House ObamaCare replacement expands HSAs, replaces subsidies with tax credits

It is not perfect. It is not the bill I would have drafted. But the ObamaCare replacement bill released yesterday by House Republicans is a monumental improvement over ObamaCare - not that this is saying much - and if the bill that's ultimately put on President Trump's desk is something along these lines, he should absolutely sign it. Let's get to the primary details of what they're calling the American Health Care Act, quoted directly from House Republicans' summary of the proposal:

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Taken together, here's what our combined legislation will do:

DELIVER RELIEF

Dismantles the Obamacare taxes that have hurt job creators, increased premium costs, and limited options for patients and health care providers--including taxes on prescription drugs, over-the-counter medications, health-insurance premiums, and medical devices. Eliminate the individual and employer mandate penalties, which forced millions of workers, families, and job creators into expensive, inadequate Obamacare plans that they don't want and cannot afford.

PRESERVE VITAL PATIENT PROTECTIONS

Prohibit health insurers from denying coverage or charging more money to patients based on pre-existing conditions. Help young adults access health insurance and stabilize the marketplace by allowing dependents to continue staying on their parents' plan until they are 26.

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ADVANCE 21ST CENTURY REFORMS PROPOSED BY PRESIDENT TRUMP

Establish a Patient and State Stability Fund, which provides states with $100 billion to design programs that meet the unique needs of their patient populations and help low-income Americans afford health care. Modernize and strengthen Medicaid by transitioning to a "per capita allotment" so states can better serve the patients most in need. Empower individuals and families to spend their health care dollars the way they want and need by enhancing and expanding Health Savings Accounts (HSAs)--nearly doubling the amount of money people can contribute and broadening how people can use it. Help Americans access affordable, quality health care by providing a monthly tax credit--between $2,000 and $14,000 a year--for low- and middle-income individuals and families who don't receive insurance through work or a government program. The two items under "preserve vital patient protections" are bows to political reality. These are elements of ObamaCare that poll particularly well, and House Republicans understand that if they had not incorporated these provisions into the replacement bill, the media and the Democrats would have made the entire debate about how awful it would be for people to once again be denied or charged more because of a pre-existing condition. As such, they will continue to some degree to distort the risk pool - although not nearly as badly as ObamaCare did. As far as young adults staying on their parents' insurance plans, that's perfectly fine if the young adult, the parents and the insurers want to do that. If the insurers want to insure "children" until they are 50, I don't care. But that should be a decision of the parties to the transaction, not a decision of the government. Anyway, those are two elements I didn't want to see in the replacement but that I figured we would. The other elements of it do a great deal to turn the ship of health care back in the right direction. I especially like the expansion of Health Savings Account, which allow people to put pre-tax dollars into an account they can use to pay for health care expenses, and roll over what they don't spend. You can ultimately take the money in the HSA if you want to, although you'll have to pay taxes on it if you take it as income instead of using it for health care expenses. Either way, it's a much better value than redirecting it into health care premiums. HSAs are usually used in combination with a high-deductible health insurance plan, and I have long been fans of both. They make consumers of health care more cost-conscious and return purchasing power to patients, which is one reason liberals hate them. They don't want you to have any power because if you have power, you don't need them. The House Republicans' proposal also gets rid of the taxes baked into ObamaCare, and gets rid of the individual mandate. I would have preferred that they get rid of the tax-exemption for employer-based health insurance, but I think they're afraid they can't refute the inevitable shrieking that they "raised taxes." What they would actually be doing is removing a perverse incentive in favor of one of the worst possible ways for people to obtain health insurance. It would be much better if people bought it on their own rather than relying on their employers, and it's not good news that we're probably going to go back to relying on employer-based insurance to the extent that we are.

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But it's still better than ObamaCare. The House Republicans are a little vague on how they're going to reverse the Medicaid expansion, but it sounds like the idea is to use tax incentives to help people transition to private-sector plans, while doing block-grants to the states, which they can use to make Medicaid work better for their individual situations. The inclusion of refundable tax credits (meaning you can get the value of the credit in cash if you don't have that much coming back in the way of a pure credit) is an unavoidable way to help people transition from the subsidized ObamaCare plans that are going away. It's a little better than straight subsidies, and it will do less to mask the true cost of peoples' premiums. Hopefully over time more people will decide to opt for HSAs and high-cost, first-dollar-coverage insurance plans will lose favor - thus reducing the cost of the tax credits. Supposedly the bill will get marked up in various committees on Wednesday. In the meantime, we'll see what the Senate comes up with and keep moving toward the process that will land a single, unified bill on Trump's desk. I would have preferred a bill that put even less emphasis on giving people access to third-party payers, and more access to the cash they could use to pay for their own care. But the House Republican proposal is a small improvement over the pre-ObamaCare status quo, and a gigantic improvement over ObamaCare itself. Our long national nightmare is almost over.

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