What is the Cost of the Uninsured Compared to the Gain of Freedom?

After a much needed vacation and break from WIFI, I was brought back to reality this weekend as I started to read the most recent reports related to the Affordable Care Act. There have been responses made by leading Republicans regarding the potential concern about reducing the number of insured. While I understand that just looking at the number of insured is not necessarily the only measure of success, I do believe there are serious consequences being overlooked by these Republicans who are willing to trade the number of insured for increased freedom.

The Republican I am referring to is Mike Burgess (House Energy and Commerce Subcommittee on Health), who was asked recently about concerns related to the number of people who could possibly lose insurance coverage if the Affordable Care Act is repealed. His response was: “First off, we’re not going to send an IRS agent out to chase you down and make you buy health insurance. So if the numbers (of insured people) drop I would say that’s a good thing because we restored personal liberty in this country.” (Source) Right before this comment was made, Paul Ryan and Mike Pence made similar references on twitter related to the Affordable Care Act and Freedom. (Source and Source)

One of the main reasons I wanted to started Following The Facts is to take a look at the values we hold, and to measure them against each other. This is not meant to be a tool to judge, but a tool to educate and inform each other about these values, and therefore understand each other a bit more clearly. I consider this to be a great example of two different values being presented - the cost of the number of people who are uninsured versus the cost of freedom.

Why Focus on Freedom?

The Republican argument that the Affordable Care Act impacts the freedom of Americans is based upon the implementation of the tax penalties that a person will incur if they decide to not to receive health insurance. They equate this penalty to a loss of freedom, and state that the government then requires a person to hold insurance, as opposed to giving them the decision to hold insurance. There are also federally mandated regulations that require insurance companies to adhere to certain requirements of coverage, which Republicans would prefer to leave to state decision. The federal mandates, they feel, restrict free market insurance and state decisions. It is hard to fully debate the freedom argument, as it is hard to measure the loss of freedom related to requiring the individual mandate or the additional regulations. But we can measure our feelings about this loss of freedom to the cost of the of being uninsured, and the impact of these regulations.

The individual mandate penalty in 2016/17 is $645 per adult and $347.50 per child, at a maximum of $2,085; or 2.5% of gross income at a maximum of the average cost of a nation Bronze plan. (Source) This is up from the previous two years as the mandate was rolled out. For the 2014 tax year filed in 2015, around 8 million people were charged with this penalty, which generated about 1.5 billion in tax revenue. Of those 8 million, 82% still received a tax refund, which means that about 1.4 million people had to pay additionally that year, including the healthcare penalty. (Source) The initial numbers for the 2015 tax year filed in 2016, show about 6.5 million people charged with this penalty, which generated about 3 billion in tax revenue. Of those 6.5 million, 77% still received a tax refund, which means that about 1.5 million people had to pay additionally that year, including the healthcare penalty. (Source)

Granted, these are just the people that were hit with the penalty, and it could be argued that this is less the point as it relates to all of us who are put underneath that mandate. But the number of people who are impacted by this mandate is a measurable number and helps give an understanding of the financial impact at the basis of the freedom argument.

What Has Been Proposed In Congress?

If the Republican party decided to repeal all of the ACA without a current replacement, the potential number of uninsured would go up by about 18 million people in 2018. (Source) It is unlikely that they would repeal the act without another plan in place, so I am going to assume it is unlikely that 18 million people will be the number impacted. But the initial outlook is not promising, given the shift in tax credits proposed.

The current leaked proposals to replace the ACA show potential to decrease the number of insured by changing the way that tax credits are provided, increasing the cost of insurance for many people who are most in need. (Source)

These changes simplify the tax credit amounts, as they move from complex models built upon income and cost of coverage, to tax credits strictly based upon age range (and as of the most recent leak, potentially income). (Source) Unfortunately this could most dramatically impact the lower income participants, since anyone making under 400% of the poverty level in the current ACA is provided tax credits based upon the cost of the plan and their income.

Looking at the estimates based upon income, the national average for people who make $20K or less a year could see anywhere from a $1,200/year increase, to an almost $6,000/year increase by these suggested changes. But those making $40K+ could see a substantial decrease in their cost based upon the current proposals, since income is not currently a defined factor. (Source) Also, the current proposals all look to block Planned Parenthood from receiving Medicaid reimbursements for the preventative care that is currently covered, limiting the number of clinics that will be able to offer women's heath screenings.

What is at Risk for the Declining Insured?

If we saw a modest 10% decline in the number of insured, that would be 1.8 million people that would lose their health insurance by the current proposals. Potentially another 5 million could see significant increases to their out of pocket cost, which would far outweigh the current 1.5 million who are penalized by the tax requirement, and did not receive a return. (Source)

Why is this so important? Recent studies conducted at Kaiser Family Foundation indicate the impacts to those that are uninsured are beyond just the uncompensated care cost. The long term impacts can be detrimental to a person's health, as an important part of long term health is access to preventative care. Many people who do not have insurance do not get yearly exams or woman's health screenings; and even when they are concerned about a potential medical issue, they often will delay purchasing medication or taking the necessary medical steps to help fight their illness. This often results in more serious illness requiring advanced treatment, as stated by KFF.org. (Source)

Also, the out of pocket cost for those that are uninsured can impact their financial security. By 2007, 62% of the bankruptcies were due to a medical cause, an alarming number that was used to help push the ACA into policy. Given the fact that the proposed Republican plans do impact the lowest income participants, it would be easy to conclude that bankruptcies will increase due to the loss of insured, as well as the out of pocket cost to the insured. (Source)

Conclusion

In conclusion, I believe the current Republican legislation that has been leaked does decrease the tax financial burden for a number of people, but the impact to low income individuals is far more alarming. The policies proposed remove the individual mandate, and give states more control over their policies, but the repercussions of a surge in costs for lower income participants has opportunity to increase the number of the uninsured dramatically.

Those same uninsured will have a substantially greater risk to health problems and financial issues, and the low income participants that are insured will incur immediate additional out of pocket cost compared to what they have been paying. By utilizing the immeasurable concept of freedom, it makes it harder to debate the true impact to the change in law. But the measurable negative results of the current proposed replacement plans are real, and will hit the people who need help most. I personally find that to be more important than the violation to my freedom because I am required by law to have health insurance.