If the ACA is not repealed
It may be merely maimed by 1000 cuts
Trump said during the campaign that he would not work to repeal the Affordable Care Act. Of course, Trump’s promises are not worth the breath polluted by his utterance of them, and Republicans in Congress, flush with the Republican trifecta, are talking about block-granting Medicaid. that would probably go hand in glove with phasing out the ACA Medicaid expansion — the ACA’s most important and effective program, responsible for most of the drop in the uninsured rate achieved by the ACA.
But let’s undertake the dubious exercise of taking Trump at his word. Repealing and replacing (or, in the case of the Medicaid expansion, declining to replace) the ACA’s core programs may fail, as it did in 2017. Congress may take some hacks at the law, as they did in 2017 (remember the individual mandate? or the tax on insurers?) without changing the core subsidy structure of the ACA marketplace (minus the subsidy enhancements enacted in the American Rescue Plan, which expire in 2026) or entirely eliminating the Medicaid expansion. And the Trump administration may do much to reshape the marketplace administratively — as Trump 1.0 did, but much more. As I noted earlier this fall, JD Vance sketched out how Trump might, um, “build on” (that is, partially dismantle) the ACA marketplace.
Let’s look at the various means by which the Trump administration and Republican Congress might reshape the ACA’s core programs (Medicaid expansion and Marketplace) short of wholesale repeal.
Medicaid work requirements. Billed as a way to help “able-bodied” (read: unworthy, largely nonwhite) Medicaid enrollees discover the joys and dignity of wage labor, this Republican favorite is actually a means pushing eligible people off the rolls, as brief experiments in Trump 1.0 demonstrated. As the Kaiser Family Foundation never tires of documenting, a large majority of Medicaid expansion enrollees do work, and almost all the rest are otherwise constructively engaged, e.g., in school or caring for loved ones, or disabled. During Trump 1.0, CMS administrator Seema Verma enthusiastically promoted work requirements, inviting states to file waivers enacting them. While thirteen states had waivers approved, only Arkansas implemented them, with reporting requirements so onerous and so incompetently administered that the D.C. Circuit Court shut the program down after some 18,000 had been gratuitously disenrolled, holding that the waivers were unlawful because CMS failed to consider the impact on coverage, as required for Medicaid waivers. The pandemic then interrupted other states’ waiver plans, and the Biden administration removed approvals. Various court challenges were paused or dismissed as moot. Get ready for Round 2.
Medicaid de-expansion. The path on this front is laid out by the Trumpist Paragon Institute, headed by Brian Blase, who was on Trump’s NEC. The Paragon proposal, like the 2017 ACA repeal bills, would end the federal government’s 90% match rate (FMAP) for Medicaid enrollees rendered eligible by ACA criteria (eligibility for legally present adults (except recent immigrants) with income up to 138% of the Federal Poverty Level, reducing the FMAP to each state’s FMAP for other Medicaid programs, which ranges from 50% in the wealthiest (a.k.a. blue) states to 77% in Mississippi. The proposal would allow states to drop the eligibility threshold to 100% FPL, which would then be the starting point for marketplace subsidy eligibility, as it is now in the ten remaining states that have refused to implement the ACA expansion (Paragon notes gleefully that those states, which include Texas and Florida, will never enact the expansion under this proposal). In an extra swipe at wealthy (blue) states, Paragon would drop the minimum FMAP from 50% to 40%. This proposal nominally does not end the expansion, and allows states to avoid a “coverage gap” on the current Wisconsin model (Medicaid to 100% FPL, marketplace from 100% FPL). As the federal government pays 100% of marketplace premium subsidies, the shift of enrollees in the 100-138% FPL range offset a bit of the cost to states of the reduced match rate. But most states would probably find maintaining expansion at the reduced FMAP unsustainable — especially if the Republican Congress also imposes block grant funding or per capita caps on federal Medicaid spending, which would slow-strangle Medicaid over the course of a decade or two.
Undercutting the ACA marketplace. With Republicans in control of Congress, the enhanced premium subsidies enacted through 2022 by the American Rescue Plan Act and extended through 2025 by the Inflation Reduction Act are almost certainly dead. (Had Democrats won the House, they might have leveraged the expiration of Trump’s income tax cuts to preserve the ARPA subsidy boosts.) Those subsidy increases were doubtless the main cause of a 78% enrollment increase nationally from 2021-2024 and a 123% increase in the nonexpansion states, where the enhanced subsidies rendered benchmark silver coverage free for enrollees with income in the 100-150% FPL range. That means that the pre-ARPA income cap on subsidy eligibility, 400% FPL ($60,240 annually for a single person in 2024), will snap back into place, rendering ACA-compliant coverage unaffordable for several million people.
From there, a supercharged version of Trump 1.0’s parallel, ACA-noncompliant market will go to work to reduce the ACA marketplace to a sort of high risk pool. Vance sketched out how this might work, as I noted a few weeks ago. If more wholesale repeal/redesign does not happen, Trump 2.0 might
rebuild Trump 1.0’s alternative market of medically underwritten, ACA-noncompliant plans (so-called Short-Term Limited Duration, or STLD, plans*), and 2) prompting states to implement measures like the waiver concepts put forward by Trump’s former CMS administrator, Seema Verma. These “concepts” included 1) replacing ACA premium subsidies with a lump-sum health savings account that could be used to pay premiums for any plan; 2) inviting states to restructure the federal premium subsidy as they wished; 3) allowing states to grant premium subsidies for ACA-noncompliant plans; and 4) creating state high risk pools. Options 1 and 3 could effectively convert the ACA-compliant marketplace as we know it into a high risk pool of sorts, and in combination with option 4, could create the multiple stratified risk pools that Vance described in followup comments.
