Next year, taxpayers will fork over nearly $10 billion more to cover double-digit premium hikes for subsidized health insurance under the ACA, according to a study from the Center for Health and Economy. The study estimates that the cost of premium subsidies under the ACA will rise from $32.8 billion currently to $42.6 billion. Under current law, “you get a premium increase, you pour more money in,” said economist Douglas Holtz-Eakin, founder of the Center for Health and Economy. “The concern is that will feed more premium increases.” If the health care law is repealed next year, it is still yet to be seen what the remaining carriers participating in the ACA exchanges will do in 2018. It is also unclear how supportive Congress will be for subsidies going into a system slated to disappear.
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Republicans are searching for a way to capture savings from repealing Obamacare in a piggybank they could later use to fund a replacement.
It’s not clear how or if such a maneuver would work, but if Republicans are successful, it could overcome the tricky political problem of paying for whatever health reform they try to put in the Affordable Care Act’s place.
The idea is to bankroll an Obamacare replacement that would start several years down the road with funds derived from repealing the law itself. A repeal bill Congress passed early this year, and President Obama vetoed, would have saved $516 billion over a decade, according to the Congressional Budget Office.
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It didn’t take long for Republican leadership in both houses of Congress to get over the shock of winning the election last month and start gaming out a repeal plan. The details remain under discussion, but House speaker Paul Ryan, Senate majority leader Mitch McConnell, and Vice President-elect Mike Pence (who is working closely with Ryan and McConnell on repeal) are already coalescing around a rough legislative framework. The plan might be summed up as: repeal, delay, replace. More precisely, Republicans plan to repeal most of the law, delay the implementation of most of that repeal for at least two years—and figure out what to replace it with in the interim.
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In new research for the Mercatus Center, I argue that one of the central aims for the ACA replacement should be to reduce government bias toward comprehensive insurance. Policymakers should instead focus on realigning incentives, removing government mandates and regulations, and directing government financial support to consumers instead of to insurers and providers. Doing so would lead consumers and providers to make decisions that lead to greater value from the massive amounts of money we spend each year on health care.
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In a new study by the Mercatus Center at George Mason University, Senior Research Fellow Brian Blase notes that successful, sustainable reform must simultaneously improve healthcare quality and put downward pressure on prices. The only surefire way to achieve this is by replacing the ACA’s government-centric approach with a consumer-centric approach that realigns incentives, unleashes market forces, and increases competition.
As Congress and the incoming Trump administration consider how to replace the ACA, they should aim to (1) reduce the government bias in favor of comprehensive insurance, (2) fundamentally reform Medicaid by better aligning incentives of states to be concerned about the value of spending, and (3) expand market-oriented reforms such as HSAs [Health Savings Accounts]. States should support these efforts by reducing insurance mandates and eliminating state rules that restrict competition and innovation.
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