Mark Barrett

mbarrett@citizen-times.com

ASHEVILLE – Federal spending to help lower- and middle-income wage earners buy health insurance would drop dramatically in North Carolina under the health care law winning approval in the U.S. House last week.

Only one other state would see a sharper per-person decline, according to one analysis.

The Republican-backed plan would also mean North Carolina would get an estimated $6 billion less in federal dollars to fund Medicaid, a figure that represents an almost 7 percent drop. Medicaid pays for care for children, the elderly and disabled people.

Supporters of the plan note that some businesses would be helped by changes in regulations and tax cuts and the nation stands to benefit from decreased pressure on the federal budget.

Higher wage earners – those making $152,400 a year or more – also would come out ahead.

And North Carolina would have more flexibility to direct the spending of federal dollars on Medicaid and other programs to provide health care, including an opening to re-establish a program that provided insurance to people with expensive medical conditions who otherwise would be unable to get coverage.

The American Health Care Act passed the House on a 217-213 vote on Thursday. Supporters and opponents differ over whether the law that would rewrite major portions of the Affordable Care Act, commonly called Obamacare, carries more benefit or harm for the state and nation.

But almost everyone agrees the AHCA would significantly reshape the way health care is delivered for hundreds of thousands – or millions – of North Carolinians.

That is, if the AHCA passes in something like its current form.

Several Republican senators have said they will take a different approach to revamping Obamacare, suggesting features of the House-approved AHCA could change dramatically before the Senate signs off on the legislation.

How much is anyone's guess.

The consensus in Washington is that the Senate will make big changes to the AHCA. However, 11th District U.S. Rep. Mark Meadows, R-Buncombe, indicated he was already consulting with some members of the Senate on the act’s prospects there before the bill passed the House.

Meadows was a key player in writing a compromise that secured House approval.

Jonathan Oberlander, a professor in social medicine and health policy at the UNC School of Medicine, says that won't be enough to bring many senators around.

The House plan "has zero chance of passing in the Senate in its current form," he said. "The Medicaid cuts are far too draconian."

Care for kids, elderly

By the numbers, Medicaid has at least as large an impact on North Carolinians as the Affordable Care Act and would also see big changes under the House proposal.

About 2 million people in North Carolina rely on Medicaid for their health care. That includes 42 percent of all children and 21 percent of senior citizens and the disabled. It generally does not cover people who are poor but do not fit into one of those three categories.

The AHCA would cut Medicaid nationally by $880 billion over 10 years, with $6 billion in cuts happening in North Carolina, according to the Center on Budget and Policy Priorities.

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North Carolina's share of the cuts is relatively small because it did not accept federal funds to expand Medicaid as many states did, said Brendan Riley, a health care analyst with the left-leaning N.C. Justice Center.

But losing an average of $600 million a year in federal funds for a program that cost $13.7 billion in fiscal year 2014-15 is still nothing to sneeze at, he said. Federal money accounts for about two-thirds of the program's cost and the state makes up the rest.

The state will have to either put more money into the program, cut benefits, tighten enrollment rules or cut payments the program makes to providers, Riley said.

"With this kind of federal cut ... North Carolina's going to be the one on the hook. It's really a shift," he said. "There's not really any fat in the Medicaid program."

The impact on providers is already causing concern. A stingier Medicaid program played a big role in Mission Health’s recent decision to stop delivering babies at its Angel Hospital in Franklin, system President and CEO Dr. Ron Paulus said.

A few years ago, North Carolina regularly experienced Medicaid budget overruns but has made changes so that it now has the lowest growth in Medicaid spending among the states, said Katherine Restrepo, a health care analyst with the conservative John Locke Foundation in Raleigh.

She said the AHCA would force North Carolina and other states to look more closely at how Medicaid works and make it run better.

"The value that patients get out of Medicaid is low," she said. "With the bloated health care system, the patient gets lost in the mix."

"The focus should be, yes, this is a critical safety net, but how can we make it more efficient?" she said.

Uncle Sam tightens up

The ways the House's AHCA would help people pay for insurance would have a huge impact on the roughly 500,000 North Carolinians who get federal assistance to buy health insurance today through the Affordable Care Act.

"They stand, in rural areas, to really get hit hard," Oberlander said.

The amount per person in federal help to buy insurance through the ACA that people in North Carolina would lose is the second-highest in the country, behind only Alaska, according to an analysis by the Center on Budget and Policy Priorities.

Tax credits the federal government gives North Carolinians enrolled in ACA insurance plans would fall by an average of $5,546 a year, the center says.

Many people who get insurance through the ACA would become uninsured because they could not afford premiums under the House plan, Oberlander said.

When they get sick, "They're going to be showing up at the emergency room," he said.

