Here is the most generous way I can explain the policy goal that Senate Republicans are trying to accomplish with their health care bill, some version of which may finally get a vote next week. By deeply cutting Medicaid while offering adults who live below or just above the poverty line subsidies to buy inexpensive, catastrophic insurance coverage, they are looking to move people off of a government program they see as financially unsustainable, while ensuring poorer households still have some financial protection in case of a medical calamity.
My guess is that this has to be the story most Republicans are telling themselves to justify getting behind $756 billion of Medicaid cuts over a decade. They’re not leaving needy adults out in the cold; they’re transitioning them into the private market.
Even if you believe that narrative, however, in practice it plays a bit like a practical joke on the poor. We were all reminded of that much this week when the Congressional Budget Office released its latest assessment of the GOP's legislation. It found that by 2026, a single policyholder buying a benchmark plan—those are the insurance options intended to be affordable using one of the law's tax credits—would face an astronomical $13,000 deductible, versus just $5,000 under Obamacare. “For plans providing some benefits before the deductible was met, such as a limited number of primary care visits or generic drug purchases, the deductible would be higher,” the CBO notes.
In fact, for many Americans who stand to lose Medicaid coverage under the Republican bill, these deductibles would be higher than their total annual income. In 2026, the CBO expects that someone living at 75 percent of the federal poverty line would earn $11,400, $1,600 short of the threshold they'd have to hit before their insurer started paying any medical bills. Keep in mind, they would also be expected to pay 2 percent of their income toward this insurance, which, unless they're were involved in a car wreck or got cancer, they'd likely never use.
Some people might be comfy with that idea. There are conservative intellectuals who believe that insurance should only be used in true emergencies, and we'd be better off paying for most medical care out of pocket. But insurance that doesn't kick in before you spend a year's wages barely even qualifies as catastrophic coverage, given that it still leaves your finances an utter wreck.
Unfortunately, the CBO analysis only covers an incomplete version of the Senate bill. The office did not have enough time to score the effects of the Cruz amendment, which would allow insurers to sell unregulated insurance priced based on a customer's health as long as they also offer coverage that abides by all of Obamacare's rules. That proposal won't do the poor any favors, though. If anything, it should drive the deductiles on regulated insurance even higher, since that market would largely consist of sicker individuals. However, lower-income customers would likely have to purchase those ACA-compliant plans whether they were healthy or not, because only Obamacare-style insurance would be eligible for subsidies.
It should also be said that, technically, the GOP bill bans the sort of insanely high-deductible plans the CBO thinks are required to make its numbers work. That's because it caps out-of-pocket spending at just $10,900 in 2026. That mostly reflects the bill's shoddy, incoherent craftsmanship, and fixing the internal contradiction will either require spending more money on insurance subsidies or upping the out-of-pocket limit.
But stay focused on the big picture: The GOP's bill is only really designed to help families afford cheap coverage with high deductibles, which will be all but useless to adults on Medicaid today. The tax credits it offers families to buy private insurance are geared toward purchasing policies slightly less generous than the low-level bronze plans now available on Obamacare's exchanges (today, subsidies are keyed to more comprehensive silver plans). As the health consultants at Manatt noted Thursday, the out-of-pocket costs attached to those plans are already wildly unaffordable for low-income families; a household of two currently on Medicaid would have to spend at least 60 percent on their income before their bronze coverage kicked in.
The GOP health plan would boot people off of Medicaid onto insurance they couldn't afford to use. And again, that's the nicest thing I can say about it.