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Understanding the impact of the proposed healthcare reform bill

On Thursday, members of the House Budget Committee approved the Republican healthcare bill—legislation that would replace former President Obama’s signature healthcare law—clearing yet another hurdle and sending it to the House of Representatives for consideration.

As evidenced by the three Republicans on the Budget Committee who voted against the bill, the American Health Care Act has a long road ahead to implementation.

In the second story of our two-part series examining the healthcare bill, we asked an interdisciplinary group of faculty experts why healthcare is so complex, what impact this bill would have on insurance and drug prices, and whether it meets the idea that healthcare is, as one professor says, a “moral imperative.

How will the American Health Care Act impact drug- and insurance prices?

Steven Pizer, associate professor of health economics

If this bill passes, the biggest impact on consumers will be the loss of coverage. Twenty-four million people will find it harder to afford medical care and the brunt of the impact will be on older people with chronic health conditions and those with lower incomes who will get less financial assistance to purchase insurance. As a result, many of these people will forgo recommended preventive care, including adhering to their prescribed medications. Over time, this will degrade population health and shift the focus of our healthcare system from prevention and maintenance to dealing with more acute crises in emergency rooms and hospitals. The impact on drug prices and development of new technology will be less important, but lower demand for healthcare goods and services will likely result in lower prices and less investment.

The biggest change to insurance premiums will be to the structure of financial support to purchase insurance. In general, a tax deduction comes off your taxable income whereas a tax credit comes off your tax. So, if you are in a high tax bracket (say 35 percent) then a tax deduction of $1,000 is worth $350 to you. If you’re in a 10 percent tax bracket then the same deduction is worth $100 to you. A $1,000 tax credit is worth the same no matter what bracket you are in, as long as you owe at least $1,000 in tax. If the credit is refundable, then you don’t even have to owe anything to collect the credit.

The upshot is that deductions are worth more to higher income people, refundable credits are worth the same to everyone, and non-refundable credits are less useful for the poor.

In this case, the House bill would replace the current tax credits that are targeted by income with smaller tax credits targeted by age. Younger people would get modestly better support and older, sicker, and poorer people would get drastically less. When combined with the withdrawal of funding for the Medicaid program, these changes would starkly increase health insurance costs for the elderly, the sick, and those with low and moderate incomes. The surcharge is intended to prevent people from waiting until they are sick to enroll in insurance. Unfortunately, this surcharge is probably not high enough to be effective.

Why is healthcare so complex?

Timothy Hoff, professor of management, healthcare systems, and health policy

Healthcare delivery in the U.S. market-based system is a highly fragmented, profit-oriented system, and most of the complexity stems from this simple reality.

Its fragmentation means most of the players act in their own self-interests, and not the collective interest of patients or the system as a whole. Its for-profit character means that such self-interest is pursued largely for the sake of the bottom line of individual hospitals, doctors’ offices, and insurance companies.

This reality produces a policy situation where there simply are no “quick fixes” to system-wide problems, and where gaining broad consensus is difficult for important issues like how to provide insurance coverage for all Americans.

You recently co-authored the book The Health of Newcomers, which makes the case that healthcare is a moral imperative. To what extent does the American Health Care Act meet this imperative?

 Patricia Illingworth, professor of philosophy at Northeastern and fellow at the Carr Center for Human Rights at Harvard University

The American Health Care Act has a number of moral vulnerabilities.

To the extent that it does not provide healthcare for all people in the U.S., it violates the right to health, a universal moral right that all people have in virtue of the fact that they are human beings.

To the extent that it increases the number of people without access to healthcare, it also increases human suffering and violates our moral duties to maximize the good and not to harm others.

To the extent that it does not recognize the public good dimension of health, it harms not only those who will not have healthcare, but the community at large. The harms associated with inadequate healthcare affect everyone in society.

To the extent that it burdens the most vulnerable members of society—the poor, the sick, and the elderly—while benefitting the wealthy by way of tax credits, it violates basic principles of justice.

To the extent that it violates a promise made by Trump to the American people, it violates principles of truth-telling and promise-keeping. To this extent, it also undermines the confidence people can have in democratic institutions.