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Brainstorm Health: GOP Tax Plan and Obamacare, Trump Health Pick and Drug Prices

November 29, 2017, 7:25 PM UTC

Hello, readers! This is Sy.

The contours of the GOP tax plan currently making its way through Congress are in flux. But the sprawling bill from the U.S. Senate would, in addition to reshaping individuals’ and corporations’ tax rates, also have broad effects on American health care—including millions in insurance coverage losses and premium hikes, even if Congress also passes certain fixes to shore up Obamacare markets, the nonpartisan Congressional Budget Office (CBO) said in a new report released Wednesday.

Health care became intimately mired in the tax reform debate as Senate Republicans heeded President Trump’s call to tack on a repeal of Obamacare’s individual mandate, one of the health law’s most unpopular measures, into their plan. The mandate requires all Americans to carry insurance (subsidized for the vast majority of people buying individual health insurance plans) or pay a tax penalty.

Trump and the Congressional GOP have long aimed to nix that requirement. But they’ve been unsuccessful to date in part because the CBO has projected that repealing the mandate would lead to millions of fewer insured Americans relative to current law while also hiking rates. And while experts may quibble over the precise magnitude of those effects, the CBO hasn’t equivocated about the overall trend.

“There’s a lot of uncertainty around how effective the mandate has been,” Larry Levitt, senior vice president at the independent health care think tank Kaiser Family Foundation (KFF), told Fortune in an interview. “But CBO has said the direction of the effect is clear. Repealing the mandate would increase premiums, would increase the number of people who are uninsured.”

Just how big of an effect would a mandate repeal have? According to CBO, 13 million fewer people would be insured in 2027 compared with current law while premiums would spike 10%. That’s because, without the policy “stick” of a mandate, healthier and wealthier people would likely drop out of Obamacare’s marketplaces, in turn making individual insurance risk pools more costly by disproportionately leaving them with sicker Americans.

That projection been a big road block for more moderate Republican Senators like Maine’s Susan Collins. But Collins reportedly has come around on the issue after Trump assured her he would support a pair of bipartisan “fixes” to Obamacare—one that would guarantee insurer payments that help lower out-of-pocket medical costs for poorer Americans and another (co-sponsored by Collins) that would establish reinsurance funding to give insurance companies more market certainty.

Whether such bills would pass a Congress with general antipathy toward Obamacare is an open question. But, even if they did, CBO now says they would do little to make up for the damage wrought by axing the individual mandate.

“If legislation were enacted that incorporated both the provisions of the Bipartisan Health Care Stabilization Act and a repeal of the individual mandate, the agencies expect that the interactions among the provisions would be small; the effects on premiums and the number of people with health insurance coverage would be similar to those referenced above,” wrote CBO in its new analysis.

A sizable number of consumers would be shielded from the rate hikes since more than 70% of Obamacare plan holders receive federal subsidies to help pay their monthly premiums. Those subsidies would rise in tandem with insurers’ rates. But Americans making too much money to qualify for the subsidies would be out of luck—which could be financially devastating for people with costly medical needs. “It would have the biggest effect on the middle class,” as Levitt explained.

Then there’s the matter of whether or not more insurance companies would exit Obamacare markets since a repeal of the individual mandate would introduce even more uncertainty to the health law. “Repeal of the individual mandate could be the final straw for some insurers,” said Levitt.

Read on for the day’s news.

Sy Mukherjee


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