The new Republican healthcare bill, titled the American Health Care Act, is moving through the House of Representatives despite taking increasing heat from the left and the right.
Major advocacy and industry groups such as AARP and the AMA, as well as moderate and liberal congressmen, are opposed due to fears it will cause millions to lose their health care coverage or face increased costs. The Congressional Budget Office gave credence to those fears when it announced that 24 million Americans would ultimately lose coverage under the new plan, and that among those who retained insurance, seniors would see their costs rise dramatically. On the right, the Freedom Caucus, and many of the major conservative groups oppose the bill because it leaves too many of Obamacare’s provisions intact and too big a role for the federal government for their liking.
If it passes, in anything like its current form, what does it mean for the Virgin Islands? The answer is that it’s hard to know. Apparently, the territories are largely not included in this bill and will be considered later, perhaps in the second or third phase that President Trump has spoken about. Despite, the lack of certainty, it’s useful to look at the major changes and speculate on the impact those could have on the VI if applied to us. Certainly, the proposed changes to Medicaid and the proposals to use the tax rebates to subsidize insurance costs would have a dramatic impact on the VI.
Some background may be useful. There has always been a national struggle over who pays for uncompensated and under-compensated health care. Hospitals, cities, rural counties, states and the federal government continually try to push the cost on each other. The Affordable Care Act, better known as Obamacare, transferred some of the responsibility for paying for uncompensated care from cities, counties and states and gave it to the federal government. Of the more than 20 million people who have gained coverage through the ACA, about half are covered under expanded Medicaid programs. Medicaid, the major payer of health care for low income people, is a federal and state partnership with both levels of government contributing to the cost. Obamacare provided an opportunity, largely at federal expense, for the states to expand their Medicaid programs and enroll more of their low-income population.
Obamacare can be thought of as a three-legged stool that needs all legs to remain in balance. One leg is the individual mandate requiring everyone to get coverage. The theory behind this is if younger, healthier people buy health insurance, the risk is spread among a larger and healthier pool and that drives down the cost of coverage. The second leg is a series of subsidies to help people buy insurance who cannot it without financial help. The third leg is market reform. This includes the requirements of not being able to turn down people, covering pre-existing conditions, eliminating annual and lifetime caps on coverage, providing mental health care and allowing children to remain on their parents’ insurance until age 26.
The Virgin Islands was included only on leg three. The individual mandate was not applied to us and we were not given the subsidies to help people buy insurance. The lack of federal subsidies largely torpedoed any chance we had to build an exchange. The insurance market reforms, minus the individual mandate and subsidies, may have led local insurance companies to be afraid that their clients would mostly consist of those needing lots of expensive health care which contributed to them leaving our market.
Back to the new bill. There are several areas for Virgin islanders to watch as it goes through the process and the territories are eventually addressed. One is the provision of providing tax breaks to help people purchase insurance. This is being done through allowing much larger annual amounts to be put tax free into health savings accounts and assisting with premium costs by providing refundable tax credits based on a formula that considers age and income. With our mirror tax system, either of these will be a blow to the VI treasury.
A second concern is the proposed elimination of several health programs including many of the health education and preventative health efforts we currently have. This could wreak havoc on the Department of Health’s federal funding.
Perhaps the major concern is the potential impact on our Medicaid program, known locally as the Medical Assistance Program or just simply MAP, and operated by the Department of Human Services. The proposed bill changes Medicaid nationally from an unlimited program to a block grant in which the federal government will cap its payment to the states and presumably give the states some additional flexibility to design their Medicaid programs as they want. The Virgin Islands, and the other territories, already have a capped Medicaid program. This will not be new. The major issue for us will be the level of our cap. Obamacare significantly raised our federal cap, allowing the VI to greatly expand its Medicaid program. That’s what we did, going from fewer than 10,000 recipients to around 23,000 now. The V.I. increased its maximum income eligibility levels and allowed childless adults to enroll for the first time, which included many of our homeless population.
The territory did not get all the benefits that states did for expanding their Medicaid programs, but we took advantage of what we did get. If our cap is placed back to pre- Obamacare levels, then we will not have the funding to keep the newly enrolled people on. Plus, Obamacare increased the federal share of the VI Medicaid program from 50 percent to 55 percent of the costs for most of the covered groups and up to about 85 percent now for the new group of childless adults. If, under the new bill, our match is returned to the pre-Obamacare level of 50/50, that means an even larger share of the costs must be borne by the Government of the Virgin Islands.
On the positive side, perhaps an opportunity exists to get our share of the match lowered. The state match is determined by their per capita income. The lower the state per capita income, the larger the share of the Medicaid costs the federal government picks up. Presently, eight states pay less than 30 percent of the costs with the federal government picking up more than 70 percent. Instead of using this formula for us, the territory match is instead set by law. Although our per capita income would allow us to have a very favorable federal match, it is not considered. We are treated like a wealthy state when it comes to the federal share of the match. Perhaps among the upcoming changes, Congress can at least apply the same match formula for the territories that they give to the states. This would be a huge help. Washington D.C. used to be bound by the same law as us with a 50 percent match. During their financial crisis, some years back, the federal government lowered their match to 30 percent. The V.I. and Puerto Rico are having financial crises now and one way to help us would be to treat us like a state or D.C.
To illustrate how this would help consider this example. To cover $10 million in Medicaid expenses, the VI must pay $4.5 million dollars and the federal government provides $5.5 million. In the same scenario, Washington D.C. has to pay only $3 million while the federal government provides $7 million, and Mississippi, the state with the most favorable match, has to pay less than $2.5 million, less than half what the V.I. pays.
We do not know if we will be included in some of the other reform aspects, such as the money that will be divided among the states to fund high risk pools of people with very expensive health care needs. This could be very important to strengthen any opportunity we have to attract a more robust private insurance market.
It seems certain the new health care bill is going to go through revisions before it is passed. Plus, the president has indicated that there will be a second phase that consists of regulatory reform within HHS and a third phase to deal with some additional budgetary aspects. No drafts of these phases have been released. It is impossible to know now how the Virgin Islands will be ultimately affected. A task force or stakeholders has been formed, led by Sen. Neirada “Nellie” O’Reilly, to keep informed of the legislation’s progress and advocate for the V.I.’s needs.
Continued vigilance is required.
Christopher Finch is the former commissioner of the V.I. Department of Human Services.