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September 21, 2017

The ACA could be repealed next week. Here's what you need to know.

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Senate Majority Leader Mitch McConnell's (R-Ky.) office on Wednesday announced that the Senate intends to vote next week on a GOP bill (HR 1628) to repeal and replace major parts of the Affordable Care Act (ACA) and overhaul Medicaid.

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A McConnell spokesperson said, "It is the leader's intention to consider Graham/Cassidy on the floor next week." However, the Senate would be doing so without a full score from the Congressional Budget Office (CBO). CBO on Monday said it will provide lawmakers with some basic budgetary estimates, but it will not be able to project how the bill would affect the uninsured rate or premiums before the Sept. 30 deadline to pass the bill under current budget reconciliation instructions.

Without a CBO score it is difficult to know how the bill, which would overhaul the Medicaid program and restructure the ACA's cost-sharing payments, would affect the uninsured rate, premium rates, and  market stability. Several analysts, including those from Avalere and the Center on Budget and Policy Priorities (CBPP), have offered their own estimates of the bill's effects.

What Graham-Cassidy would do

Repeal the ACA's coverage mandates

The Graham-Cassidy bill would repeal the ACA's individual and employer mandates retroactively to 2016, as well as the law's taxes on non-qualified spending from health savings accounts (HSAs), medical devices, and over-the-counter medications.

Unlike past GOP bills, it does not replace the individual mandate with a different incentive to encourage younger, healthier individuals to enroll in coverage. Several analysts have said repealing the ACA's individual mandate without a comparable alternative could destabilize the individual insurance market and raise premiums because healthier people would have no incentive to purchase a health plan, Vox reports.

Loosen ACA protections for individuals with pre-existing conditions

Further, the bill would allow states to waive the ACA's health status and age underwriting protections, as well as the law's essential health benefits.

While the bill does include language prohibiting states from waiving the ACA's requirement that insurers offer coverage to individuals with pre-existing medical conditions, several analysts say those with pre-existing conditions could face higher premiums or reductions in coverage access in states that waive the ACA's health status and age underwriting protections or its essential health benefits. According to CBPP, "States seeking waivers would only have to explain how they intend to maintain access to coverage for people with pre-existing conditions, but they wouldn't have to prove that their waivers would actually do so."

Further, the New York Times reports waiving the law's essential health benefits could weaken the ACA's rules barring insurers from setting annual and lifetime limits on coverage.

Avalere also noted that CBO previously estimated similar waivers "would lead to lower average premiums," but would "substantially increase costs of those individuals with significant medical costs and those who would be at risk of medical underwriting"

Turn traditional Medicaid into a per capita cap program, beginning in 2020

Like the Senate's Better Care Reconciliation Act, the Cassidy-Graham bill would reform the traditional Medicaid program by shifting Medicaid's current funding structure, in which the federal government matches the money states spend on Medicaid enrollees, to a per capita cap system.

Under the bill, the per capita cap for children and non-elderly, nondisabled adults would initially increase with CPI-M, a measure of inflation in the cost of medical care, but beginning in 2025, the bill would tie spending growth for that population to CPI-U, the lower growth rate of inflation for all goods.

For elderly and disabled populations, per capita caps would initially increase with CPI-M plus 1 percent, but beginning in 2025, the bill would tie spending growth for that population to CPI-M.

Previous Congressional Budget Scores have shown such changes would significantly reduce the amount of federal funding states receive for their Medicaid programs each year.

Repeal the ACA's Medicaid expansion and put in place new state block grants for federal health care funding

The largest impact of the bill, according to Elizabeth Carpenter, senior vice president at Avalere Health, "would be the reallocation of federal dollars between states."

The Graham-Cassidy bill would effectively bar any new states from expanding their Medicaid programs under the ACA. For 2018 and 2019, it would set the Medicaid expansion match rate to 90 percent; then, it would eliminate the expansion entirely in 2020, when all states would begin to receive block grants that they could use to support low-income individuals not eligible for traditional Medicaid in gaining coverage.

