their out-of-pocket spending. This bill would repeal those and replace it with a tax credit that is going to be substantially less generous for low- and moderate-income people. The big change there is that healthcare is going to be much less affordable for people in this low-income range. In addition to that, it would repeal the individual mandate, which would likely make the individual market risk pool worse and therefore drive up premiums in the individual market. It has some things that it tries to do to mitigate that disruption from repealing the individual mandate, but my hunch is that they would be inadequate to do so.

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What parts of Obamacare are left intact?
One of the other goals of the Affordable Care Act was to drive systemic changes in how we pay for healthcare that encourage providers to deliver healthcare in more efficient ways or to provide higher quality care. That whole side of the ACA is actually not being modified. They are trying to do this through reconciliation, which means in the Senate, there are certain types of provisions that don't have a direct budgetary impact that they can't include. As a result, insurers still can't charge a higher premium or deny coverage to people with preexisting conditions, and insurers must cover an essential health benefits package, meaning they must cover a number of major types of healthcare. Those provisions would remain. I think the combination of reducing financial assistance and repealing the individual mandate raises real questions whether the coverage that people are going to be able to access is actually affordable at the end of the day.

Coverage is going to be a lot less affordable because of the less generous tax credits and other subsidies—and because of the repeal of the individual mandate, coverage is going to be a lot less affordable than it was before.

Who benefits most from the American Healthcare Act and who does it hurt the most?
I think it's fairly clear that it will hurt low- and moderate-income who are going to lose their health insurance coverage or have their coverage become less affordable under this bill. In terms of people who benefit, this legislation reverses a variety of the revenue raisers in the ACA, in particular tax increases on high-income people that help to pay for the cost of the coverage expansion, those would go away. So the people in those income brackets who pay those additional taxes would be better off as a result.

Republicans want to replace the individual mandate with a new rule that says if you let your insurance lapse for more than two months, you'd have to pay 30 percent more in premiums if you want to get it again. Would this make people even less likely to buy health insurance?
I think there's a complicated set of effects, and I am very uncertain what the effects of this would be. The general suspicion is that the net effects on coverage would be fairly small. I don't think it's an adequate response to the individual mandate. I think the point you're raising of someone who does have a lapse—then are they only going to come back in when they're really sick?—I think that is a plausible effect. There are probably some people who would look ahead and say, I'm not sick now, but I might be sick later, and I'd have to pay the 30 percent so maybe I'll take up coverage. That's a fairly small group of people, given what we know from a variety of research in behavioral economics about how people think about risk and how people think about the future.

If you bought your insurance at an exchange, what would change for you if this became law?
If you're receiving a tax credit, the tax credit you're going to receive under this law would be dramatically smaller. If you're getting assistance with cost-sharing under the ACA, that assistance with deductibles and co-payments and so forth, that would go away. With the repeal of the individual mandate and the reduction in subsidies, there would be a less healthy risk pool, and that would mean premiums would rise overall. In some cases that might mean that some insurers might decide to exit the individual market, so on top of the reduced financial assistance, potentially seeing premium increases and that your carrier is no longer offering a plan.

Is there anything good about this bill, from your perspective?
I'm struggling. Let me think about that…

Is it good for the health insurance companies?
No. The bill repeals the individual mandate immediately, so it creates tremendous near-term uncertainty about what their pools are going to look like. Reducing financial assistance to consumers to buy their product is not good for insurers.

What do you think the biggest change people should know about is?
In the Affordable Care Act, Congress made a decision that we were going to put in place a set of provisions that made sure everyone could afford and access coverage. This legislation rolls those things back, which means that there are a lot of people who can afford coverage today who won't be able to afford it going forward.

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