Senate Republicans Alter Health Care Bill To Avoid 'Death Spiral'

Jun 26, 2017
Originally published on June 26, 2017 5:55 pm

Updated at 5 p.m. ET

Senate Republicans have updated their plan to repeal and replace the Affordable Care Act, attempting to patch a hole that threatened to destabilize the individual insurance market.

The original Senate bill, unveiled last week, required insurance companies to offer coverage to everyone, including people with pre-existing medical conditions. But there was no requirement that individuals purchase insurance. Critics said that created a perverse incentive for healthy people to go without insurance, only buying coverage after they got sick. Without enough healthy customers making regular premium payments, insurance companies would be forced to raise prices, driving more customers away — a situation sometimes described as a "death spiral."

The revised bill attempts to solve that problem by imposing a penalty on those who don't maintain continuous insurance coverage: People who let their coverage lapse for at least 63 days in one year would be locked out of the insurance market for six months the following year.

The change comes as congressional forecasters are trying to predict how the Senate bill would affect insurance costs and coverage. The nonpartisan Congressional Budget Office expects the change would slightly increase the number of people buying insurance in the individual market.

It's not clear how strong that effect would be. The Affordable Care Act already includes a limited enrollment window when people can sign up for coverage, along with a tax penalty for those who don't. Even with those provisions, many insurance companies have struggled to attract a good mix of healthy and less healthy customers.

The bill passed by House Republicans relies on a different mechanism to encourage healthy people to buy coverage. Those who don't would have to pay a premium when they finally did sign up.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

ROBERT SIEGEL, HOST:

Congressional forecasters say a Senate bill that aims to repeal and replace Obamacare would leave 22 million more people uninsured by 2026. That's only slightly fewer than a House version that passed last month. That forecast comes as Senate Republican leaders are pressing for a vote on the bill later this week. NPR's Scott Horsley joins us now to talk about this. Hiya, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you, Robert.

SIEGEL: These numbers come from the Congressional Budget Office. This is the nonpartisan office of bean counters on Capitol Hill. Where do they think these coverage reductions are going to come from?

HORSLEY: The biggest change, Robert, would be in Medicaid. Remember; Obamacare expanded the eligible population for that safety net program. This bill would shrink it. CBO forecasters think within a decade, you would have about 15 million fewer people getting coverage from the Medicaid program. They're also anticipating about 7 million fewer people who would be getting coverage on the individual insurance market. And those who'd be losing coverage would be disproportionately older people at the lower end of the income ladder, especially people between 50 and 64 years old for whom health insurance is a really serious thing.

SIEGEL: Sixty-five - of course Medicare takes over.

HORSLEY: Right. Once you get to be 65, you get kicked into Medicare.

SIEGEL: The CBO puts a big headline number on a bill, in this case the number of people who would lose insurance. Senate Republican Leader Mitch McConnell has been hoping to get a vote on this bill by the end of the week because lawmakers go out of town for the July Fourth recess after that. How does this forecast, this big number affect the chance of that happening?

HORSLEY: Well, it probably doesn't help. Remember; the Senate Republicans have very little margin for error. They can only afford to lose two members of their own caucus if they hope to pass this bill. We already have one Republican, Dean Heller of Nevada, who is up for re-election next year, who has expressed some reservations about the number of people losing coverage under this plan. This number, 22 million, could scare off a few other moderate Republicans.

We've also of course had some conservative Republicans who say this bill doesn't go far enough in unwinding Obamacare. A caveat, though - the CBO says this bill saves a whole lot more money off the federal bill. It reduces the deficit by a whole lot more than the House bill, about $200 billion over a decade. Presumably Mitch McConnell could plow some of that money back into this bill over the next week or so, sweetening the pot and perhaps bringing some of those reluctant lawmakers along.

SIEGEL: Of course that wouldn't sweeten the pot for people who think more deficit reduction is a vital part of the...

HORSLEY: That would be a way to win over some of the moderates...

SIEGEL: Moderates.

HORSLEY: ...Not the conservatives.

SIEGEL: The senators made some last-minute changes to this bill to address a potential problem that critics said could have led to further erosion in the individual insurance market. What'd they do?

HORSLEY: Yeah. The original version that came out last week was potentially destabilizing for that individual market because it required insurance companies to provide coverage for everyone, but it didn't include any kind of requirement for people to buy coverage. And that could create a perverse incentive for people to wait till they get sick to buy coverage, thus driving up prices for everyone. The last-minute fix that they put in would penalize people who don't get coverage. Say, if you don't - if you let your coverage lapse for two months in any given year, you can be locked out of the market for six months the following year.

SIEGEL: This bill would not only roll back Obamacare. It would also change Medicaid very seriously. What does the CBO say about that?

HORSLEY: Yeah. This goes after the traditional Medicaid program for the poor and disabled. And it would squeeze those costs - the federal cost of that - potentially forcing states to either kick people off or offer a stingier version. But the big effects of that don't come until the later decades, and so they're not really reflected in the CBO forecast.

SIEGEL: NPR's Scott Horsley. Scott, thanks.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.