March 08, 2017

ACA Repeal and Medicaid Restructuring


ACA Repeal and Medicaid Restructuring

On Monday (3/6/2017) evening, House Republican leaders released their Affordable Care Act (ACA or "Obamacare") "repeal-and-replace" legislation, the American Health Care Act (Energy and Commerce Committee provisions).

The legislation is similar to the drafts that were leaked during the past couple weeks. Among other things, it would create per capita caps for Medicaid, and significantly change subsidies for the purchase of insurance. It would eliminate the employer mandate and the individual mandate to have health insurance coverage, but would allow higher premiums to be charged temporarily for individuals who did not have continuous coverage. The legislation would provide age- and income-based, refundable tax credits for the purchase of insurance plans for people up to a certain income level; "enhance and expand" Health Savings Accounts; allow the sale of insurance across state lines; and provide "State Innovation Grants," which states could use to make health care or insurance more affordable, including the creation of high-risk pools. Unlike earlier drafts, this bill would not cap the expenditures on health insurance that employers can deduct as businesses expenses. The bill would prohibit Medicaid payments to Planned Parenthood facilities.

Consumer protections; continuous coverage. According to official summaries of the legislation, it would retain the ACA's provisions that allow young adults to stay on their parents' insurance policies until age 26; prohibit annual and lifetime insurance coverage limits; and prohibit discrimination against individuals with pre-existing conditions. As noted above, the legislation would, however, allow insurers to temporarily charge higher premiums for individuals who have had not had continuous insurance coverage. This "continuous coverage" provision serves as a substitute for the ACA's mandate that everyone have insurance coverage; if there were no incentive for healthy people to purchase insurance, then the risk pool would have too many high users of health care, ultimately making insurance unaffordable.

Medicaid expansion. In 2020, the legislation would stop providing enhanced matching payments for the "expansion population." Until then, it would provide extra payments to states that did not expand Medicaid, so they are not disadvantaged when the per capita caps on federal Medicaid payments take effect in 2020.

Process. There are two parts of the legislation - one part that has been referred to the Energy and Commerce Committee, which has jurisdiction over Medicaid and many other aspects of the legislation, and one part that has been referred to the Ways and Means Committee, which has jurisdiction over the tax provisions. As of this writing (Monday evening), no subcommittee consideration of the bills is scheduled; the full committees are scheduled to take up ("mark up") their respective portions of the bill on Wednesday, March 8. Once the committees have approved the bills (which is expected), the Budget Committee will merge the two pieces and the bill will be ready for consideration by the full House. Speaker Ryan has indicated that he would like the House to act by the end of March.  The Senate may act prior to the next recess, which begins the second week of April. 

Some conservative House Members may oppose the bill because it would provide refundable tax credits (as opposed to a tax deduction ) to subsidize the purchase of insurance, meaning that individuals could receive a subsidy even if they do not have any tax liability. In the Senate, there are Members on both sides of the aisle who may oppose the legislation. More liberal Senators may object to the caps on Medicaid payments to states and the more conservative Senators may object to the fact that the bill does not completely repeal the ACA, premium subsidies and all.

Outlook.  Although it is not a sure thing, it is currently expected that the bill will pass the House, but it is not clear that it will pass the Senate.  All House Democrats are expected to oppose the legislation.  Some conservative House Members may also oppose it because it does not completely repeal the ACA or because it would provide refundable tax credits (as opposed to a tax deduction ) to subsidize the purchase of insurance, meaning that individuals could receive a subsidy even if they do not have any tax liability.  In the Senate, most Democrats likely will oppose the bill, although some who are from conservative states and are up for reelection in 2018 may decide to support it.  In addition, some Republicans on both ends of the spectrum may oppose the bill. The more moderate ones -- e.g., Senators Susan Collins (ME), Lisa Murkowski (AK), and Shelley Moore Capito (WV) -- may object to the amount of premium subsidies, caps on Medicaid payments to states, and/or the defunding of Planned Parenthood, among other things.  The more conservative Republican Senators - e.g., Senators Ted Cruz (TX), Rand Paul (KY), and Mike Lee (UT) -- may object to the fact that the bill does not completely repeal the ACA, premium subsidies and all. If all Senate Democrats vote against the bill, and only three Republicans oppose it, then the bill will fail in the Senate.  The ultimate outcome may depend on how involved the president gets in pushing Republicans to support it, and of course, on the feedback that Members get from their constituents.

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Many experts are in the process of analyzing the details of the bill; more information about its possible impact will be forthcoming.