ACA replacement bill would raise costs for health insurance for many Minnesotans and slash federal funding for health care

Republicans in the U.S. House of Representatives introduced a plan this week that would slash the federal commitment to affordable health care. We will continue to write about this plan – dubbed the American Health Care Act (AHCA) – as more details about this fast-moving legislation become available. You can also find out how to add your voice to the debate around this legislation here. For now, these are our top takeaways about what the AHCA would do.

  • Federal funding for health care through Medicaid would be drastically reduced and shift costs to the states. The AHCA would cut federal funding for Medicaid by $370 billion over ten years. That happens in two ways. First, the bill fundamentally changes the federal role in Medicaid, turning it into a capped funding source that doesn’t reflect the cost to provide care. Second, the bill includes a slow but final repeal of the Medicaid expansion that has played a critical role in raising health insurance coverage rates to historic highs. With such huge funding cuts, Minnesota will be faced with cutting other areas of the state budget or choosing from a menu of terrible options that are essentially different ways to ration health care for seniors, people with disabilities, children and other Minnesotans.

  • Federal health care funding would no longer respond to changes in the health care needs of Minnesotans. Right now, when Minnesota funds health insurance for our most vulnerable neighbors through Medicaid, the federal government matches that spending, making health care a shared responsibility. The AHCA would instead provide a fixed amount of funding per person, and that amount would not keep up with any new challenges faced by the state. If we face a public health crisis like the opioid epidemic, federal funding will not respond. As our population continues to grow relatively older, federal funding will not reflect Minnesotans’ increased health care needs.
  • The current income and affordability based premium assistance would be replaced with a poorly targeted, insufficient approach. Under the Affordable Care Act, a person can qualify for a tax credit to bring down the cost of their health insurance based on their income and typical costs for health insurance in their geographic area. Under the AHCA, people could qualify for a tax credit based primarily on their age; the tax credit is only based on income in that it gets smaller for those with incomes over $75,000. That means less assistance to many of those who struggle most to afford health insurance, and more assistance to those with higher incomes.
  • People in Greater Minnesota would likely be hardest hit by the changes in premium assistance, especially seniors and those with lower incomes. For example, the Kaiser Family Foundation estimates that in 2020, a 60-year-old in Rochester earning $40,000 would receive $8,590 less in premium assistance under the AHCA than under the Affordable Care Act. If the same person lived in Minneapolis, they’d lose $2,900 in tax credits. Meanwhile, a 27-year-old non-smoker in either area earning $75,000 would receive $2,000 more in assistance under the AHCA, despite facing much lower health care premiums.

Rather than building on the successes of the Affordable Care Act, the AHCA would leave most Minnesotans worse off. The bill would do nothing to address the problems Minnesotans are facing in the health care marketplace, and would eliminate many of the supports in place to bring down costs and expand access to health care. Federal policymakers should reject any Affordable Care Act replacement proposal that does not improve people’s ability to afford health insurance, or that shifts the responsibility for funding essential health care services to the states.

-Ben Horowitz

About Ben Horowitz

Ben Horowitz is the Minnesota Budget Project's policy advocate.
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