A ‘Full Repeal’ of Obamacare Could Spur Medicare’s Bankruptcy
Policy + Politics

A ‘Full Repeal’ of Obamacare Could Spur Medicare’s Bankruptcy


Congressional Republicans have come under growing pressure to preserve key elements of the Affordable Care Act as they move towards action in early January on special budget legislation to repeal President Obama’s signature health insurance law.

President-elect Donald Trump, for instance, has said he favors preserving two highly popular measures. One would allow parents to keep their children on their health insurance policies until their kids turn 26. The other prohibits insurance companies from discriminating against applicants with pre-existing health problems.

Related: 8 Big Changes Under Tom Price’s Obamacare Replacement Plan

Meanwhile, health insurers seriously contemplating bolting from the Obamacare markets during a two-year transition period to a new Republican plan are pressing GOP lawmakers to provide them with “bailout payments” to offset hundreds of millions of dollars of anticipated losses.

Senate Finance Committee Chair Orrin Hatch (R-UT) and other high ranking Senate Republicans are pressing the GOP leadership to preserve other important provisions – including insurance tax subsidies for low income Americans and expanded Medicaid coverage for the poor.

Now comes a warning from the Kaiser Family Foundation that a complete repeal of the Affordable Care Act would have a dire financial impact on the Medicare program for seniors. A full repeal of Obamacare would reverse the progress made in slowing the rate of growth of Medicare Part A spending on hospital care and accelerate the estimated long-term insolvency of the trust fund, according to the report released on Tuesday.

The Obamacare legislation passed in 2010 included numerous provisions affecting the Medicare program and the 57 million seniors and people with disabilities who depend on it. Those provisions, among other things, substantially slowed the growth in Medicare payments to hospitals and other health care providers and the Medicare Advantage HMO plan.

Obamacare also updated and reformed the hospital payment and delivery system, raised premiums for higher-income beneficiaries, and generated new revenues dedicated to the Medicare program. Those revenues came from an 0.9 percentage point increase in the Medicare Part A payroll tax on earnings of higher-income workers and a fee on the manufacturers and importers of branded drugs.

Related: 52 Million Americans With Pre-Existing Conditions Face Uncertainty Under Obamacare Repeal

Before Obamacare was signed into law in 2010, Medicare Trustees projected that the Part A fund for hospital care would begin running low on money for benefits beginning in 2017. Following enactment of the legislation, the insolvency date projection was extended to 2018.

But a full repeal of the ACA would have the effect of pushing up the insolvency date.

“Full repeal would increase spending primarily by restoring higher payments to health care providers and Medicare Advantage plans,” the report states. “The increase in Medicare spending would likely lead to higher Medicare premiums, deductibles, and cost sharing for beneficiaries, and accelerate the insolvency of the Medicare Part A trust fund.”

CBO has estimated that full repeal of the Affordable Care Act – including changes in provider payment rates – could drive up Medicare spending by $350 billion over the coming decade. There would also be an increase in the Part A deductibles and copayments which would hit consumers. 

A full repeal of the Medicare provisions would also knock out improvements in Medicare benefits, such as preventive screenings for breast and colorectal cancer, cardiovascular disease and diabetes. Obamacare also closed a coverage gap for many beneficiaries in the Part D prescription drug program – the so-called doughnut hole.

Related: The Health Care Industry Is in a Panic Over Obamacare Repeal

There’s no way of knowing at this point precisely how much of the Obamacare law the Republicans intend to strike down to have ready for Trump to sign when he takes office Jan. 20. A lot will depend on negotiations within the party and pragmatic calculations about how long it will take the GOP to come up with a replacement law that passes muster with a majority of Congress.

Last year, House Budget Committee Chair Tom Price (R-GA), introduced a fiscal 2017 budget resolution that proposed a full repeal of the ACA. That measure passed Congress but was vetoed by President Obama last January.

Another House Republican plan, “A Better Way,” introduced by House Speaker Paul Ryan (R-WI) in June 2016, proposed to repeal some, but not all, of the ACA’s Medicare provisions.

The relationship between Medicare – the government-run health system for seniors and the disabled – and Obamacare has been a subject of great controversy between Republicans and Democrats for years. Republican allegations that Obamacare has drained Medicare of resources date back to the 2010 midterm elections – but are largely bogus.

Related: GOP Cuts in Medicare May Be Next After Dismantling Obamacare

Former Arkansas Gov. Mike Huckabee charged during an August 2010 GOP presidential debate that Obamacare had “robbed” Medicare of $700 billion. In fact, Huckabee was referring to the Obamacare provisions that had slowed the rate of growth of Medicare spending – a development that many fiscal conservatives favored. What’s more, those savings came at the expense of insurers and hospitals, and not from seniors or other beneficiaries.

Throughout the 2016 presidential campaign, Trump promised repeatedly to leave Medicare and Social Security unscathed in attempting to reduce the government’s long term costs. However, Ryan charged Obamacare was draining the Medicare trust fund and that government intervention was needed. Ryan has been promoting a plan to convert Medicare into a voucher-style private health insurance program gradually.

"Because of Obamacare, Medicare is going broke," Ryan said in an interview on Fox News on Nov. 10. "So you have to deal with those issues if you're going to repeal and replace Obamacare."

In fact, just the opposite is true, according to analysts and media fact checkers. Obamacare has apparently extended the life of Medicare.

“The Affordable Care Act actually strengthened the near-term outlook of the Part A trust fund,” wrote Glenn Kessler, the Washington Post’s Fact-Checker, in early November. “The net result was that the ‘insolvency’ date was extended by 12 years.”