It would replace the law with a plan that does more to benefit the young, healthy, and rich — and disadvantages the sick, old, and poor. Price's plan provides significantly less help to those with pre-existing conditions than other Republican proposals, particularly the replacement plan offered by House Speaker Paul Ryan (R-WI).
The biggest cut to the poor in Price's plan is the full repeal of the Medicaid expansion, a program that currently covers millions of low-income Americans, which Price replaces with, well, nothing.
Most Republican replacement plans are still white papers rather than actual legislative language. This means they leave out a lot of key details — who, for example, would qualify for a high-risk pool or how big tax credits would be. But Price's plan is detailed. It is 242-pages long and lays bare exactly how he would repeal Obamacare — a program Trump is now putting him in charge of.
Prices' Empowering Patients plan, like Obamacare, requires insurance plans to offer coverage to any patient regardless of how sick they are. But the Empowering Patients plan, unlike Obamacare, would let insurers charge sick people more if they did not maintain "continuous coverage."
This continuous coverage policy shows up in a lot of the Republican replacement plans, and is likely something we'll hear lots of debate about in the coming months. It's part of House Speaker Paul Ryan's Obamacare replacement plan, as well as Sen. Finance Chair Orrin Hatch's proposal.
Here's how it works: If a cancer patient goes straight from insurance at work to her own policy, her insurer has to charge her a standard rate — it can't take the cost of her condition into account.
But if she had a lapse in coverage — perhaps she couldn't afford a new plan between jobs — and went to the individual market under Empowering Patients, insurers could charge her up to 150 percent of the standard premium for her first two years of coverage (you can read this section on page 151 of the bill).
A patient can once again qualify for the standard rate if she maintains 18 months of continuous coverage — although that would likely be with premiums set at the higher rate.
Empowering Patients does have a safety net for people like this: It would invest $3 billion over three years in a high-risk pool to cover those with preexisting conditions who are unable to afford coverage on the marketplace. This is significantly less generous than other Republican proposals for high risk pools. Ryan's Better Way plan, for example, would put $25 billion towards the high-risk pools over a decade ($2.5 billion per year) and keep them running indefinitely. In that way, Price's bill has a much weaker safety net than his House colleagues envision.
One constant Obamacare gripe from Republicans is that the health care law mandates too big of a benefit package. This drives up premiums, they argue, and scares off some healthy and young enrollees who want to buy a skimpier plan.
There is some truth to this argument. Obamacare's marketplaces have struggled to attract young adults at the level the White House had initially hoped (the Obama administration originally said it wanted one-third of the marketplace to be people between 18 and 34 but, right now it's only about a quarter).
Empowering Patients makes the individual market more advantageous for healthier people. It eliminates the essential health benefits package, which mandated that all insurers cover a set of 10 different types of care including maternity services and pediatric care. Empowering Patients would allow insurers to cut whatever benefits they no longer want to cover — they could stop covering maternity benefits, for example, to make their plans less attractive to women who plan to become pregnant. This would likely benefit healthy people, who generally want less robust coverage at a cheaper price. But it'll send the cost of more comprehensive plans — the plans sicker people need — skyrocketing. And it could leave someone who, say, wants health insurance to cover her maternity costs completely out of luck.
There are other ways Empowering Patients makes insurance better for young people too: by letting insurance plans charge them lower rates.
It does this by allowing insurers to charge their oldest enrollees as much as they want. Right now, insurers can only charge the oldest enrollees three times as much as the youngest — that constrains prices for patients in their 50s and 60s.
Eliminating this regulation would increase "increases the overall number of people with coverage, but older people end up falling out of the market as premiums rise," says Christine Eibner, an economist with RAND Corporation who has modeled similar changes to Obamacare's age-rating provisions.
And while young people might have cheaper premiums and an easier ability to enroll, older Americans could struggle to purchase coverage in this market, where their costs would rise. These are people who tend to have more urgent health care needs and could be in a worse position without health care than a young adult might be.
This worries some Obamacare supporters, who say the goal of insurance reform isn't just expanding coverage — it's expanding coverage for people who really need health care.
"If you replace a 60-year-old with a 20-year-old, that doesn't change the number of people covered, but it changes the value of the coverage and of the program," says Jonathan Gruber, the MIT economist who helped the White House model the economic effects of Obamacare.
Price would provide tax credits, but they would help the older (and likely richer) more
Empowering Patients, like Obamacare, envisions that Americans will use tax credits to purchase individual health insurance, but the structure of the tax credits is very different.