The Affordable Care Act bases payments on participants' income and the cost of insurance where they live. That results in more generous payments in North Carolina because insurance costs are higher here.

The AHCA would employ a different formula to distribute benefits that does not factor in insurance costs but would extend tax credits for buying insurance to many people who now make too much to qualify for federal help.

The changes would drastically increase costs for many people between 50 and 65, according to figures from the Kaiser Family Foundation.

For instance, the net cost of insurance for a 60-year-old making $30,000 a year in Buncombe County is $2,480 under current law but would jump to $18,360 under the AHCA.

But a 60-year-old making $100,000 a year would get a $1,500 tax credit under the AHCA as opposed to no direct assistance under Obamacare.

Supporters of the House plan say the opportunities it gives states to ease rules on what insurance must cover or to put people with high health care costs in a separate insurance pool will make health insurance more affordable.

"I believe the revised AHCA will substantially reduce health care premiums and provide a strong net of protection for the most vulnerable Americans," Meadows said after the bill passed the House.

Riley said paying less for insurance will mean people will get less.

He said if he took the same approach to transportation, "I could buy a golf cart instead of a car. Now, if I want to get out on the highway or drive in the rain, I've got problems."

The tax bite

The Affordable Care Act was financed in part by increases in taxes on investment income and payroll tax. Those increases would be repealed, along with taxes imposed on tanning beds and medical devices and the tax penalty paid by people who choose not to buy health insurance.

The result would be a tax cut of about $765 billion spread over 10 years, by one count. The requirement that large employers provide insurance for their workers would also go away.

Those changes would benefit the national and the North Carolina economies, although they and other cuts would not boost the growth rate in the national economy as much as President Donald Trump has projected, said Michael Walden, an economics professor at N.C. State University.

Benefits from the cuts would flow to people up and down the income scale, according to an analysis by the nonprofit Tax Policy Center, although the wealthy would benefit much more than middle- or low-income wage earners.

The center says 64.2 percent of the cuts would go to those with annual incomes greater than $152,400, and the average cut for that group would be $2,780 a year. The average cut for all taxpayers would be $600, but because wealthier taxpayers get such a large share of the proceeds, most Americans would see cuts of less than $390 a year.

The biggest reductions would go to those with the top 1 percent of income, and Walden said most of those people live in the Northeast, California or cities like Dallas and Houston.

However, some of that money would be invested and find its way to North Carolina, he said.

"Even if you're a wealthy person who has their taxes cut in New York City, the world is their investment oyster, if you will," Walden said.

Jumping into the high-risk pool?

Much attention in the debate over the House plan has focused on a provision to allow states to set up high-risk insurance pools to cover people with expensive medical conditions.

The theory is the government-subsidized pools would make insurance cheaper for everyone else because their insurer would not have to pay the cost of care for a baby born with a birth defect or a cancer victim.

About 35 states had such pools before the Affordable Care Act went into effect. Reviews of the results are mixed at best. Many observers say most pools were chronically underfunded, still had very high rates for insurance and left their customers with ruinous bills for care that insurance didn't cover.

It is unknown whether North Carolina would restart its high-risk pool, which began in 2009 and was phased out when the Affordable Care Act went into effect. It is debated how successful it was or how well one would operate in the future, or whether the AHCA would provide enough money to run the pools.

Restrepo said reviving the pools would be cost effective, even though she called their record nationwide "a mixed bag."

The pool covered 12,000 to 13,000 people at its peak and "was always a solvent plan,” said Louis Belo, former chief deputy insurance commissioner for North Carolina. Belo served on the board that governed the plan.

The law creating the pool said it could charge no more than double the average cost of insurance and Belo said the rate was usually 50 percent more than the typical North Carolinian paid.

"It made (insurance) a little more affordable. I won't say it was cheap," he said. Many states had difficulty funding their pools – no one expects them to break even – and Belo said the fact that North Carolina's had a dedicated stream of funding from a tax on all health insurance premiums helped keep it from losing money.

But the fact that the risk pool's books balanced doesn't mean that those who were covered could balance their household budgets, said Adam Searing, a former advocate for health care access in North Carolina. Searing is now a professor at Georgetown University's McCourt School of Public Policy.

The plan paid out a maximum benefit of $1 million over the lifetime of those covered and did not cover pre-existing conditions for the first 12 months someone was covered, Searing said. Some of those covered "could blow through a lifetime (benefit) cap in a year or two years."

"Probably some of the hardest conversations I ever had with people who needed health insurance ... (were) to explain to them that the high-risk pool was too expensive and it wasn't going to solve their problems," he said.

Establishing the pool was a positive step, but touting high-risk pools as a way to cover many people or dramatically lower health insurance costs for others is "a false hope," Searing said. "It helped a few people, but it was never the right answer."