Federal and State governments use four major structures to provide access to health care coverage – namely, Medicaid, Medicare, TriCare and the Affordable Care Act’s (ACA) Marketplace. The ACA and Medicaid face severe funding difficulties. Beyond these are private health care plans supported by employers and individuals.
The ACA created Marketplace has about 9 million subscribers, most of whom enjoy premium subsidies. The ACA also offers states a huge but declining subsidy to expand eligibility (as high as 95%) for low income residents in their Medicaid plans.
The ACA health care plan comes with four brackets of deductibles and premiums – Bronze, Silver, Gold and Platinum with progressively higher premiums. The Kaiser Family Foundation reports that, “In 2017, the second-lowest silver [monthly] premium for a 40-year-old non-smoker living in these cities will range from $229 in Louisville, KY and Cleveland, OH to $904 in Anchorage, AK, before accounting for the tax credit.”
The ACA tax credit “can be paid to your insurer in advance to lower your monthly premium on a Marketplace plan or adjusted on your tax returns.” Income based credits are available to those earning between 100% and 400% of the Federal Poverty Level ($24,300 to $97,200 for a family of 4 during 2017). In some cases, the tax credit can reduce a $,3500 premium to $500. The average tax subsidy is $1,100 and two-thirds of ACA subscribers qualify for the tax credit.
Marketplace insurers collect premiums from subscribers and until now, they collected a cost-sharing payment from the federal government. This week, President Trump announced he will immediately cut ACA’s cost sharing payments to insurers and will authorize health care plans that are much cheaper because they exclude some of the 10 “essential” coverages included in the original ACA.
Health care plans that skip some coverages in return for cheaper premiums will help some consumers. But, coverage exclusions can rebound on consumers who chose imprudently. They may later find they needed the omitted coverage. Subscribers who opt for the cheaper plans are likely to be healthier than the norm. That will concentrate sicker subscribers into the original Marketplace plans, adding to the plan’s high costs.
In Maine, voters are being offered an expanded Medicaid eligibility plan that could cover 70,000 more people. “The expansion would cost Maine $54 million a year once fully implemented and would bring in $525 million annually from the federal government.”
The hope of covering low-income neighbors through federal subsidies is attractive to voters, but Maine’s painful earlier experience with runaway Medicaid expansion costs seems forgotten. Unlike Idaho, Tennessee and West Virginia, who are putting Medicaid expansion hopes on hold, Maine seems determined to risk Congress’ whimsy on cutting Medicaid expansion subsidies. The state is gambling that Congress will help it avoid a $579 million annual hole in its budget. Maine’s heart may be in the right place, but its prudence needs reinforcement.
In contrast to the Marketplace and prospective Medicaid beneficiaries, the 56 million Medicare beneficiaries seem to be sitting pretty. Their Medicare program may face minor adjustments in eligibility and premium levels, but nothing as radical as is likely to befall the Marketplace.
TriCare provides health care coverage to 9.4 million active military members, veterans, and their families. The scandals over “wait” times at Veterans Affairs medical facilities seem to have died down. The 2017 Department of Defense budget contained some increases that will improve medical services for the active and retired military community.
Health Care – a sector that is one sixth of the US economy should be able to avoid unaffordable premiums and officious sermons on what must be covered. When you take your family to a restaurant, the rational policy is to select only the categories of dishes that you can afford, not everything that’s on the menu. The bill should be paid with cash or credit that you will clear at the end of the month.
The same prudence applies to government health plans – cover only what you can afford. As evidenced by Medicare and TriCare, government health plans work when they avoid the politician’s lethal temptation to offer everything to everyone.