The numbers don’t add up on America Next health plan

The numbers don’t add up on America Next health plan

By Steve Spires

Now that the Senate has refused to extend Medicaid coverage to more than 240,000 Louisiana adults, it’s time to examine an alternative solution: The “America Next” health plan recently unveiled by Gov. Bobby Jindal’s new, Virginia-based policy organization.  While the plan appears geared to a national audience, state Sen. Ben Nevers has incorporated the governor’s ideas into a new bill. The “Louisiana First America Next” plan is scheduled for debate this week in the Senate Health & Welfare Committee.

Unfortunately, these policy prescriptions would take Louisiana’s health care system in the wrong direction. They would do little to increase coverage for the uninsured, and could actually harm low-income Louisiana families.

The following analysis is an attempt to explain how the plan might impact Louisiana families, particularly those who are low income and would benefit from Medicaid expansion. It relies on certain assumptions, which are explained in the text. LBP made several attempts to contact America Next with specific questions about the plan, but received no response.

The Jindal plan begins with a repeal of the Affordable Care Act. In its place is a tax deduction to help families buy insurance — an initial step toward gradually de-coupling employment and health coverage. Currently, insurance offered through an employer is paid for with before-tax dollars, while insurance bought by an individual is paid for with after-tax dollars.

But low-income families who earn below 150 percent of the federal poverty line — $17,505 for an individual or $35,775 for a family of four — would not benefit very much from a tax deduction. To help this group, Jindal proposes to give states $100 billion over 10 years to subsidize coverage for the poor and people with pre-existing conditions. There would be few conditions on this money to allow the states to act as “laboratories of democracy.”

The problem with this approach is that the math doesn’t work. Census data tells us there are nearly 45 million Americans aged 18-64 with income below 150 percent of poverty (we are assuming that seniors continue to receive Medicare, and children from low-income families remain eligible for Medicaid). Of those 45 million, around 9.6 million get insurance through their job and about 17 million are already enrolled in Medicaid and Medicare. Assuming those programs are not trimmed back, that leaves around 21 million adults—18 million uninsured and about 3 million who buy insurance on their own:

18-64 year-olds with family incomes below 150% FPL

The plan, then, is to use $100 billion to subsidize insurance for 21 million Americans for an entire decade. That breaks down to about $466 per person, per year, or $38 per month, to secure access to care (This figure is optimistic and would actually go down as inflation chipped away at the value of the grant money). This also doesn’t take into account people with pre-existing conditions, who tend to be more expensive to cover. A 2010 analysis from conservative health policy analysts James Capretta and Tom Miller estimated that it would cost $15 or $20 billion a year just to cover between 2 and 4 million Americans whose pre-existing conditions make it virtually impossible for them to buy private insurance at any price.

Let’s compare these proposed subsidies to the current cost of health coverage. According to Kaiser State Health Facts, the average insurance premium on the individual market in Louisiana in 2010 — before Obamacare — was $206 per month (or $237 in current dollars). As an illustration, if the pool of $100 billion was used to directly subsidize lower-income buyers of insurance, a person making $17,505 annually (150 percent of the poverty line), would have to spend more than 13 percent of their income on premiums alone, not taking into account the cost of deductibles or co-pays. A worker making less, $11,670 or 100 percent of the poverty line, would have to spend more than 20 percent of their income on premiums. (Our calculations don’t include the benefit of any standard deduction, though at this income level most taxpayers would receive little — if any — significant benefit from a deduction.)

Cost of Coverage under America Next Plan

This simply does not pass the test of affordability, and it is hard to see how even the most innovative states would be able to close such a large resource gap. A more likely result is that more families would be at risk of medical bankruptcy, while others delayed seeking care due to cost — worsening health outcomes.

Under the Affordable Care Act, these same low-income workers have their premiums capped at 4 percent and 2 percent percent of their income, respectively, with federal tax credits helping to cover the rest. And many of the poorest Louisianans who work low-wage jobs in the service sector — those currently stuck in a “gap” with no access to affordable coverage — would be eligible for Medicaid if the state decided to expand coverage using available federal dollars.

In Louisiana, there are around 400,000 adults with income below 150 percent of the federal poverty line who are either uninsured or who buy coverage on their own. Using the calculations above, the state would receive around $1.9 billion in federal funds over 10 years to fund coverage for this population. But with Medicaid expansion, Louisiana would get almost $16 billion in new federal health dollars to cover low-income adults.

The America Next plan includes good ideas like cracking down on fraud and making health care costs more transparent. But it flunks the test of affordability, and would leave thousands of Louisiana workers and their families in worse shape than they are today. A better solution for Louisiana would be to stick with the Affordable Care Act, work with the federal government to improve its deficiencies and take advantage of the opportunity to cover low-income adults with federal dollars.