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Health Care in the 2012 Presidential Election: Who Can Do It Better?

The Commonwealth Fund has released a report comparing how President Obama and Governor Romney’s health plans will affect Americans.  The study was based on a microsimulation analysis done by MIT economist Jonathan Gruber to model three policy scenarios: the baseline (if the ACA had not been implemented); full implementation of the ACA; and full implementation of Romney’s proposals to block grant the Medicaid program and provide the same tax advantages to people who buy coverage on their own as those available to people insured through an employer.

The authors examined seven key questions in their analysis, and found that President Obama’s plan would likely outperform Governor Romney’s plan in all seven criteria.

Will the plans increase the number of Americans with health insurance?

In the absence of the ACA, the number of uninsured is projected to rise to 60.0 million.  When fully implemented, the ACA is projected to substantially reduce the number of uninsured in every state, income group and age group to 27.1 million.  However, Romney’s plan is projected to increase the uninsured population by 12 million compared to the baseline, leaving 72 million uninsured in 2022.  More than 80% of this increase will be caused by the cuts in Medicaid eligibility resulting from state block grants.  People with incomes below 250% of the federal poverty level would be hardest hit; while the ACA would decrease the uninsured rate in this income bracket from 38.6% to 19.4%, Romney’s plan would increase it to 43.7% (38.7 million).  Romney’s plan would have a similar effect on children’s coverage, with the uninsured rate increasing from 12.1% to 21.6% (17.9 million), while the ACA would decrease it to 7.2% (6 million).

Will the plans make health insurance more affordable?

While both plans will make health insurance more affordable than the baseline scenario, the ACA provides a much grater subsidy than Governor Romney’s proposal to equalize the tax treatment of employer-based coverage and plans purchased in the individual insurance market.  Under the ACA, by 2016, about 20 million are projected to be eligible for tax credits, with the average per-person credit to range between $3,900 to $4,500; the 20 million potential beneficiaries are expected to be evenly split between those had been uninsured and those who had insurance coverage.  Under Romney’s plan, about 10 million are projected to be eligible, with the average tax deduction ranging from $1,900 to $2,600.  Only about 1 million is projected to be those who were previously uninsured.

Under the baseline scenario, those buying coverage in the individual market are estimated to spend an average of 18.1% of their income on coverage in 2016.  With the ACA, this number is expected to drop to 9.1%.  Romney’s plan will also lessen their total out-of-pocket costs to 9.1% of their income.

Will the plans protect consumers?

The ACA has several measures to protect consumers and improve the individual and small-group insurance markets.  Almost all states have begun to implement the “Patient’s Bill of Rights,” which went into effect in 2010 and bans insurance companies from rescinding health insurance policies, bans restrictions of lifetime/annual benefits, bans excluding children with preexisting conditions from enrollment, and requires insurance providers to cover preventive care services without cost-sharing.  Beginning 2014, insurers will not be able to deny or restrict coverage based on preexisting health conditions, and will be prohibited from charging higher premiums based on health status or gender.

Governor Romney’s plans to repeal the ACA would also remove these protections.  Instead, he has said he would prevent discrimination against those with preexisting conditions who maintain continuous coverage.

Will the plans improve consumer choice?

Through the state and federal exchanges, the ACA aims to provide consumers with a menu of health plan choices that include information on premiums and cost-sharing, benefits covered, participating providers and ratings of plan quality and enrollee satisfaction.  The exchanges will offer four tiers of plans with standardized cost-sharing and benefit packages.

Romney’s plan would replace these ideas with a Consumer Report-type ratings for plans, and allowing consumers to purchase health insurance across state lines.   Under this proposal, insurance carriers would be free to choose a state in which to be licensed and then sell coverage in other states without having to comply with regulations in each state.  The Congressional Budget Office (CBO) estimated that such a policy would lead to fewer consumer protections across all states, higher premiums for enrollees in poor health, and lower premiums for those in better health.

Will the plans help small businesses?

Much like in the individual market, the ACA has provisions to help small businesses that want to offer health insurance to their employees.  Insurers will not be allowed to deny coverage or charge small businesses higher premiums on the basis of the health of their workforce.  Additionally, small low-wage firms with fewer than 25 employees are eligible for tax credits to offset premium costs.  In 2010, 170,000 small employers claimed tax credits worth $468 million.  The Obama administration has proposed allowing firms with up to 50 employees eligible for this credit.

Governor Romney’s repeal of the law would increase costs for employers already receiving tax credits.  It could also lead to coverage denials and higher premiums for small businesses in some states.  Romney has proposed empowering small businesses to form purchasing pools (multiple employer welfare arrangements; MEWA) but has yet to describe specific policy proposals. While MEWAs have the potential to lower premiums with younger and healthier workforces, some have been plagued by insolvency problems in the past.

Will the plans improve Medicare?

The ACA started to improve Medicare in 2010 with the phasing out of the “doughnut hole” in prescription drug coverage, and making preventive care services and annual wellness visits available without any cost-sharing.  The law also includes provisions to reduce spending, increase revenues and improve the quality of care.  The Trustees of the Medicare Trust Fund estimate that these changes will extend the solvency of the Medicare Hospital Insurance (Part A) Trust Fund to 2024.  Without the law, the fund would be depleted by 2016.

Governor Romney plans to reduce Medicare costs by providing beneficiaries with a lump sum to pay for premiums, and allowing them to apply the amount to either a Medicare private plan or traditional Medicare.  Paul Ryan has proposed similar changes to Medicare as chairman of the House budget committee.  Under the Romney-Ryan plan, there will be great pressure to lower Medicare spending, with beneficiaries more likely to face higher out-of-pocket spending if the level of premium support failed to keep pace with rising health care costs.

Will the plans improve health care quality and slow health care spending growth?

The ACA included an extensive set of demonstration programs and incentives to improve quality and lower costs of health care.  These include:

  • Payment innovations, such as higher reimbursement for preventive care services and patient-centered primary care
  • Bundling payments for hospital, physician and other services provided for a single episode of patient care
  • Enabling accountable provider groups that assume responsibility for the continuum of a patient’s care to share in the savings they generate
  • Pay-for-performance incentives for Medicare providers

Governor Romney’s repeal of the ACA would have real fiscal effects by adding $109 billion to the federal budget deficit over 2013-2022.  His proposals would reduce federal spending, but then shift the burden of health care costs growth onto states, low-income families and Medicare beneficiaries without addressing the underlying causes of rising costs.

Governor Romney’s cost containment proposals include promoting HIT interoperability, alternatives to fee-for-service, capping noneconomic damages in medical malpractice lawsuits, and providing innovation grants to explore non-litigation alternatives to dispute resolution.  The CBO found that capping noneconomic damages could lower malpractice premiums and provide some small savings in health care costs (about 0.5% or less of total health spending).

The full report is available for download.  Please refer to this ITUP report for a comparison between the ACA and Romney’s health care overhaul in Massachusetts.

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