Affordable healthcare is vital to good health. NEJM says we are one of the “richest,” countries in the world with the largest uninsured population.
Why is health care becoming less affordable?
The cost to each American for healthcare is rising and becoming exceedingly unaffordable. The new 2025 Budget Reconciliation Act says the New England Journal of Medicine (NEJM) is predicted to increase the number of uninsured by 10 million people over the next ten years. The cuts target families who will or currently depend on Medicaid or the Marketplace Exchange (ACA or Affordable Care Act) for affordable healthcare coverage.
While most other developed nations have achieved universal or near universal health coverage to assure the health and wellness of its citizens, the U.S. relies on a mixed system of public or tax funded and private insurance leaving a significant portion without health insurance. In 2023, approximately 26 million Americans or 8 % of the population were uninsured.
This rate, while historically low still exceeds that of other democratic nations. The new budget changes are expected to shift the cost of healthcare from government dollars to the pockets of lower-income people by restricting their access (either directly or indirectly) to Medicaid and Marketplace programs. The purpose of this is to reduce government spending by $900 billion dollars over the next 10 years and to help balance the budget.
This coupled with the scheduled expiration of what’s called the “Premium Tax Credits,” by the end of 2025 and tightening up eligibility requirements will make health insurance too expensive or not available for many people. This may lead to fewer people able to afford preventative screening exams, like mammograms to test for breast cancer, or even avoiding critical emergency room visits for fear of receiving huge bills that they simply cannot pay.
In fact, the cuts may cost the hospitals and providers over $50 billion in lost revenues. This is especially important as many hospitals in America are operating on critically narrow margins particularly in rural and underserved communities that depends heavily on government-based insurance funding to stay afloat and without the additional revenue may be forced to close their doors. This would further limit access to critically needed emergency services in these areas.
What about the Marketplace (ACO) and Medicaid Plans staying affordable?
The New bill will make it harder to qualify and afford both Marketplace and Medicaid plans. It will limit who will qualify by imposing new restrictions. For example, Medicaid restrictions will be put in place including requirements for work reporting and re-enrollment every 6 months instead of annually along with new co-payments ($35) for certain services. In addition, state taxes to pay for Medicaid programs will be cut. They are currently “capped,” at 6 % and will drop to 3.5 % decreasing the funds available to treat patients.
ACO or Marketplace members will also be subject to stricter enrollment and verification requirements, automatic re-enrollment will be prohibited, and unless extended (as not directly addressed in the Budget Act), the premium tax credits will go away which allows for certain tax deductions for those with higher out of pocket premiums.
Premium tax credits are scheduled to expire at the end of this year. If Congress does not act by the end of 2025, premiums will go up significantly and several million people are expected to go uninsured and, in many states, there are relatively few options for alternative affordable health care coverage.
What are Premium Tax Credits?
Currently the majority of people with Marketplace plans are eligible for the premium tax credits. Tax credits make it possible for families not usually able to afford health insurance to be covered as the credits are intended for those who are 100 to 400 % above the Federal Poverty Level (FPL).
The “net,” premium tax credit or the amount that you actually owe is the difference between the amount paid on your monthly premium minus the amount paid by the government in the form of a rebate. The purpose of the tax credits is to lower the monthly payment or premiums charged by the private companies who offer Marketplace Exchange Plans. This reduces the out-of-pocket expense for families making healthcare affordable. It also caps the out-of-pocket premium costs to 8.5 % of your annual or yearly income.
Based on the premiums, enrollment in Marketplace plans has soared and in fact has more than doubled since 2021. It makes healthcare possible for 24 million people. This translates into more Americans being able to see their doctors, get preventative health care, have necessary surgeries, and get the medications they need.
Unfortunately, if the premium or extended tax credits expire at the end of this year, we can expect on average a 75 % increase in net premiums along with a 4 to 8 % increase in overall rates charged by the Marketplace insurance plans called the “gross,” premiums. This increase in cost will likely cause healthier people to drop out of the exchange (as cannot afford the cost any longer) and sicker people remain (as need health coverage the most) increasing the “risk,” pool of those covered leading to higher premiums to cover the higher cost of medical care.
The good news is that Congress is considering a “Buget Reconciliation Package,” that may have some provisions that offsets the rising premium costs however not enough to completely offset the lack of premium tax credits if expires at the end of 2025.
Any last advice on Medicaid and Marketplace (ACO) Plans?
In our nation’s quest to balance the budget (which is ideally a good goal) and save billions of healthcare or tax dollars it seems we are willing unless new changes are made or affordable options provided at risk for sacrificing the health of an estimated 10 million Americans.
The good news is that certain Medicaid programs will remain intact including programs that cover children, pregnant women with children, and our most “vulnerable,” people. In addition, the cuts will trickle in slowly over the next few years so their effects will be gradual with the exception of the premium tax credits slated to expire at the end of this year.
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