Obamacare's tax credits are based on income, with those who earn less getting more help. Empowering Patient's tax credits would only be based on age, giving more help to those who are older (and who will presumably be charged higher premiums). The tax credits outlined in the bill are as follows:
- $900 for children under 18
- $1,200 for those between 18 and 35
- $2,100 for those between 36 and 50
- $3,000 for those 51 and older
This means that that Bill Gates would qualify for the largest tax credit simply because he is 61-years-old. Under the Empowering Patients bill, Gates' net worth of $83 billion — presumably enough to purchase health coverage — would do nothing to disqualify him. Under Obamacare, he gets no help.
Conversely, a 23-year-old with little income and health problems gets minimal help under Price's plan — despite the fact that they need support much more than Gates does.
And these credits wouldn't go especially far towards purchasing comprehensive coverage. I looked at how much a plan for a 55-year-old would cost where I live, in Washington, D.C. The cheapest option was $8,316, and that works out to $443 per month after the Price tax credit — a hefty fee for a poor, older enrollee.
The plans under Price's proposal would near certainly be cheaper because they wouldn't have to cover so many benefits. A 55-year-old under Empowering Patients might find lower premiums for plans that cover fewer benefits. But its also true that the plans that do offer comprehensive benefits would likely prove financially out of reach for many.
Some Republican replacement plans have begun to look at ways to preserve parts of Obamacare's Medicaid expansion, which now covers millions of low-income Americans.
Ryan's Better Way plan, for example, allows states that have already expanded Medicaid to continue running the expansion program, although the federal government would provide significantly less funding for it. Sen. Ted Cruz's Health Care Choice Act goes even further, leaving Medicaid expansion totally untouched.
It's easy to see why: Medicaid is one of the big reasons that Obamacare has pushed the uninsured rate to an all-time low. More than 15 million Americans have enrolled on Medicaid since the expansion began in 2014. Ending Medicaid expansion would mean disrupting and possibly ending coverage for most of those people.
But Price's proposal mentions nothing about replacing the Medicaid program. Those people would become eligible for the tax credits discussed earlier, and have the opportunity to purchase coverage on the private market. But given that these are people who are right around or just above the poverty line — those eligible for Medicaid expansion earn less than $16,394 — they could easily find that the premiums in the private market are prohibitively expensive.
This change will likely make Price's proposal significantly cheaper than those that do continue the Medicaid expansion, but it will come at the cost of throwing millions of Americans off of their health insurance.
Most of the changes in Empowering Patients have to do with people who get insurance through Medicaid or on the marketplaces. But there is one important change the plan would make to employer-sponsored insurance: It would cap the tax exclusion for employer-sponsored coverage.
The health insurance tax break is the biggest in the federal budget; the government loses out on $260 billion annually by not taxing health benefits. And economists across the political spectrum agree that we should eliminate or at least reduce this tax break, which currently gives those with jobs a huge discount on their coverage — and an incentive to buy more coverage than they actually need.
Price's bill proposes limiting the employer-tax exclusion for insurance to $8,000 for individual policies and $20,000 for individuals.
As popular as this provision will be with economists, you can bet that the public will hate it, as it would make some health plans significantly more expensive — and face similar pushback to Obamacare's Cadillac tax.
Even if Price is confirmed as HHS Secretary, he won't have the authority to replace Obamacare himself. But he'll be a key player in negotiations with Congress over how to replace Obamacare, and he'll have vast power over the replacement's implementation.
There is distance between Price's plan and those of his Republican colleagues on the Hill (you can read in-depth about the other Republican replacement plans here). The decisions legislators make about which direction to go in will be hugely important for the people who rely on Obamacare for coverage.
There are likely to be specific flashpoints in the coming debate, such as:
- Should Republicans save Medicaid expansion in some way? As mentioned earlier, some Republican replacement plans do see a future for Medicaid expansion. And there might be support for this from within the Trump administration: Vice President-Elect Mike Pence is among the 10 Republican governors who have expanded Medicaid in their own states. So Price's plan could face some pushback in this space, particularly from legislators and governors worried about their constituents losing coverage.
- How generous should those high-risk pools be? Price envisions spending much less on the insurance plans for Americans with pre-existing conditions than Speaker Ryan does.
- Will Republicans weather the political backlash to raising the costs of employer-sponsored insurance? The proposal to limit the tax exclusion for health insurance would amount to a significant price increase for those with the most generous health insurance plans. Employers will view it as a massive tax increase. Like Obamacare's Cadillac tax, it would almost certainly face significant political backlash.
The question right now isn't whether Republicans have plans to repeal Obamacare. It's which parts of which plans they'll pick — and how quickly they'll coalesce around one option.
But in choosing Price, Trump is signaling that he is serious about dismantling Obamacare. He has found one of the law's most ardent, knowledgeable, and prepared opponents, and put him in charge of the effort.
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Has Donald Trump just picked the perfect person to dismantle Obamacare?
