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We are seeing the impact of the
benefits of federal subsidies
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with the Affordable Care Act,
because we have also seen 1.5
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million people quit their health
care plans through the ACA in
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2026. This all because the
subsidies were held up by
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members of Congress. That number
also expected to rise due to the
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rising costs of health care. It
shows just how important a
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financial component from the
federal government is to this
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program. So what is the future
for the ACA and what should we
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be thinking of an idea brought
forward by President Trump of
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providing funds but letting
people go pick the plan that
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they want? Pleasure to be joined
by Mark Pauly, who is Professor
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Emeritus of Healthcare
Management here at the Wharton
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School. Mark, great to have you
back again. Thank you for your
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time.
- Thanks, Dan.
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Obviously seeing people
drop their plans
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en masse, this was kind of
expected, especially if Congress
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was not going to be able to come
to some sort of resolution on the—
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on the benefits.
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What's happened already is that
the subsidies that were
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increased during the period of
COVID have snapped back to their
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original design from 2014. And
that has caused an estimated—
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well, we don't know yet, because
the official sign-up period
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ends January 15, today. But the
early returns suggest that
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when the dust clears, maybe up
to 7 million people out of the
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24 million or so, 21 million
people who are buying insurance
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through the exchanges, they'll
drop off of exchange coverage.
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There is a silver lining,
though. Many of the— those who
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drop exchange coverage because
it now becomes more expensive
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with a smaller subsidy, will go
back onto employment-based
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coverage. Say, pick up a
spouse's coverage or go to
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unsubsidized coverage,
individual coverage off the
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exchange. So at least the smart
money says that the net net
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impact on the number of people
who are uninsured is going to be
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on the order of 2 million
people. That's millions of
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Americans, of course, but that's
less than 1% of the total
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population. So the sky's not
falling here, although, if you
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remove any subsidy program,
whether it was reasonable or
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unreasonable, the people who are
getting the subsidy are going to
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suffer when the subsidy is taken
away.
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Doesn't this, though, also
highlight, again, something that
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I think you and I have talked
about in the past, is, just the
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general need to focus on
healthcare costs and look at
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what needs to be done in the
future, if anything can be done,
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to make it more affordable for
the public, en masse?
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Well, yes and no. I mean,
most of what the consternation
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surrounding the ending of the
enhanced Affordable Care Act
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subsidies is because of the
subsidy. And of course, if your
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premiums are, for example—
I actually looked these numbers
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up. A 50-year-old would
have, under the enhanced
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subsidy, been paying only 7% of
the total premium, and when the
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subsidy snaps back to the old
level, that goes up to 19%. That
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more than doubles their premium.
So they get a big kick in the
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head. But on the other hand,
the amount of subsidy that's
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being provided by the rest of us
isn't really reduced all that
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much. So mostly it's the subsidy
removal that's causing the
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consternation here. If you look
at, to get a more reasonable
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picture, what's happening to
insurance coverage for people
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who get private insurance the
way most people get private
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insurance, which is through
their job, that premium is
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going up maybe five to 7%.
Somewhat higher than average.
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And, you know— and it's not a
good thing unless you're getting
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something for the money. But it's
not near the doubling
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and tripling that CNN will
tell you about that you
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should be concerned about. Of
course, you know, frankly, I'm
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on Medicare, so this doesn't
matter to me, personally. Other
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than that I'm such a soft-
hearted person.
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So the idea being presented by
President Trump of allowing the
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public to try and, you know,
receive funds and go get their
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own healthcare, is that one that
is a viable option in your mind?
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Well, it's probably viable in
the sense that if it happened,
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it would happen. My guess is,
depending on the rules— now, the
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rules in different bills
are different. But depending on
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the rules, I would expect and
would hope that most
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people would take that money and
go buy the insurance they would
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have bought anyway. Maybe a
little more affordable now,
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because they are getting the
government subsidy. The
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alternative strategy of saying,
"Well, I'll just put the money
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under my mattress and use it if
I get sick." Well, that's okay,
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as long as you don't get too
sick. But if you have a six-figure
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bill, you're not going to get a
big enough subsidy to cover
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that, so you'll be exposed to
financial risk. So I would
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advise people to take their
subsidy money, if they call me,
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and go buy whatever insurance,
with their enhanced income, they
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think they most prefer. The sort
of mirror image that some people
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are talking about that could be
linked with the cash subsidy
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from lump sum subsidy is either
a health savings account or a
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much more limited coverage plan
that people might be able to buy
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as short term insurance. But
they could renew that year after
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year. That seems to be much less
expensive insurance in terms of
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its premium than even the bronze
plans. But again, you don't get
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something for nothing. That
limited coverage insurance is
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limited coverage, and it exposes
you to a fair amount of out of
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pocket risk if you get really
sick.
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What do you think, then, has
been the role that the ACA has
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played in our healthcare system
over the last several years?
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Well, I think the main positive
one, of course, is dramatic drop
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in the fraction of the
population that's uninsured.
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Most of that drop occurred in
the first round of the ACA. The
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enhanced subsidies pushed the
percentage uninsured down a
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couple or three percentage
points more to an all time
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low. But we're getting into the
range of diminishing returns,
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where there are what I call the
Evil Knievels of health
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insurance, people who think that
they will never get sick and
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won't buy insurance unless you
make them buy it. And even if
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it's free, you have to make them
sign up for it. But so— but—
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but— so that's, I mean, putting
in a plug here. That's why
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I favor a mandate that says, if
you don't buy insurance, we're
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going to buy some insurance,
some bare bones insurance for
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you. And if you want, you can—
you will have to pay something
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for that, but it's— so it'd be
like a tax. But— and then if you
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want, you can top up that
coverage. But that idea of
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pairing a health savings account
or a deposit type of subsidy
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with less generous, more
catastrophic coverage, it's an
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old idea, actually an old
Republican idea. It's been
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around for a long time. That
seems to be what the President
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has in mind, although we don't
know what the President really
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has in mind.
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Nor does he always.
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No, that's true. Yes. Mark,
great to talk to you. Thanks
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very much for your time today.
All the best.
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All right, thanks, Dan.
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You got it. Mark Pauly, who
is a Professor Emeritus of
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Healthcare Management here at
the Wharton School.
