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March 7, 2017

Here's the House GOP plan to repeal, replace the ACA

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House Republicans on Monday unveiled legislation that would repeal and replace the Affordable Care Act (ACA).

The legislation, called the American Health Care Act, was developed in conjunction with the White House and Senate Republicans. According to the Associated Press, the Congressional Budget Office has not yet scored the bill or provided coverage estimates, but the bill is expected to cover fewer people than the ACA.

The House Ways and Means Committee and the Energy and Commerce Committee are scheduled to take up the legislation on Wednesday with the aim of approving the measure this week, allowing the full House to act on it before lawmakers begin their spring recess on April 7, the New York Times reports. However, several House Republicans have spoken out against the bill and, according to the Times, the bill could face obstacles in the Senate, where "a handful of Republican senators expressed serious concerns about the House plan." Democratic lawmakers also swiftly condemned the bill, with one House Democratic leader labeling the plan the "Make America Sick Again" bill.

Legislation details

Bill would end individual and employer mandates, but would allow insurers to charge more if individuals' coverage lapses

The GOP's bill would eliminate the ACA's individual and employer mandates as of last year. As a result, individuals who did not have coverage in 2016 would not have to pay the tax penalty that would otherwise be required under the individual mandate.

In place of the individual mandate, which encouraged individuals to participate in insurance risk pools by assessing a penalty on those who went without coverage, the law would instead nudge individuals to purchase insurance by allowing insurers to raise individuals' insurance premiums by 30 percent for a year if they have gone 63 days or more without coverage.

The bill also would replace the ACA's income-based premium subsidies, which help individuals purchase coverage on the law's insurance exchanges, with refundable tax credits. The tax credits could not be used by individuals who purchase plans that cover elective abortion services.

The tax credits would range from $2,000 annually for people under 30 to $4,000 for people over age 59.  While previous versions of the bill would have based tax credits solely on a person's age, the new bill also takes into account income: Individuals with annual incomes over $75,000 would have their tax credit reduced by $100 for each $1,000 in additional income. A similar phase-out would apply to married couples with incomes over $150,000.

Additional changes to the individual market

The bill would keep three of the ACA's more popular provisions:

  • Allowing young adults to stay on their parents' plans until age 26;
  • Barring insurers from denying coverage to people with pre-existing conditions; and
  • Barring insurers from imposing lifetime coverage caps.

The bill would allow insurers to charge older beneficiaries up to five times as much as younger individuals. The ACA restricts the premiums for older individuals to three times the cost of younger enrollees.

Further, the bill would:

  • Eliminate a provision that would indefinitely allow "grandmothered" plans that do not meet the ACA's coverage requirements to remain on the market;
  • Eliminate the ACA's cost-sharing reductions insurers received to reduce cost-sharing for low-income enrollees; and
  • Increase the amount of pre-tax money people could set aside in HSAs.

The bill also would create a "Patient and State Stability Fund" to provide states with grants to pursue cost-controlling measures, such as creating high-risk pools or establishing state-based cost-sharing reductions. The fund will allocate $15 billion for 2018 and 2019, after which it will allocate $10 billion annually through 2026.

Extension of ACA's Medicaid expansion

While draft versions of the bill would have ended the ACA's Medicaid expansions, the new bill would maintain the ACA's Medicaid expansion—and the law's increase in the federal government's share of funding for Medicaid expansion beneficiaries—through Jan. 1, 2020, meaning states that have not yet expanded their programs could do so until 2020, Vox reports.

After 2020, states no longer would be able to enroll additional adults under the expansion, but those already enrolled could remain covered provided they do not become ineligible for the program for longer than one month. States that did not expand their Medicaid programs under the ACA would receive additional federal funding to increase payments to Medicaid providers, according to STAT News.

Further, in states that did not expand their Medicaid programs, the bill would immediately roll back the ACA's cuts to Disproportionate Share Hospital payments for hospitals that treat a disproportionate share of low-income and uninsured patients. States that did expand their Medicaid programs would see those hospital payment cuts reversed in 2020.

Shift in Medicaid to per capita allotment model

The bill also would overhaul the way the federal government pays for Medicaid starting in 2020. Currently, states and the federal government split the cost of coverage for the traditional Medicaid population, with the federal share of reimbursements ranging from 50 percent to 74 percent depending on the state. However, there are no limits on how high those costs can grow.

The House GOP bill would shift Medicaid to a per capita model in which the federal government would provide states with capped payments based on the number of beneficiaries in their state, with states bearing the responsibility for any remaining costs. Funding, according to the Times, would vary by category of beneficiaries, such as for children, older Americans, and people with disabilities. Federal payments would rise according to a government measure of medical inflation, the Associated Press reports.

The bill also would roll back requirements on health benefits Medicaid plans must cover, such as requirements for providing funding for mental-health services at parity with other services.

Provisions related to Planned Parenthood, Prevention and Public Health Fund

The bill would halt federal funding for Planned Parenthood clinics for one year and in 2019 would eliminate unobligated funding for the Prevention and Public Health Fund, which helps CDC supplement public health funding and respond to emergencies.

Effects on taxes

The bill in 2018 would repeal many of the taxes levied under the ACA, including those on individuals with higher incomes, health insurance plans, investors, medical device companies, and tanning salons, which were used to help fund the coverage expansions.

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In a shift from previous draft versions, the bill does not include a provision to tax the 90th percentile of employer plans' premiums. The bill would, however, keep the ACA's Cadillac tax—which serves a similar purpose by collecting revenue on high-cost employer-sponsored plans—but delay the implementation of the tax from 2020 to 2024. The bill does not specify how it will be funded.