Verma’s waiver concepts plainly violated the ACA statute, as alternative state schemes outlined in an ACA Section 1332 “innovation waiver” proposal has to provide coverage at least as comprehensive as that stipulated in the ACA; provide coverage and cost sharing protections that are at least as affordable; and cover a comparable number of residents. Amending the waiver provision to allow Verma-esque concepts would be low-hanging fruit for a Republican Congress, and in fact was under negotiation after Republican repeal attempts failed in 2017.
Georgia made a brief attempt to take Verma up on her waiver concepts, filing a waiver proposal in late 2020 that would have eliminated a state-sponsored exchange, relying on commercial Enhanced Direct Enrollment (EDE) platforms commissioned by the federal government, and, in one early iteration, allow plans that did not include all Essential Health Benefits to be paid for with federal subsidies. That provision was cut from the submitted waiver, as it violates the ACA statute too plainly even for Trump 1.0’s administrators. But this may be the ACA’s future, if it has any future: some semblance of the ACA subsidy that can be used for ACA noncompliant plans — including, perhaps, medically underwritten plans. As those plans would be cheaper for healthy people, ACA-compliant marketplace enrollment might be reduced to those who would a) pay very little for comprehensive coverage because of low income and a favorable shakeout of price spreads, and/or b) those who know they need comprehensive coverage or who could not get a viable offer when subjected to medical underwriting.
The big enchilada, now as ever, is the ACA Medicaid expansion — and behind that, sustained federal funding for Medicaid programs generally. Perhaps Republicans will divide the baby, and cut the ACA expansion’s enhanced FMAP, say to 80% instead of 90% — and/or cut it disproportionately for states with higher per capita income. Under the best scenarios, the uninsured rate will rise substantially, and the individual market for health insurance will degrade considerably. Just one set of the many pillars of our society likely to come crashing down in coming months and years.
Photo by Kaboompics.com
Update: It’s worth noting that when the Trump administration created an ACA-noncompliant market by extending the allowable limit of so-called Short-term, limited duration (STLD) plans to a full year, renewable twice, many states imposed or preserved strict limits of their own. (The STDL plans are medically underwritten, don’t have to cover the ACA’s ten Essential Health Benefits, and are not subject to medical loss ratio limits, e.g., the requirement to spend at least 80% of premiums on patients’ medical expenses.) As of this year, 14 states have either banned STDL plans outright or effectively regulated them out of existence, and others had either imposed other duration limits (often six months) or new coverage rules. If the ACA is not substantially repealed, state markets will doubtless diverge further in how they regulate and reshape coverage.
Update 2, 11/16/24: Charles Gaba, by means of Georgetown’s Edwin Park, runs down the more extreme scenario, Republicans enacting their proposals to destroy Medicaid.
Update 3, 12/3/24: A further way Republicans in Congress could undermine the marketplace, goose an ACA-noncompliant market, and save money for tax cuts: Fund the direct reimbursements to insurers for Cost Sharing Reduction that Trump cut off in October 2017. Regulators predictably responded to the cutoff by allowing, encouraging, or requiring insurers to price the value of CSR directly into silver plans, since CSR is available only with silver plans. Since income-adjusted premium subsidies are set to a silver benchmark, the result was higher premium subsidies that rendered bronze plans free for millions of prospective enrollees and in some states and regions made gold plans available at prices below the silver benchmark. Reversing that process might send prospective enrollees into STLD plans or some equivalent, especially if Republicans contrive to make premium subsidies available for such plans.
* Borrowing my last quick rundown of the Trump admin’s STLD program:
The Trump administration’s major initiative to “build on” the ACA marketplace after repeal failed was to stand up (by administrative rule in 2018) a parallel market of medically underwritten, lightly regulated plans by extending the allowable duration of already-existing so-called “short-term, limited duration plans” (STLD) to up to one year, renewable twice. The Obama administration had limited STLD duration to three months, though not until 2016. In combination with the Republican Congress’s zeroing out of the tax penalty for failing to obtain ACA-compliant insurance, the STLD market was an alternative for people who were priced out of the regulated ACA marketplace — as several million people were before the Biden administration removed the income cap on subsidy eligibility via the American Rescue Plan Act (ARPA) in March 2021. (The ARPA subsidy enhancements were temporary, and extended by the Inflation Reduction Act only through 2025.)
STLD plans can refuse access to people with pre-existing conditions or exclude coverage for the condition. They do not have to cover the ACA’s Essential Health Benefits and generally offer very limited prescription drug coverage, if any, and no substance abuse coverage. They are not subject to the ACA requirement to spend at least 80% of premiums on members’ medical bills (and on a few allowed other expenses) and have been reported to spend as little as 45% of premiums on claims. They do not have to offer a provider network and can pay providers what they deem appropriate, exposing enrollees to balance billing. They do not have to provide an annual out-of-pocket cost cap on covered benefits, though some do. They are much like the plans offered in the pre-ACA individual market.
Photo by Kaboompics.com
Here we go again...