House Republicans have proposed a major rewrite of the Affordable Care Act that would increase the cost of health insurance for older workers and profoundly change the Medicaid support system for the most vulnerable. It would be the biggest change in government assistance for long-term care since the creation of Medicaid a half century ago.
The proposal would retain the basic structure of the law but redesign individual insurance subsidies and sharply reduce the federal payments to the Medicaid program. The likely bottom line for seniors: Higher premiums and out-of-pocket costs for those aged 60 and older who are not yet enrolled in Medicare, and reduced benefits for low-income seniors who are receiving long-term services and supports from Medicaid.
Those are just the direct effects. Keep in mind indirect consequences as well. For example, the more people under age 65 pay for medical care, either through higher premiums or higher out-of-pocket costs, the less money they’ll have to purchase long-term care insurance or save for personal assistance in old age. That means more older adults and younger people with disabilities will exhaust their assets on medical and long-term term care, and more will become eligible for Medicaid. However, because the federal contribution to Medicaid will shrink, those enrollees will receive less generous benefits.
The House bill is complex, and leaves many key issues unresolved, but here is how some of the key provisions would affect seniors:
Individual medical insurance: The House GOP bill would eliminate the Affordable Care Act subsidies that help people purchase individual insurance and replace them with a new subsidy design. That new model would create tax credits that are adjusted by age. For example, people under 30 would get an annual credit of $2,000. Those 50-59 would get a credit of $3,500 and those over 60 would receive a credit of $4,000. The credit would phase out for individuals making $75,000-a-year ($150,000 for couples).
However, the bill would also significantly increase the premiums that insurance companies could charge older adults. Insurers could charge them premiums that are five times higher than those paid by young people. The likely net effect of the higher premiums and higher subsidies: Much more costly insurance.
At the same time, the bill would also eliminate the tax penalty for those who do not have insurance, and instead allow insurers to charge those who drop coverage a 30 percent premium for re-enrolling. Health economists argued that the ACA incentive for buying insurance was too weak, thus many young, healthy people simply did not buy, driving up premiums for the relatively sicker population that did purchase coverage. The House GOP incentive is even weaker and many experts feel it will result in even more costly premiums. Combined with the new premium cap, it is very likely that many of those in their 50s and 60s will be priced out of the new insurance market.
Medicaid: The House Republican plan would reduce the federal contribution to Medicaid, the joint federal/state health and long-term care program for low-income people. The program provides benefits for 8.3 million older adults and younger people with disabilities (4.6 million seniors), most of whom have very low incomes and severe functional limitations. It spends more than $140 billion annually for long-term supports and services.
The bill would slash benefits by imposing what it calls a “per capita cap,” starting in 2020. In other words, it would limit the federal share of Medicaid costs per beneficiary. If costs exceed a set amount, states would either have to pick up the additional expense or reduce benefits.
The proposal would divide the Medicaid population into categories (the elderly, younger people with disabilities, children etc). Each would be subject to its own cap. This would help protect seniors if a recession throws large numbers of working age adults onto Medicaid. But it would also set up a battle over how to divide those funds.
The consequences of Medicaid cuts: With less money, the program would likely reduce the amount it reimburses providers, such as nursing homes and home care agencies. Nursing facilities, already chafing under low Medicaid payments, would likely shift more beds to post-acute care, which are supported more generously by Medicare. High-quality home care agencies, already reluctant to participate in Medicaid, would likely abandon the program.
Although states have been shifting participants to home and community-based care, such benefits are optional. Thus, a poorly-funded program would likely reduce home care benefits. For instance, aides might be available for fewer hours. This is likely to be exacerbated by budget cuts the White House is expected to announce next week in programs such as Meals on Wheels, transportation, and senior housing.
This proposal faces an uphill battle, even in a GOP Congress. But if it becomes law, long-term care will change in profound ways.