GOOD NEWS! Speaker Pelosi onboard with #KillTheCliff (or at least raising the subsidy cap, anyway)

For years now, I (and many other healthcare wonks) have been arguing that one of the most important fixes/improvements that the ACA needs regardless of the Next Big Thing® is to #KillTheCliff...that is, to eliminate the infamous "subsidy cliff" which hits those who earn just over the 400% Federal Poverty Level income cap for Advance Premium Tax Credit (APTC) assistance.

Once again: Under the ACA, if you earn between 100-400% FPL (between $12,140 and $48,560 for a single person), you're eligible for APTC assistance on a sliding scale. The formula is based on the premium for the Silver "benchmark" plan available in your area, which averages around $611/month in 2019.

Here's how the formula works under the current ACA wording:

Right now, a single adult/no kids earning $25,000 (206% FPL) will only have to pay around 6.6% of their income (around $1,650) in premiums for the benchmark Silver plan.

If that plan costs $611/month at full price ($7,332/year), they'll receive around $5,682 in subsidies for the year, or $474/month, which they can apply to any Bronze, Silver, Gold or Platinum ACA exchange plan.

If they earn $40,000/year (329% FPL), they'll have to pay 9.86% of their income ($3,956), which means they'd receive $3,376 in subsidies or $281/month.

Here's the problem: If they earn exactly 400% FPL ($48,560), they'll also only have to pay 9.86% ($4,802), receiving $2,530 in subsidies for the year....

...HOWEVER, if they earn even one dollar more than 400% FPL, they don't qualify for ANY subsidies at all and have to pay full price. Going from $48,560 to $48,561...a one dollar income increase...just cost them over $2,500 in subsidies.

This also means that instead of paying 9.86% of their income for a Silver plan, they have to pay 15.1%. And again, that assumes the average premium. If they're older (say, 60+), they might have to pay twice as much as that or more...potentially over 30% of their income. Ouch.

THIS, above all else, is one of the sources of the loudest and angriest complaints about the ACA (with those caught at the opposite end of the formula, the Medicaid Gap population, being the other major source): Middle-class people who earn too much to qualify for any financial assistance but too little to be able to easily afford the cost.

The simplest solution to this problem would be to simply remove the 400% FPL subsidy cap so that no one has to pay more than 9.86% of their income for a Silver plan. Yes, the subsidies themselves should also be beefed up, and there are plenty of other fixes/improvements which are needed as well, but this single change would dramatically improve the ACA for millions of people.

As it happens, last summer, Senators Feinstein, Leahy, Warren, Baldwin, Harris and Hassan all co-sponsored a very simple bill to do exactly that.

Needless to say, it went nowhere.

Today, I'm happy to report that Speaker of the House Nancy Pelosi, in an MSNBC interview Friday night, stated point blank that one of the most important things she intends to push through the House this term is raising the subsidy income threshold (via Bruce Japsen of Forbes):

More Americans will become eligible for subsidies to buy individual coverage under the Affordable Care Act if Nancy Pelosi gets her way.

The new Speaker of the U.S. House of Representatives said this weekend she wants changes in the income threshold to allow more Americans to gain subsidies so they can buy individual coverage known as Obamacare. Helping more people get subsides are among the "couple of things" she would like to do to improve the ACA and expand health coverage to more Americans, Pelosi, a California Democrat, told MSNBC Friday night.

“Raise the income level at which people can get subsidies so more people would be able to get the subsidies,” Pelosi told MSNBC’s Joy Reid in an exclusive interview that aired Friday night and this past weekend. “I think that’s very, very important.”

...Exactly what the income threshold would be raised to is unclear. Pelosi didn’t disclose further details in her MSNBC interview. Hearings, though, are expected on the ACA in several Congressional committees.

Now, raising the threshold isn't as good as removing it altogether, but it'd still be a hell of a lot better than keeping it where it is now. The current $611 average benchmark premium is over 9.86% of a single person's income up until around $74,000, or 610% FPL (the amount varies depending on the number of people in the household), so I could see bumping the ceiling up from 400% to, say, 600% FPL as being most likely. This would still leave some people high and dry, but it would resolve the premium problem for millions of others.

The cap should really be done away with altogether, since the subsidies would still taper off eventually, but I sort of understand the desire to keep some maximum threshold on them. The problem with removing the cap altogether is more about the optics--you'd have people (falsely) claiming that "Bill Gates and Warren Buffet would get subsidies!" which wouldn't be true but would be easy to lie about since there'd be "no income cap whatsoever!"

Anyway, kudos to Pelosi for making it clear that at least partly solving the single biggest problem with the ACA is on her agenda.

AS AN ASIDE, I was also a bit shocked to hear the other major ACA agenda item that Pelosi mentions just before she talks about raising the subsidy cap (right around 2:00 minutes in):

"In their tax scam bill that the Republicans passed, they took away the individual mandate, which was very dangerous in terms of the Affordable Care Act...so we would have to replace that."

I should note that she doesn't say we'd have to restore the mandate penalty, she says we'd have to replace it, which could just be a semantic quibble but could also mean rethinking the mandate penalty (perhaps with something like the "down payment" bill being considered by the Maryland state legislature?)

Still, I'm honestly pleasantly surprised that Pelosi is openly talking about bringing back any type of "red leg" incentive to get people to enroll--I'd pretty much accepted that this would only be feasible at the state level these days, as Massachusetts, DC and New Jersey have done. I figured even an emboldened Democratic Caucus would never be willing to consider the mandate penalty battle again after it caused them so much grief the first time around, but it sounds like Pelosi is in a fighting mood, so good for her!