Concerned About the Poor???

Health Proposals by Walker and Rubio Are Less Concerned About the Poor

By Margot Sanger-Katz

Obamacare gives federal money to poor people to help them get health insurance. Scott Walker, Wisconsin’s governor, has a replacement plan. It would give federal money to old people instead.

There are many, many other differences between Obamacare and Mr. Walker’s plan, announced Tuesday in a white paper and a policy speech. But that difference points to the key similarity between the plans, and the most consequential change.

The similarity: Both embrace the notion that the federal government should have some responsibility for making insurance affordable for people who don’t get it through their jobs. The Walker plan, and a similar though vaguer plan announced by Senator Marco Rubio on Tuesday in an editorial in Politico magazine, thinks that responsibility should, in part, take the form of federal money. Both Republican presidential candidates would give individuals tax credits they could use to shop for health plans.

But the Republican plans differ substantially from Obamacare in their vision of how the money should be doled out, and what it should be used to buy. The Walker and Rubio proposals call for a much less regulated insurance market, where the federal government exercises little oversight over the products in the market.

Their plans are also much less concerned about ensuring health care access for the poor. In addition to rolling back Obamacare, both would also reduce future federal spending on state-administered Medicaid programs.

One of Obamacare’s main effects has been to redistribute income. The law taxes wages, health insurance and medical devices, and raises insurance prices for wealthy, healthy people. It uses the money to subsidize insurance for people who are poor or whose health history made them poor insurance risks in the old system. As my colleague Kevin Quealy and I wrote last year, the law has had the effect of pushing back against income inequality. In addition to lowering the cost of buying insurance, federal dollars also reduce the out-of-pocket costs that low-income Americans now pay when they use those plans. But Obamacare has had more limited success in attracting higher-income Americans into the new markets.

Governor Walker’s plan appears to be less generous for many poor Americans. It would roll back the Medicaid expansion that has provided free insurance to low-income adults. It would distribute tax credits to those with private coverage on the basis of age, not income. Such a system would be far simpler to administer: Every person 50 to 64 would be given $3,000 to spend on health insurance, while everyone 18 to 34 would get $1,200. Older people tend to have higher health care costs, and are charged higher insurance premiums, the argument for the age-based subsidy system. But it means that for people without a lot to spend on insurance, a comprehensive health plan may slip back out of reach. For others, an affordable plan might be so bare-bones that it wouldn’t kick in before a major health catastrophe.

Wealthier people, on the other hand, could fare better under this plan, as long as they’re healthy. They would get more federal money to buy insurance plans, and they would have the choice of buying cheaper, less comprehensive plans than those offered under Obamacare rules.

The plan could make it harder for people with prior illnesses to buy insurance. Under Obamacare, insurers have to offer the same products and charge the same prices to customers of the same age, regardless of their health histories. The Walker plan would offer similar protections for people who remain insured for their entire lives. But anyone with a major gap in coverage could later be either priced out of the insurance market or disallowed from buying certain health plans.

Governor Walker’s white paper says that states could establish special programs for these people. But such programs in the past have proved quite expensive. Such a mechanism would provide a financial incentive for people to stay insured, much as Obamacare’s individual mandate uses tax penalties to keep people in the system. But for anyone who’s gone without insurance, getting back into the system would be much harder.

The Rubio plan shares some of the basics, but offers fewer details. His editorial says people would get tax credits to buy insurance, but he doesn’t specify how those tax credits would be calculated or what would happen to people with pre-existing health conditions.

Both plans, however, would strip away Obamacare’s myriad health insurance regulations. Among the rules that would be cut away are popular ones, like rules preventing insurance companies from capping how much health care they will pay for during your lifetime, or the requirement that plans cover adult children up to age 26. They would also eliminate less popular rules, like the requirement that everyone obtain insurance or pay a fine and a rule that requires every health plan to cover a fixed set of benefits, including prenatal and maternity care.

Without all the rules, and without as many sick people in the system, insurance would be expected to become less expensive, and perhaps more inventive. Insurers could offer a wider array of products, including plans that only cover certain, limited services, or products that charge high deductibles or cap the amount of care they will pay for. Insurers may develop innovations that appeal to customers and cost less than what’s currently offered. Plans that include health savings accounts would be encouraged with additional federal dollars.

States would have the authority to impose insurance rules, so some markets might have more restrictions. But the plan would also allow people to buy insurance sold in any state, meaning all Americans would have access to the least regulated products. The result of erasing the rules, both campaigns suggest, is that the plan’s tax credits would go further in making insurance affordable for more middle-income people.

All of the Republican presidential candidates say they’d like to repeal Obamacare. But any of these plans, however meritorious, can only be accomplished through enormous disruption. Millions of people who have obtained insurance through the law’s expansion of the Medicaid program would lose it. Millions more would most likely lose the coverage they bought through new insurance marketplaces.

Of course, repealing Obamacare means more than just getting rid of insurance regulations. Obamacare did so many other things — including adding a suite of major reforms to the Medicare program for older Americans. Governor Walker’s white paper includes the word “Medicare” just once — in a footnote. A Medicare plan may well be forthcoming from him.

But the campaign’s silence on this major plank of the health law is another reminder of just how large and entrenched Obamacare has quickly become and how difficult it will be to unravel.