The state block grants would be funded by federal money currently being spent on the ACA's Medicaid expansion, premium tax credits, and cost-sharing reduction payments to insurers. The amount of funding each state would receive would be based on a formula that takes into account several factors, including the federal funding states currently receive for Medicaid expansion and cost-sharing under the ACA, as well as the state's total number of eligible beneficiaries with annual incomes between 50 and 138 percent of FPL. 

According to a FAQ, the bill aims to achieve parity in federal Medicaid spending by 2026 when "at base rate, every state will be receiving the same amount of money for each beneficiary in the 50 and 138 percent FPL range." But to achieve that parity, states that expanded Medicaid under the ACA, as well as those that have enrolled a high number of people in the individual market, are likely to see the biggest funding cuts.

Compared with current law, Avalere estimated that by 2026, 34 states and the District of Columbia would see their federal funding cut, including 7 states that would face cuts of more than $10 billion, while 16 states would see funding increases ranging from less than $1 billion to $35 billion.

For example, from 2020 to 2026:

  • California, which expanded its Medicaid program under the ACA, would see a reduction in federal funds of $78 billion;
  • New York would see a $45 billion cut;
  • Oregon would experience a $13 billion cut.

Even states that did not expand their Medicaid programs would see cuts. For example, Florida, which according to Vox has worked to enroll more residents in the individual market, would see federal funding cut by $4 billion, according to the analysis.

Overall, Avalere found the block grant formula would reduce federal funding by $215 billion through 2026, compared with current law. CBPP analysts separately have estimated that the formula would "provide $243 billion less between 2020 and 2026 than projected federal spending for the Medicaid expansion and marketplace subsidies under current law."

What's more, experts say the bill gives states broad flexibility on how they spend the funding and does not mandate the funding go toward providing coverage, Vox reports. For instance, the bill suggests states could create high-risk or reinsurance pools to help "high-risk individuals" purchase coverage, assist individuals with out-of-pocket costs, partner with insurers to create managed care plans, or "pay providers for the provision of health care services."

Edwin Park, a policy analyst at the Center on Budget and Policy Priorities, said the law's language allows states to "spend the money on a whole host of other services that have nothing to do with expanding insurance coverage." He said, "A state could say, 'I'm going to take all this money to pay doctors for uncompensated care and not provide any health coverage.'"

Kaiser Family Foundation SVP Larry Levitt in a tweet wrote that flexibility would create a great amount of uncertainty because each state "would have to create a new health insurance program by 2020," and those programs could vary widely.

Further, under the bill, the block grant funding is guaranteed only from 2020 to 2026, meaning without congressional action federal funding for the state block grants would expire, the Times reports.

As a result Avalere estimated that in 2027, 39 states and the District of Columbia would see their federal funding cut, including 18 states that would face cuts of more than $10 billion, and 11 states would see funding increases.

Analysts say number of uninsured would rise

While Avalere's analysis did not look at the bill's effect on the uninsured rate, several analysts have offered projections on the topic. 

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For instance, the Center for American Progress estimated that, by 2026, 30 million more Americans would be uninsured under the bill, compared with current law.

The Commonwealth Fund's Sara Collins in a post Wednesday said the bill likely "would lead to a loss of health insurance for at least 32 million people after 2026," citing CBO projections of the effects of similar legislation.

CBPP analysts, also citing previous CBO projections, said after 2026 the bill likely would result in even larger coverage losses "because it would not only entirely eliminate its block grant funding—effectively repealing the ACA's major coverage expansions—but also make increasingly severe federal funding cuts to the rest of the Medicaid program (outside of the expansion) under its per capita cap."

Meanwhile, Lanhee Chen, a professor at Stanford's conservative Hoover Institution, said, "I tend to think that the Graham-Cassidy proposal holds a lot of promise to expand coverage down the road," citing the bill's increased state flexibility (Everett/MinKim, Politico, 9/20; Kliff, Vox, 9/20; Cornwell/Heavey, Reuters, 9/20; Park/Sanger-Katz, New York Times, 9/18; Leibenluft et al., Center for Budget Policy Priorities report, 9/20).

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