Republicans are seeking to repeal and replace the affordable care act, even as Republican candidates for office profess support for many parts of the act including protections for people with pre-existing conditions. The primary Republican achievement since 2016 involves a tax law that repealed the individual mandate and a Texas federal court ruling currently under appeal that voided the entire law because of the individual mandate repeal.
Democrats have robustly opposed Republican efforts to repeal the ACA but are now split between fixing the Affordable Care Act or moving towards a single-payer system. Many 2020 Democratic candidates have endorsed Medicare for all without fully considering details of and implications of their proposals.
Some Democrats are now advocating proposals that would allow some private firms or some individuals to buy into Medicare or Medicaid. One advantage of adding a government (Medicare or Medicaid) option is that these options allow people to keep private insurance.
This section starts with a review of the current health care policy debates. The analysis reaches the following conclusions.
- Republican efforts to repeal the ACA would substantially increase the number of uninsured people in the United States.
- Democratic Medicare for all proposals have not been fully vetted, would leave many people with private insurance worse off and would be more expensive than anticipated.
- The combination of a decrease in the eligibility age for Medicare combined with a higher ratio of insurance premiums for older households relative to younger households could decrease the number of uninsured people in all age groups.
The section contains discussions of three technical health insurance issues with important implications for health insurance markets that have not received attention during the debate over repeal of the ACA.
The first issue involves modifications of rules governing health savings accounts and high deductible health plans. Proposals designed to mitigate problems created by the increased use of health savings accounts and high deductible plans include:
- Creation of a tax credit for contributions to health savings account by low-income and mid-income households.
- Expansion of the type of health plans, which allow contributions to health savings accounts.
- Require high deductible health plans pay a portion of prescription drugs used for chronic diseases prior to deductible being met.
The second issue involves modification of rules and incentives governing the use of employer-based insurance versus state exchange insurance.
Proposals designed to strengthen state exchange insurance and to allow more firms to replace employer-based coverage with state exchange coverage include:
- An expansion of the tax credit for premiums on health insurance policies purchased through state exchanges.
- An alternative to the employer mandate for employers subsidizing the purchase of health insurance on state exchanges.
- Financial incentives for young adults to leave their parent’s health insurance policy and obtain health insurance on state exchanges.
The third issue involves how to mitigate financial distortions caused by extremely expensive and complex health care cases. Proposals designed to mitigate problems associated with the most expensive health care costs include:
- Government and private firms sharing health care expenses over a certain threshold.
- Automatic Medicaid enrollment for people purchasing a health plan with an annual benefit cap once expenditures exceed the cap.
- Government assistance for certain health care cases that are difficult to treat in narrow-network HMOs.
The health care debate is eerily analogous to the student loan debate with each side taking extreme positions. Republican efforts to repeal the ACA would increase the number of uninsured. Democratic initiatives would crowd out private insurance for many households that are well served by the existing system. The road to improving health care like the road to reduce student debt problems involves the analysis of arcane rules and incentives and the design of economically efficient alternative regulations.