The Build Back Better framework will fix some of the most glaring problems with the Affordable Care Act. But adopting only temporary fixes will lock the entire country into at least another decade of extremely subpar health coverage and continued fights over Obamacare. It will make advancing reform at the state level exceptionally difficult and possibly even self-defeating. It also forces Democrats at the national level to keep litigating the same battle.
The framework contains two major health care provisions. The first would extend ACA exchange subsidies to people who fall into the Medicaid gap in the 12 Republican-controlled states that refuse to expand Medicaid, giving these low-income earners free or near-free coverage. The other makes exchange subsidies more generous for people with middle-class incomes, and eliminates the so-called income cliff, where making just one dollar too much could make you ineligible for subsidies and cost you thousands of dollars in higher insurance premiums. With this fix, nobody will pay more than 8.5 percent of their income in premiums, regardless of salary. Both of these measures only run until the end of 2025, though.
The most significant problem is that extending these programs beyond 2025 will take another law passed by Congress and signed by the president. The probability that Republicans control the presidency or at least one branch of Congress in 2025 is extremely high. Nothing about Republicans past behavior indicates the party will proactively vote to improve Obamacare. The whole reason Democrats need to deal with the Medicaid gap is that 12 Republican-led states have turned down a huge amount of federal money, financially damaging their own local economies just to politically undermine Obamacare. The sole reason this Medicaid gap provision is so expensive is because the CBO projects that Republican opposition to Obamacare will remain almost unchanged even a decade from now.
The likelihood that Republicans will simply allow these provisions to expire or demand significant changes before voting to extend them will be a major worry for millions of Americans who depend on these provisions, and catastrophic for state reform efforts.
The best long-term move for state health care activists might be to NOT try to significantly improve things.
First, it will legally make many state reform ideas not viable. Under the ACA, states can apply for Section 1332 waivers, which allow states to take the money that would be used for exchange subsidies and instead use them for a better local health care program. But they must prove that their reform could be executed with the available funds.
These waivers can run for up to five years. Yet if a Democratic state put together a waiver plan next year, their five-year waiver would run from 2023 to 2027. Legally, the states and federal agencies would have to assume a massive cut in funding halfway through the waiver period. Plans that require up-front cost to produce long-term savings will legally not pencil out.
Second, there is no way to reasonably expect that Democratic-led states will be able to move forward with more serious reforms, given such a major source of uncertainty about future funding. Up until now, state reform efforts have been mostly hampered by the subsidy cliff. The weird design of the ACA subsidies means that the more expensive the insurance, the less low-income people have to pay. As a result, reforms to make official premiums lower helped those above the subsidy cliff, but ironically hurt low-income people who qualified for subsidies. Conversely, most proposals to make insurance plans on the exchange more comprehensive and generous for low-income people with subsidies would drive up costs for those above the subsidy cliff, making insurance unaffordable for many. Almost every proposal was a thorny issue of robbing Peter to pay Paul.
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Removing the subsidy cliff should be a major source of hope for state activists. In theory, uncapped subsidies would make state reform dramatically easier by removing this split-market dynamic. It should allow for every possible idea: from minor improvements like fixing the accidental age penalty and making shopping for plans easier, to more dramatic reforms like creating a pathway to a single payerlike system. Yet the temporary subsidy increase makes the ACA an even bigger straitjacket against progress than the subsidy cliff.
State lawmakers are going to be very reluctant to adopt changes that would help people in 2024 if there is a serious chance the rules would make them dramatically worse off come 2026. Liberal state policymakers and activists should also be scared that any plan they develop will be turned into fodder for the 2025 fight to extend the subsidy fix. If one or two blue states take the risk and adopt very progressive plans, there is a good chance that Republicans controlling one part of the government will demand explicitly outlawing such plans as part of any bipartisan deal in 2025. The best long-term move for state health care activists might be to NOT try to significantly improve things until the temporary fix is made permanent, given the high risk of them backfiring. Instead, they may want to focus on only modest, small reforms likely to go mostly unnoticed.
The Build Back Better framework will definitely improve health insurance for millions. It will make insurance cheaper for a small share of the population and help some 24 million of the poorest Americans living in conservative states to finally get insurance. So on net, it will make our health care system slightly better. But it will also indirectly guarantee that our vastly inferior system will not improve beyond that for several years, if not another decade. Health care reform is about to be locked in amber again.