Democratic lawmakers condemn the bill

Several Democratic lawmakers have signaled they would not support the bill.

House Democratic leader Nancy Pelosi (Calif.) called the plan the GOP's "Make America Sick Again" bill, saying it would "enable insurers to once again charge more or deny coverage to millions of Americans with pre-existing conditions, abandoning those families who lapse in coverage for any reason at all."

Rep. Frank Pallone (D-N.J.), the ranking Democrat on the House Energy and Commerce Committee, and Rep. Richard Neal (D-Mass.), ranking Democrat on the House Ways and Means Committee, both signaled they would not support the bill. 

Republican lawmaker reaction suggests hurdles ahead

House GOP leaders and the White House praised the bill.

Republican House Speaker Paul Ryan (R-Wis.) in a statement said the bill will "drive down costs, encourage competition, and give every American access to quality, affordable health insurance," adding that it "protects young adults, patients with pre-existing conditions, and provides a stable transition so that no one has the rug pulled out from under them."

The White House also signaled its support in a letter from HHS Secretary Tom Price to Rep. Greg Walden (R-Ore.), chair of the House's health subcommittee. In the letter, Price wrote, "We look forward to working with you throughout the legislative process, making necessary technical and appropriate changes, and ensuring eventual arrival of this important bill on the president's desk."

However, several prominent Republican lawmakers raised concerns with the bill.

Rep. Mark Walker (N.C.), who heads the Republican Study Committee, said the new bill is a step in "the right direction," but said lawmakers on the Republican Study Committee "are carefully reviewing this legislation looking in three main areas of shared conservative concern: protection of the unborn, elimination of Obamacare's Medicaid expansion, and ensuring the tax credits are fiscally responsible."

Rep. Jim Jordan (Ohio)—a member of the conservative House Freedom Caucus, which consists of about 40 conservative lawmakers who recently have expressed reservations about leaked GOP health care proposals—reacted skeptically, calling the bill "Obamacare in a different format." Jordan also said that the bill's Medicaid expansion and tax credits are hang ups for conservatives, and added that he is concerned that the bill maintains some of the ACA's tax increases.

Sen. Rand Paul (R-Ky.) also expressed reservations on Tuesday during an interview on "Fox and Friends." Paul said the bill would not work. He said, "I think it'll be a real mistake to go for this," adding, "It won't pass, and conservatives won't take it."

Senate Finance Committee Chairman Orrin Hatch (R-Utah) also suggested that the bill could undergo changes in his chamber. Concerns expressed by Republican senators are significant because of the GOP's slim majority in the Senate, which allows them to lose only three votes from their own party unless they pick up Democratic support, The Atlantic reports.

Reaction from advocates, industry, experts

The bill, according to Vox, also is being met with some resistance by industry observers, including some of those who have critiqued the ACA.

For instance, Avik Roy, the co-founder of the Foundation for Research on Equal Opportunity, said that while he supports the proposed Medicaid reforms, those changes "are overshadowed by the bill's stubborn desire to make health insurance unaffordable for millions of Americans, and trap millions more in poverty." Particularly, Roy took aim at the non-means tested tax credits, which he said "will price many poor and vulnerable people out of the health insurance market."

Bob Laszewski, a health care industry consultant, said the House GOP proposal "is worse" than the ACA. Laszewski said Republicans' "paltry 12-month 30% premium surcharge" to encourage people to stay insured would not work and that the proposed tax credits will not help low-income individuals purchase affordable coverage, saying, "What good will it do a person making $15,000 a year to get a premium credit only large enough to buy a plan with a $3,000 or $5,000 deductible?"

Others, such as Douglas Holtz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office, called GOP efforts to give states more authority a "sensible" approach.

Some experts raised concerns about the lack of details on how the law will be funded. For instance, Gail Wilensky, an economist who now is a senior fellow at Project HOPE, said, "I don't understand where the money comes from. I understand what they have taken away."

ACA advocates strongly criticized the bill. For instance, Ron Pollack, executive director of Families USA, said, "This bill would strip coverage from millions of people and drive up consumer costs. It shreds the Medicaid social safety net that serves more than 72 million people, including many children, senior citizens, and people with disabilities." He added, "And it once again leaves millions of people in America with chronic illness and disease at the mercy of insurance companies."

From the insurance industry, America's Health Insurance Plans said it is still "reviewing the bill."

Kathy Hempstead of the Robert Wood Johnson Foundation in an emailed statement said the House GOP bill seems to have "the potential to cost a lot but provide relatively few benefits."

(Berman, The Atlantic, 3/7; Fox, NBC News, 3/7; Pear/Kaplan, New York Times, 3/6; Alonso-Zaldivar/Fram, AP/Washington Times, 3/7; AP/Washington Times, 3/6; Scott, STAT News, 3/6; Newkirk, The Atlantic, 3/6; Kliff, Vox, 3/6; Goldstein et al., "PowerPost," Washington Post, 3/6; Hellman, The Hill, 3/7; Small, FierceHealthcare, 3/7; Klein, Vox, 3/7)

What to know about the House GOP's repeal and replace plan

House Republicans just released their proposal to repeal and replace portions of the Affordable Care Act. This session will provide participants with an overview of key aspects of the proposal, including a look at possible changes to the individual insurance market and Medicaid program.

In addition, we will provide our early analysis on the impact of the proposal on providers and thoughts on how providers should be preparing for changes to the ACA.

Register now

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