Two Things You Might Not Learn (Unitl it's Too Late) About the GOP Deathcare Plan (Updated)

There is more than sufficient ink being spilled in reviewing the larger changes that the GOP Deathcare plan creates. Yes, your costs will go up, significantly more than if Congress did nothing -- there are just no two ways about it, and Medicaid will be massively slashed. I'm not here to rehash that ink; I'm here to highlight two very important points that are buried in insanely complex legalese and might be ignored by the news media and others.

Point 1: Republicans intend to punish Medicaid expansion states

"Exemption from exemption for non-expansion states" -- that's the ridiculously complex title of a section that the GOP bill introduces into the SSA laws. Its purpose, obfuscated: Republicans want to stick it to those states who expanded Medicaid under the ACA by allowing what are called Disproportionate Share Hospital (DSH) cuts to proceed while eliminating them from states that did not expand Medicaid.

DSH payments are federal dollars distributed to hospitals that treat a disproportionate number of uninsured / poor, offsetting underpayments from these two groups. The theory was, that because the ACA increased the insured by expanding Medicaid coverage, those states with expanded Medicaid wouldn't need as much DSH payments. This wasn't exactly how it worked out, as Medicaid does not pay out 100% (closer to 92%) which meant that some states had a shortfall. These cuts were put off, each year, until 2018, and they were supposed to last through 2025. Under the GOP plan, Medicaid expansion states would see those cuts through 2025 while the non-expansion states would see those cuts end in 2019.

I'm fairly certain that this will end up in a federal lawsuit if the bill ever became law, owing to the Equal Protection Clause that would normally prevent separate treatment of states based on their class status, without any ability to opt out. Consider it the parallel to the successful lawsuit of non-expansion states to avoid penalties for not expanding Medicaid under the ACA.

Point 2: Republicans are effectively keeping the Mandate

The intent of the ACA's individual mandate was to force people to obtain coverage if they could afford it. The GOP Deathcare Plan ends up penalizing anyone who drops their coverage only to gain access once again, and the penalties are at least twice as much as the ACA's.

Essentially, the GOP will force insurers to charge you a 30% penalty for those months in the current plan year that you didn't have coverage. The current law allows for a maximum of $695 for an individual, based on a full year of non-coverage, but with exceptions for poor people.

For example, take the case of Larry who signs up for coverage but missed one month during the plan year, and his plan costs $350 a month:

• Under the GOP Deathcare proposal, Larry would pay a penalty of $350 * 1 month * 30% = $105.
• Under the current rules, Larry would pay a penalty of 1 month / 12 months * $695 = $57.92. Note, however, that under the current rules you don't pay any penalty so long as you held insurance for 10 out of the 12 months in a year, thus, your penalty is $0.

Now, let's say that Larry missed 11 months and signed up for coverage on the last month during the plan year:

• Under the GOP Deathcare proposal, Larry would pay a penalty of $350 * 11 months * 30% = $1155.
• Under the current rules, Larry would pay a penalty of 11 months / 12 months * $695 = $637.09.

Let's just say that the GOP Deathcare Plan is bad. It's so bad, one preliminary cost review suggests that it will add $600B to the federal debt over the decade. So yeah, it'll kill Americans physically and financially and the GOP aren't all that concerned about this reality.

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Update: It appears that Point 2 has gained the attention of others, but the interpretation is that the penalty extends forward for 12 months. If this is the case -- the language does not indicate how this mandate will work, given that at the end of the regular enrollment year one can simply switch insurers or cut and run -- then it's a lot worse of a penalty than the ACA's mandate and will inundate insurers with much more paperwork and time. This may be the intention, but here's my reading (underlined sections) of the pertinent portion:

"(1) IN GENERAL.—Notwithstanding section 2701, subject to the succeeding provisions of this section, a health insurance issuer offering health insurance coverage in the individual or small group market shall, in the case of an individual who is an applicable policyholder of such coverage with respect to an enforcement period applicable to enrollments for a plan year beginning with plan year 2019 (or, in the case of enrollments during a special enrollment period, beginning with plan year 2018), increase the monthly premium rate otherwise applicable to such individual for such coverage during each month of such period, by an amount determined under paragraph (2).‘‘(2) AMOUNT OF PENALTY.—The amount determined under this paragraph for an applicable policyholder enrolling in health insurance coverage described in paragraph (1) for a plan year, with respect to each month during the enforcement period applicable to enrollments for such plan year, is the amount that is equal to 30 percent of the monthly premium rate otherwise applicable to such applicable policyholder for such coverage during such month."

Now, like I said, since plans are 12-months long, and since the bill mandates that the insurer implements the penalty, the popular interpretation makes much less sense because one could then cut and run at the end of every plan year, thus avoiding the full year of penalties to avoid the new year of penalties. Whichever interpretation is correct, the plan is still terrible and still highlights that the GOP are maintaining a costly mandate.