“Do we stay with Obamacare and the unsustainable status quo, or do we repeal it and replace it with something better?” Paul Ryan asked in a 2017 op-ed for USA Today.
As a conservative hawk, Ryan’s vision of healthcare in the United States involved significant levels of privatization. It was an idea that even caused Alice Rivlin, the former budget chief of the Clinton Administration, to partner with him on this quest to change how Americans could access their healthcare providers.
After the Trump Administration swept into office and Republicans controlled the House and the Senate, the American Health Care Act (ACHA) became one of Ryan’s signature pieces of legislation. This bill even managed to pass in the House by four votes (217-213), although it stalled in the Senate thanks to the efforts of another Republican, the late John McCain.
Depending on where you fall on the political spectrum, you might consider the ACHA to be either brilliant or cruel. Either way, there are some pros and cons to examine with this legislative effort.
List of the Pros of the Paul Ryan Healthcare Plan
1. The ACHA would have helped to reduce the federal deficit.
The ultimate goal of Ryan’s healthcare plan was to reduce the amount of medical spending that was happening in the United States. It used targeted cuts and points of savings, often relying on assumptions of lower prescription drug costs and pods of insurance for healthier people where only catastrophic coverage was necessary, to build in $15 billion per year in savings over the next decade. Although that figure is a fraction of total healthcare spending in the United States, the ACHA hoped that it would start a snowballing process that would agencies and the government find additional ways to save.
2. It eliminated the individual mandate from Obamacare.
Under the guidelines of Obamacare, families must either qualify for Medicare or Medicaid, purchase insurance from the exchange, have employer-sponsored coverage, or pay a fine because they didn’t care any healthcare insurance during the year. During the first year of the law, the annual penalty was $95 per adult and $47.50 per child, up to a maximum of $285 or 1% of family income.
After 2016, the individual mandate increased to its maximum level of $2,085 per family or 2.5% of income, whichever was greater. The penalties were then supposed to rise with the rate of inflation. Legislation outside of the ACHA in 2017 ended the penalties starting in the 2019 tax year.
3. The ACHA allowed for an increase in HSA contributions.
Ryan included a stipulation in the ACHA that would let families contribute up to $13,100 per year into a health savings account so that they could help to manage their medical expenses throughout the year. These tax-advantaged accounts work in similar way to an IRA, but do require you to divert income away from your paycheck to deposit in this plan.
Then you could create investment gains or collect interest without taxes while the money remained in the HSA. Withdrawals are also tax-free if you use the funds to pay for a qualified medical expense. The Trump Administration even wanted these plans to become part of an estate so that they could pass to an heir without paying taxes.
4. Subsidies were available for those with pre-existing conditions.
The Urban Institute examined the costs of supporting the high-risk pools for people with pre-existing conditions through the ACHA and found that the coverage and subsidies would cost over $650 billion over 10 years. Even if strict eligibility rules were in place, the cost could be as much as $37 billion per year. Even conservative experts like James Capretta suggested that at least $15 billion per year would be needed to fully finance the subsidies even if they covered just 2 million people. The premiums for the high-risk pool coverage would have paid just 53% of the program cost.
5. It would have allowed competition across state lines.
Paul Ryan and other conservatives believe that an increase in competition across state lines would naturally lower the costs of healthcare insurance policies in the United States. Under the current legal structure, each company must be licensed in every state where they offer some form of insurance. The goal here is to allow association health plans to re-enter the market, creating a variety of different options that could help consumers potentially save some money.
6. Families could deduct the cost of their healthcare premiums from their taxes.
Another way that Ryan wanted to help make healthcare costs more affordable was to allow for individuals and families to deduct the cost of their premiums from their taxes. Corporations and businesses already receive this benefit, so conservatives felt like it made sense to let personal returns have the same benefit. This advantage would have reduced the amount of taxable income reported each year, which could lower the individual tax responsibilities for the year.
7. The ACHA would have created more price transparency.
When you go to the doctor, do you know how much that visit is going to be? Most medical providers do not post what their rates are, but the ACHA would have made that a requirement. This benefit would have given Americans the option to compare costs with their local providers to choose the most affordable options for their needs at any given moment. Then the cost of care could be paid from the HSA or put toward the deductible so that you could have whatever level of coverage you felt was necessary to protect your family.
This benefit would have extended into the pharmaceuticals arena as well. The ACHA would have created a free market for drugs that would have allowed Americans to import them from other countries. That meant manufacturers who were selling at lower prices overseas would have faced a lot of pressure to lower their prices domestically.
8. It kept some of the popular provisions of Obamacare.
There are some popular provisions in the Affordable Care Act that conservatives wanted to keep even though they came from liberal legislation. That’s why Paul Ryan left items like keeping dependents on a parents’ insurance plan up until the age of 26 so that families could manage their expenses in better ways.
