Mitchell & Mitchell: Health Care and the Trump Agenda, Part 4: Replacing ACA Subsidies with Tax Credits
This is the fourth post in an ongoing series regarding potential changes in health care that may take place—and actual changes that do take place—with the new Trump administration. The likely implementation issues to be encountered for both potential and actual changes are described, based on detailed methods of analysis. The emphasis is on what these shifts mean for legal practices and how attorneys may prepare in the most effective ways.
The possible conversion of the Affordable Care Act (ACA) subsidies to tax credits is a disputed concept. The basic idea is that such credits can bring market forces to bear—thereby motivating the public to better control health care expenses.
The preliminary version of the American Health Care Act (AHCA) now working its way through Congress proposes to use limited (capped) tax credits—based on income and age—to help lower-income individuals and families purchase health insurance. Insurance companies would be freed from many regulations to offer policies that would match up with various levels of tax credits. As envisioned, the end result could be to reduce payments to providers, and thereby reduce the overall costs of health care.
It is important to recognize that tax credits are specific types of vouchers. In general, a voucher is a commitment by a funding source to pay for defined goods or services that are to be provided to a recipient. Vouchers are widely used in health care, notably with respect to payments to insurance companies operating Medicare Advantage and Medicaid managed care plans. Some “cafeteria” approaches to insurance allow individuals to select policy coverage within a given voucher limit. These general voucher uses provide a broader perspective for the evaluation of the tax credit proposals.
Under the preliminary AHCA plan, existing insurance arrangements, such as employer-based insurance and Medicare, would be left in place. Medicaid would be converted to block grants. Everyone needing alternative health insurance coverage could receive a tax credit or voucher (payable monthly) and shop for the desired insurance coverage. In order to be eligible to accept vouchers, insurance companies may be required to meet certain requirements. In order to stay in the health care business, these companies might feel forced to design coverage and set premiums to reflect voucher values.
The voucher value could be a baseline. Better coverage might be made available for individuals who could combine their vouchers with out-of-pocket payments to obtain broader coverage, or who might be able to buy supplemental coverage to enhance voucher-based coverage. For example, basic coverage with low caps might be combined with catastrophic coverage with a large deductible. Thus, secondary vouchers and subsidies from other sources might allow some recipients to obtain better coverage.
A key feature of voucher use in health care is that—in general—the funding source has limited responsibility for the transactions taking place between individuals, insurance companies and providers. Individuals are given the choice of how to use a voucher (from available insurance plans) but lose much of the ability to appeal to federal agencies for assistance if coverage or care issues arise. This may be contrasted with the ACA, which has extensive appeal rights under federal regulations.
This may be seen as an advantage by federal agencies. Complaints will be more distributed and directed elsewhere. Attorneys may find that representing individuals in such cases is more difficult and results in more direct conflict with insurance companies and providers.
If the AHCA becomes law, the recipients of tax credits may complain not only about their limited coverage and selection, but also about appeal difficulties. Negative reactions may develop and are likely to be directed in a diffuse way toward “those responsible” for the situation.
Providers may be strongly affected by less funding being available under a tax credit plan, and by insurance company plans that are likely to vary widely. Strong negative reactions by providers are likely to develop, since their funding will be cut. It will also be difficult for these reactions—in composite—to be directed toward a specific target.
This post was authored by Ferd H. Mitchell and Cheryl C. Mitchell, Thomson Reuters authors and attorney partners at Mitchell Law Office in Spokane, Wash. They are active in elder law and health law practice areas and have been working together on programs and activities on behalf of the elderly and in health care for more than 25 years. During their studies, they have visited and evaluated the health care systems of Japan and several countries in Europe to learn how the needs of the elderly are assessed and met in other countries, and they have been better able to understand the U.S. health care system and related care issues from these visits. More about the lessons learned from the ACA and issues involved in health program changes may be found in the 2017 edition of the authors’ book, Legal Practice Implications of Changes in the Affordable Care Act, Medicare and Medicaid, published by Thomson Reuters. More about these methods of analysis may be found in Mitchell & Mitchell, Adaptive Administration, published by Taylor and Francis (link). Click here to read part one of this series, here for part two, and here for part three.
The views and opinions expressed in this post are those of its authors alone.