Questions to Ask About the House Republican Health Reform Proposal

This was published as a Wall Street Journal Think Tank column on June 20, 2016.

House Speaker Paul Ryan’s health-care task force is expected to outline its alternative to Obamacare this week. The outline reportedly will not include the level of detail that would allow much external analysis of its impact by health-care experts and the media, though Democrats are likely to attack its concepts, most of which will be familiar proposals that Republicans favor and that Democrats have opposed in the past. The outline is part of Mr. Ryan’s effort to add Republican policy ideas to the election debate, in particular to the presidential campaign, and seems aimed at helping down-ticket Republicans as a part of an agenda that can appeal to their base. Details will be needed to understand whether the plan is more progressive or regressive and how many uninsured people would be covered. Another big question is how Donald Trump will respond.

One expected feature is a tax credit to help people pay for insurance. It matters whether this is a flat credit, which would be more regressive, or a progressive credit that would provide more help for lower-income people (like the Affordable Care Act does). The impact of tax credits can be complex and whether it varies by age and geography, as well as income, is important. A flat credit of around $2,000, for example, will be better on average for people earning more than about 200% of the poverty level (about $24,000 for a single person) and worse for people earning less than that; it may induce more people to buy high-deductible plans with somewhat lower premiums.

Previous Republican proposals called for converting Medicaid into a traditional block grant to the states. Giving each state a fixed allotment of federal dollars through a block grant can provide an incentive for states to limit enrollment or cut eligibility when the economy slows down and enrollment rises. When governors saw how many more uninsured people might be in their states under the traditional block-grant approach, many soured on the idea. Another approach that is reportedly part of the forthcoming GOP outline, called a per capita cap, allows federal payments to states to rise and fall with enrollment. But a primary Republican goal is to limit future federal Medicaid spending. And as growth in federal Medicaid spending tightens in the future and health costs rise, states may face an incentive to limit the benefits they provide for low-income residents. If the cap on federal spending hits far enough down the road, more governors may be persuaded to support the idea in return for the flexibility they would get; if the cap hits sooner, fewer may support it.

Democrats are sure to oppose any Medicaid cap as a cut in program funding and as a fundamental change to the federal-state Medicaid bargain in which the federal government matches state efforts based on a formula reflecting state needs. Without the prospect of millions losing coverage, a per capita cap is a tougher target for Democrats than the traditional block grant was. For states, the Medicaid wars with the federal government have historically been framed as a fight about flexibility and control when they have always been at least as much, if not more, about money and the consequences of federal funding reductions. I learned this firsthand while overseeing a Medicaid program for a Republican governor in New Jersey in the late 1980s.

Overall, the ACA has increased the number of people with health coverage by about 20 million. Without specific details of the GOP proposal, it will be difficult to assess how much that would change if all the elements expected to be part of the Republican outline were implemented.

Donald Trump’s reaction is even harder to predict than its impact. He could choose not to comment or to endorse some elements but not others. His campaign website says that any health reform effort “must begin with Congress.” Mr. Trump has said that he opposes any cuts to Medicare and Medicaid but has also endorsed a Medicaid block grant. He has endorsed high-deductible health insurance plans with savings accounts and allowing the purchase of insurance across state lines, both of which are expected to be elements of the Republican outline. Health policy has not been a focus for Mr. Trump so far, though it may come into play in the general election in back-and-forth over Obamacare or when Hillary Clinton challenges Mr. Trump’s health-care ideas and command of detail about the issues.

Debate over the forthcoming GOP outline will reflect both partisan politics in an election year and strongly held differences in policy goals between Republicans and Democrats. For those of us in the business of independent analysis, the expected lack of detail will make informing the discussion more challenging.

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