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Repealing and replacing Obamacare will take time

Republicans have been promising to repeal and replace Obamacare since the Affordable Care Act was passed in 2010. Overturning the law is also one of the top items on President-elect Donald Trump's to-do list.

But doing it without plunging the health system into chaos may be easier said than done. More than 20 million Americans now depend on the ACA for health insurance coverage either through subsidized exchange plans or by qualifying for expanded Medicaid, which covers low-income adults in more than two dozen states.

"The bottom line here is the Trump administration owns Obamacare for the next two years," said consultant Robert Laszewski, president of Health Policy and Strategy Associates. "They're going to have to implement it pretty much as it is, because the kind of replacement plan they're talking about is so significantly different, you can't just pull little pieces out of this."

"My sense is they would repeal the subsidies and the Medicaid expansion and make it effective at the end of 2019, and then in the interim come up with some kind of replacement for people who would otherwise lose the coverage," said Tom Barker, co-chair of law firm Foley Hoag's health-care practice, and former advisor to Health and Human Services Secretary Michael Leavitt during the Bush administration.


Replacement road map

House Speaker Paul Ryan's "A Better Way" health plan may offer a road map to how the new president and Republican-controlled Congress could go about replacing the Obama reforms.

The Ryan plan includes a number of Republican proposals endorsed by Trump, such as individual tax credits, health savings accounts and allowing insurance to be sold across state lines to increase competition.

"They have stressed that they want freedom of choice," said Dr. David Friend, managing director of consulting firm BDO's Center for Healthcare Excellence & Innovation. "As you know, (ACA) plans have been very structured as to what they offer and now there's a desire to change that to create more freedom of choice."

GOP reform trade-offs

Ryan's plan and other Republican proposals would eliminate some of the most unpopular measures in the ACA, while trying to maintain the measures that enjoy public support. Those changes would come with certain trade-offs.

They repeal the controversial individual mandate, which requires people to be insured or pay a fine, while keeping the ACA ban on insurers discriminating against those with pre-existing conditions — but only for those who maintain insurance coverage. Those who drop their insurance would not be protected by the exemption on pre-existing conditions.

They would drop ACA health-plan requirements to cover a wide array of preventive services, including annual check-ups, screenings and birth control, which critics say make plans too expensive. Instead, the Republican proposals would allow insurers to sell cheaper, more basic plans. The insurers would also be able to charge older sicker, patients more.

"It's really sort of six of one, half a dozen of the other," explained Laszewski. "They'll accomplish some of the same things, providing incentives for more efficient plans."

Tax caps and credits

Republicans would also eliminate the so-called Cadillac excise tax on expensive employer health plans. Obamacare proponents saw this as a way to encourage employers to hold down health-plan costs. Instead, the Republicans want to cap how much of a tax exemption companies can deduct for those plans.

"You needed $87 billion — or that's what the CBO projected that you'd have from the Cadillac tax to pay for many of the provisions in the health-care plan. Now with congressman Ryan's plan, it is essentially a way of reducing the tax level and getting more revenue," said Tim Prichard, head of the employee benefits practice at Wells Fargo Insurance.

The open-ended tax exclusion for employer health plans is one of the largest health-care expenditures in the federal budget, costing more than $250 billion in fiscal 2016, according to the Congressional Budget Office. The Obamacare exchange plan tax credits are estimated to have cost about $40 billion in fiscal 2016.

The Tea Party holds an Exempt America from Obamacare rally on Capitol Hill in Washington.
Brooks Kraft LLC | Corbis| Getty Images
The Tea Party holds an Exempt America from Obamacare rally on Capitol Hill in Washington.

President George W. Bush proposed a similar cap on the exemption for employer-sponsored plans in 2008, but the plan failed to gain support.

"The thinking was that eliminating the open-ended exclusion and replacing it with a capped deduction ... would create competition and lower costs overall," said Foley Hoag's Barker.

As for individual Obamacare exchange plan subsidies, Republicans would replace those, as well. A plan introduced by Rep. Tom Price of Georgia, who is said to be under consideration for HHS secretary, would replace the current subsidies tied to premium prices with a flat-tax credit that would range from $1,300 to $3,000 depending on your age.

Laszewski said the GOP would do well to tread carefully and take note of the difficulty the Obama administration had launching Obamacare in 2014, even with a four-year transition after the law was passed.

"Health care is just really big and it's complex. You change one thing here, somebody loses there. And they're going to change a lot of things," he said. "It is about a hundred thousand times easier to screw it up than get it right."