Deep cuts to Medicaid remain the centerpiece of the Republicans’ proposals

By H.C. | WASHINGTON, DC

WHEN the House of Representatives passed the American Health Care Act in early May, it was widely thought that the Senate would rewrite it. The House’s bill, among its many reforms, would unwind Obamacare’s expansion of Medicaid, health insurance for the poor. That expansion has given health insurance to 12m Americans. Surely moderate Senate Republicans could not tolerate a reversal?

Yet the Senate bill, the Better Care Reconciliation Act (BCRA), revealed on June 22nd after a secretive drafting process (see leader), merely delays the start of the Medicaid cuts by an additional two years, to 2021. In fact, the cuts to the programme would end up being deeper than under the House plan.

By contrast, Senate Republicans have significantly altered the House’s approach to the individual market, which serves those who buy health insurance for themselves. The House had proposed a subsidy for buyers in this market that varied only with age. By contrast, the BCRA’s subsidies would be linked to income, just like under Obamacare. The poorest buyers would pay no more than 2% of their income for insurance. As a result, those who lost Medicaid coverage would probably still be able to buy insurance.

That insurance, though, could be skimpy indeed. Obamacare provides enough of a subsidy to buy a “silver” plan, which pays 70% of enrollees’ medical bills on average. The BCRA would only cough up enough for a “bronze” plans, paying on average 58% of expenses. In other words, the poor would face higher out-of-pocket expenses, such as deductibles. Obamacare gives them help with such costs, but the BCRA eventually abolishes that assistance. As a result, the insurance within reach of the poor would be useful only if catastrophe struck. From day to day, they would find themselves paying a lot more for predictable expenses such as trips to the doctor or prescriptions. They might forego such care to save money.

The bill mainly keeps the House’s proposal to let states deregulate insurance markets. For instance, states could decide what treatments insurers must cover, and may choose to allow bare-bones plans. The BCRA, unlike the House bill, would never let insurers charge more to people who already have a health condition. However, in newly deregulated markets, firms will probably find it easier to discriminate against the sick in other ways. For example, they might not cover expensive treatments that, under Obamacare, they must pay for.

That sort of “risk-selection” is all the more likely because the bill abolishes the individual mandate, the requirement that everyone buys health insurance or pays a fine. The individual mandate is a foundation of Obamacare. It is supposed to ensure that enough healthy people buy insurance to fund care for those who are sick. Without it, fewer healthy people will buy insurance, which will force premiums up. Republicans probably hope that many people will buy cheap, high-deductible plans without being forced to. But with less money coming in, it is hard to see how the market could continue to fund treatment for those with chronic, expensive conditions like diabetes.

The bill’s prospects are uncertain. It creates plenty of losers. Notably, the old could be charged up to five times more than the young, up from three times currently. The idea is to encourage more healthy young people into the market. But it will create pain for older buyers, especially some middle-earners who stand to lose their subsidies. Currently, these go to all those who earn less than 400% of the poverty line ($47,550 for an individual). The BCRA cuts this to 350% (about $41,600). Charles Gaba of acasignups.net, a number-crunching website, estimates that a 60-year-old earning $37,000 would go from paying roughly $3,600 a year for a silver plan today, to paying roughly $6,000 for a bronze one, under the BCRA.

Medicaid cuts, however, were always the most likely barrier to moderates supporting the bill. It does not look as if moderates have yet fought hard against their inclusion. For now, the most vocal Republican opposition is coming from the right of the party, which is upset that the bill leaves some of the building blocks of Obamacare in place. Four conservative Republicans—Ted Cruz, Ron Johnson, Mike Lee and Rand Paul—have said they are “not ready” to support the bill. With Democrats united in opposition, three Republicans “no” votes would stop the BCRA’s passage. Expect the bill to change over the next week as the Senate leadership tries to stop that from happening.