GOP has a broad outline of a plan to replace Obamacare

They have a broad outline. They have talking points. But more than a month into Donald Trump’s presidency, congressional Republicans still haven’t offered a detailed plan for replacing the Affordable Care Act.

What they have disclosed so far would benefit people with middle-class and higher incomes, while resulting in larger deductibles and lesser coverage for people with lower incomes.

It also eventually would cut off the federal dollars that enabled 31 states to expand their Medicaid programs, an Obamacare provision that enabled more than 10 million Americans to become insured.

“The scheme that the Republicans are heading toward is a 180-degree reversal,” said Robert Laszewski, a health care consultant and former insurance executive.

The outline of what House Speaker Paul Ryan and others in the GOP are considering includes offering tax credits to help offset the cost of health insurance.

How big would those tax credits be? That wasn’t specified in the documents disclosed this month. How would the plan be paid for? Also not specified.

One big change that is spelled out is that the tax credits — which would be available to anyone who doesn’t get health insurance through an employer — would be based on age rather than income. So older Americans would get bigger tax credits than younger ones, regardless of how much they make.

In contrast, the Affordable Care Act provides tax credits for individuals and families who earn up to a set threshold — $48,240 for an individual, for instance, and $98,400 for a family of four. It also subsidizes out-of-pocket expenses such as deductibles for people with low incomes.

What the Republicans are considering would work well for families with middle-class incomes, Laszewski said.

But it may not work as well for families in low-wage jobs that don’t provide health benefits, a group that made up the largest share of people who had no health insurance before the Affordable Care Act became law.

They also were among the groups that benefited the most from the Affordable Care Act: More than 70% of the people who bought health plans on the federal Obamacare marketplaces last year had low incomes — for example, $30,150 or less for an individual and $61,500 for a family of four.

The Republican replacement plan would allow more variation in what expenses health plans cover, as well as the size of their deductibles, a change that would give people more choices and lead insurers to offer health plans that cost less than those available today.

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The cheaper health plans, though, would provide less coverage. Regulations in the Affordable Care Act that require health plans to cover maternity care, to cover at least one drug in every drug class and to cover behavioral health, for instance, could be dropped.

Still, cheaper health plans might appeal to some people, such as those in their 20s and 30s who only want coverage of catastrophic illnesses or injuries.

“You can craft a plan that people want to buy,” Laszewski said.

The Republican replacement plan also would allow insurers to set higher premiums for older people than are allowed under the Affordable Care Act.

On the other hand, if the changes were to lead more healthy young people to buy insurance, they could lead to lower premiums. Laszewski estimates that premiums could drop 30% to 40% if the number of people insured — the so-called risk pools — were larger.

Not enough healthy people

One of the reasons that the cost of health plans sold on the Obamacare marketplaces jumped this year is the health plans haven’t drawn enough healthy people to offset the cost of covering people with existing health conditions. Yet mandatory coverage of people with pre-existing conditions is one of the most popular provisions of the Affordable Care Act.

Much less popular is the law’s allowing deductibles and out-of-pocket expenses that are too high for low- and middle-income people to afford. The law caps deductibles and other out-of-pocket expenses at $6,550 for an individual and $13,100 for a family.

“A health insurance policy with a $10,000 deductible doesn’t feel like insurance at all to a lot of people,” said Melinda Buntin, a professor of health policy at Vanderbilt University Medical Center.

The Republican replacement plan would encourage more people to have health savings accounts, which allow people to set aside pre-tax dollars for medical expenses.

It also would increase the maximum amount that someone could put into a health savings account — now capped at $3,400 for an individual and $6,750 for a family — to the current cap on out-of-pocket expenses of $6,550 for an individual and $13,100 for a family.

That proposal, though, has been likened to an additional tax break for the wealthy.

Why? Individuals and families with higher incomes are in higher tax brackets and therefore save more on their taxes when they contribute to an HSA. For example, someone in a 33% tax bracket saves 33 cents on every dollar put into a health savings account. Someone in a 15% tax bracket saves only 15 cents.

Plus, people in low-wage jobs are the least likely to have money to set aside for medical expenses.

The logic behind HSAs and high-deductible plans is to make people aware of how much they are actually paying for health care and encourage them to shop for the best value, which in turn should pressure doctors to control their costs.

But not everyone agrees that health care works like other markets.

People tend to defer to their doctors, can’t easily get information on costs and don’t have access to good information on health care quality, said Susan Giaimo, an assistant professor of political science at Marquette University.

Health systems in some markets also have the power to set prices, said Giaimo, whose second book on health policy, “Reforming Health Care in the United States, Germany, and South Africa: Comparative Perspectives on Health,” was published last year.

But another idea underlying proposals to move to HSAs and higher deductibles is that health insurance should protect people from financial catastrophe and not cover more common expenses. It’s based on the belief that one of the reasons for rising health care costs is that most people — such as those covered by insurance through an employer or by Medicare — are insulated from the cost.

The result could be lower-cost health plans that ideally cover some preventive care, said Stephen Parente, a health economist at the University of Minnesota.

Remaking Medicaid

According to the Republican outline, Medicaid would be revamped to give states either block grants or per-capita grants, as opposed to the federal government’s paying a percentage of the total cost. In Wisconsin, the federal government covers 58% of Medicaid costs.

In exchange, states would be given the flexibility to try new approaches that could improve care and control costs. Many governors, including Gov. Scott Walker, support the approach.

The risk is that Medicaid spending will grow more than the block or per-capita grants, shifting costs to states, said Buntin of Vanderbilt University.

Medicaid, which covers more than 70 million people, now is states’ second-largest expense.

But roughly two-thirds of Medicaid spending is for people who are elderly or disabled and who are impoverished — including many middle-class people whose assets get eaten up by the high cost of nursing home care. And the number of people who need long-term care is certain to increase as the population ages.

For now, Ryan and the Republican leadership in the House are coalescing around a set of principles, Buntin said.

But it's not yet a plan.

"The details aren’t there,” she said, “and the details are extremely important.”