The ACA is working – and there is no replacement

By Jonathan Gruber, MIT*

One of the most contentious public policy issues of the early days of the Trump Administration is the future of the Affordable Care Act (ACA). President Trump and congressional Republicans decry the law as a failure and say that it must be repealed and replaced with something better. This line of argument is problematic in two different ways. First, the claim that the ACA is a failure is wrong. Second, there is no replacement that does not significantly worsen the U.S. health care system.

The ACA has accomplished the three main goals it set out to achieve. First, the law has significantly reduced the number of uninsured Americans (by about 20 million, according to latest estimates). Second, the law has stabilized a broken individual insurance market. Before the ACA, individuals without insurance from their employer or the government were subject to a discriminatory market where they could be denied insurance based on their health, or charged more based on their health or gender. The ACA ended this discrimination, bringing millions of uninsured into the new market. Third, the ACA has contributed to the most dramatic health care cost slowdown in measured U.S. history.

Such a positive assessment may strike some as odd given rhetoric to the opposite effect, but such rhetoric is subject to an important fallacy. Republican criticism compares the ACA to a perfect world, not to the world that it replaced. Consider, for example, premiums in the ACA health insurance exchanges. Much attention has focused on the fact that last year these premiums rose by 22 percent, on average. But there has been little focus on the fact that premiums were far below expectations when the law went into place, so that on net premiums are below where they would have been on average without the law. Relative to a world without the ACA, we are now a nation with higher insurance coverage and more stable and lower cost insurance markets.

That’s not to say that the ACA is perfect – far from it – but it is important to note that the ACA represents an improvement over the world that preceded it. And, more importantly, it is much better than current alternatives posed by Republicans.

While there are a number of alternative “replace” plans, all share three features. First, they significantly weaken the insurance market anti-discrimination protections of the ACA. Millions of individuals who now have access to insurance at prices independent of their health will suddenly see their coverage become unavailable or unaffordable. Second, these plans make insurance much less affordable for low-income Americans. Most proposals remove the Medicaid expansions that made insurance accessible for the first time to millions of low-income Americans, and all proposals replace the income-based tax subsidies of the ACA with universal flat tax credits that don’t vary with income. This means that low-income families will have to pay enormous shares of their income to afford insurance, while rich families get a flat tax credit that they don’t need. Finally, the plans repeal the tax increases on the wealthy that were used in part to finance the ACA.

The bottom line is that Republican alternatives make insurance unavailable and unaffordable for the lowest income and sickest Americans, while providing new benefits and tax breaks to the richest Americans. The result will be a dramatic reduction in insurance coverage in the U.S. among our most vulnerable citizens. This is not a “replacement”. This is a catastrophe.

*Prof. Jonathan Gruber is a professor of Economics at the Massachusetts Institute of Technology as well as the director of the Health Care Program at the National Bureau of Economic Research. Prof. Gruber was a key architect of both the 2006 Massachusetts health care reform and the 2010 Patient Protection and Affordable Care Act.

 



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