List of the Cons of the Paul Ryan Healthcare Plan
1. It would have caused more people to be without health insurance.
One of the primary goals of the ACHA was to eliminate the individual mandate that was put into place by the Obama Administration. If you did not carry health insurance under Obamacare, then you had to pay a fine as part of your taxes. Ryan wanted to eliminate that cost, but the only way to reasonably do it was to remove the requirement to carry insurance in the first place.
If the ACHA would have passed, an estimated 24 million people in the United States would have lost their healthcare coverage by 2026. That would have meant fewer visits to the doctor, delayed reactions to care, and a reduce quality of life.
2. States could be waived from providing core essential services.
One of the reasons why Obamacare was a fairly popular option at the time of its passage was the fact that there was a mandate to provide a list of essential benefits in every state. Although that meant higher costs in some areas, it also provided coverage for mental health needs, maternity care, and other essential services that were not always available from a private policy.
The ACHA provided a stipulation that allowed states to obtain a waiver, excluding themselves from the essential benefits requirements. Then they could draft their own set of rules to follow, creating a patchwork of different coverage expectations that consumers would need to follow.
3. People with pre-existing conditions would experience a greater burden.
Ryan faced significant opposition to the idea that insurance should return to what it was like in the pre-Obamacare era where insurers had the right to drop you if you had a pre-existing condition and no previous insurance. He addressed that problem by creating a system of subsidies that some people could use if they received a qualifying diagnosis from their doctor.
The only problem with that structure is that states could also obtain a waiver that would allow insurance agencies to charge higher premiums to those with a pre-existing condition if they experienced any lapse in their coverage.
4. Older adults might have needed to pay higher premiums than younger ones.
Under the current law, an insurance company can already charge up to three times more for a policy with an older adult compared to younger people. Paul Ryan included a stipulation in the ACHA that would expand that rate to five times, creating a larger pool of funds that would expand the opportunities for profit. When you combined this issue with the other potential disadvantages, the risk of suffering from a pre-existing condition could have eliminated any potential insurance benefit for some seniors in the United States.
5. There would have been a rollback of Medicaid expansion.
One of the reasons why there were so many more Americans protected by health insurance under Obamacare was because there was an expansion of Medicaid funded to all 50 states if they wanted to provide the extra coverage. That expansion allowed millions of people to access a doctor without the need to go to an emergency room. The ACHA would have cut that funding, leaving the states to hold the bill on the extra expenses.
6. If people can’t afford the individual mandate, how could they save more in an HSA?
Imagine that you’re earning $60,000 per year as a household, which puts you outside of the Medicaid or Medicare benefits. If you don’t carry health insurance under Obamacare, then you’re paying over $2,000 in penalties, but that is cheaper than the cost of the plans on the exchange – so you do it. Under the ACHA, the individual mandate disappears, and you get additional health savings account benefits if you hold a qualifying high-deductible plan.
That means you must pay the monthly premium for the insurance and contribute to your HSA. Most families would have ended up paying even more out of their paycheck to cover those expenses until enough value was established in the account.
7. There was still an individual mandate as part of the final plan.
What Republicans didn’t communicate very well about the ACHA was the fact that they were repealing one mandate to create another with this legislation. Instead of paying a tax for not having the required coverage, individuals could see a surcharge of up to 30% on their insurance policies if they allowed their insurance to lapse. This payment was necessary to avoid having consumers only paying for insurance when they got sick, and then dropping their coverage when they became well again.
8. The ACHA would have substantially cut federal funding to Planned Parenthood.
Abortion can be a polarizing subject in the United States, so it is essential to look at facts. Taxpayer money in the U.S. does not pay for this service, but that didn’t stop officials from pretending like it did. One of the key priorities that Ryan had with the ACHA was to cut funding to Planned Parenthood because of its services. There were plans to restrict coverage requirements for private insurance companies as well.
Up to $500 million in direct care benefits to low-income women and families could have been lost through the ACHA. Although Ryan and conservatives suggested that those funds could go to other local providers, there were few details given on how that could happen.
Final Thought: Pros and Cons of the Paul Ryan Healthcare Plan
Before the rules of the Affordable Care Act changed the consumer approach to healthcare insurance, there were 14 states that already had authorized plans with deductibles that were $10,000 per year or higher for individuals. There were 30 states that imposed maximum lifetime limits, often $1 million or $2 million. Some policies even had average coverage limits that were as low as $75,000.
Although the ACHA did not pass, measures like Medicare work requirements were given the green light by the Trump administration.
The pros and cons of the Paul Ryan healthcare plan are important to keep in mind because the United States needs to do something about consumer expenses in this area. Americans are paying almost double for lesser care than what people in other countries receive.
Natalie Regoli is a child of God, devoted wife, and mother of two boys. She has a Master's Degree in Law from The University of Texas. Natalie has been published in several national journals and has been practicing law for 18 years.