8 Big Changes Under Tom Price’s Obamacare Replacement Plan
Policy + Politics

8 Big Changes Under Tom Price’s Obamacare Replacement Plan

© Joshua Roberts / Reuters

Rep. Tom Price (R-GA), the fierce opponent of the Affordable Care Act who was just tapped by President-elect Donald Trump on Tuesday to head the Department of Health and Human Services, is a rarity on Capitol Hill: A Republican with a plan to simultaneously repeal and replace Obamacare.

Price, 62, an orthopedic surgeon from the Atlanta suburbs and the chair of the House Budget Committee, began focusing his energies on dismantling Obamacare almost as soon as President Obama signed the landmark health insurance law in 2010. Over time, he has drafted and promoted a series of largely market-based substitutes to overcome what he has described as “oppressive” federal government strictures and runaway costs.

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As the new HHS Secretary, the Tea Party conservative will be central to the GOP drive to repeal Obamacare – a major step that they are likely to take beginning in January after a new Republican-controlled Congress is sworn in and Trump takes the reins at the White House.

As an unwavering supporter of Trump throughout the campaign, Price will be well positioned inside government to help shape the emerging Obamacare replacement legislation. He will then likely press on with his other ideas for reforming Medicare and Medicaid, the nation’s premier entitlement programs for seniors and the poor.

The legislation Price is offering as a replacement to Obamacare is called the Empowering Patients First Act and is reflective of his long-standing concern that government has interfered with the traditional doctor-patient relationship. The latest iteration of his legislation would try to wean 20 million Americans off of Obamacare with a handful of tax credits, savings incentives, state grants and other marketing incentives to encourage competition within the insurance industry.

Price’s approach is comprehensive – his latest proposal totals 242 pages – and highly ambitious in conceiving of a parallel universe of health care insurance for many in this country.

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But Price’s proposals are also controversial, among Republicans and Democrats alike.  And critics warn that anything approved along these lines would result in millions of Americans losing coverage. Moreover, younger, healthier and wealthier consumers would likely fare much better under Price’s plan than older and sicker people.

Here are eight big changes in U.S. health care that may be coming if Price’s legislation Empower Patients First Act prevails:

  • Obamacare would be scrapped, including the government-run insurance markets in every state, the mandates on individuals and businesses and federal tax credits to subsidize the insurance of lower income Americans. Price’s plan instead would offer fixed tax credits – pegged to a person’s age rather than their income -- so that they can buy their insurance policies in the private market.
    Those tax credits would be fairly modest, ranging from $1,200 a year for people 18 to 35 years of age to $3,000 for those 51 and older. In many regions of the country, that would hardly begin to cover the premiums and out-of-pocket costs for a relatively comprehensive health insurance plan.

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  • Just as is the case under Obamacare, people with pre-existing medical conditions or chronic illnesses couldn’t be denied coverage under Price’s approach -- provided they had continuous insurance for 18 months before choosing a new policy. That’s a big caveat designed to discourage people from obtaining coverage during an illness and then dropping the policy after recovering. If someone allows their policy to lapse, the next time they return to the market they could be charged up to 150 percent of the standard premiums for the next two years.

  • This concept of requiring people to maintain “continuous coverage,” is a popular one among Republican policymakers, and is also included in House Speaker Paul Ryan’s “Better Way” approach.

  • Price would seek expanded use of health savings accounts to allow people to save income before taxes to pay for future health care needs. Health savings accounts already are a common feature in many workplaces. One twist under Price’s approach is that people who are currently covered by Medicare, the Veterans Affairs Department or some other government health program could contribute to health savings accounts to help cover their premiums and copayments.

    As a way of addressing the insurance industry’s challenge in covering older and sicker Americans, Price would provide grants to states to insure the “high risk” population. The risk pools would be the equivalent of a safety net for insurers, to offset part of their costs when hit with enrollees’ catastrophic health care costs. But Price appears to be seriously low-balling the scope of the problem by proposing to invest a mere $3 billion into state risk pools over a three-year period. Ryan’s “Better Way” plan, for instance, would provide $25 billion over the coming decade, and even that might prove to be woefully inadequate.

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  • Price would likely roil businesses by imposing a cap on the amount of money that companies could deduct from their taxes to defray the cost of providing health insurance to their workers. This exclusion is one of the largest in the federal tax code and costs the government an estimated $260 billion a year in foregone revenue. Price’s approach would limit the employer tax exclusion for providing health insurance to $8,000 a year for individual policies and $20,000 for families.

  •  In one of the biggest blows to poor and low-income Americans, Price would repeal the expanded Medicaid coverage in 32 states and the District of Columbia for able-bodied single people and leave those current beneficiaries to fend for themselves on the open market, using other tax credits and benefits.

  • Price’s approach matches that of GOP President-elect Donald Trump in one notable way – by allowing health insurers licensed to sell policies in one state to offer them to residents of other states. This approach would allow consumers to shop around for health insurance across state lines just as they might for any other insurance product.

  • Finally, the Price proposals would foster an insurance market very welcoming to young, healthy and financially self-sufficient people but hostile to sicker and older people. For one thing, it would eliminate Obamacare-style mandates for insurers to include a standard package of benefits such as maternity services and pediatric care and allow them to offer cheaper, less comprehensive policies to younger people who are looking for a bargain.

At the same time, insurers could jack up the premiums and copayments on their oldest enrollees by as much as the market would bear. The Affordable Care Act currently limits insurers from charging their oldest enrollee three times as much as their youngest clients, but that would no longer be the case under Price’s approach.

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