On March 6th, 2017, both the House Energy and Commerce Committee and the House Ways and Committee released draft legislation, the “American Health Care Act,” to repeal and replace the ACA. Each Committee then held very lengthy and extremely contentious “mark-up” meetings to debate and make changes (or “mark-up”) the drafts before passing them out of committee. Next week, the House Budget Committee will combine the bills into one House bill. However, more changes are anticipated before the combined package gets to the House floor by the anticipated goal of the end of March.
ACG is in the process of gauging the impact of the proposal on GI practices and patients, given the information that is publicly available. The Congressional Budget Office (CBO) has yet to release the official estimates of the costs/savings to the federal government, as well as the estimated impact on insurance enrollees.
The current plan preserves the cost-sharing and other protections for preventive services, such as colorectal cancer screening, as well as protection for those with pre-existing conditions. Medicare services are also not impacted by the proposed legislation. However, defined essential health benefits and preventive services in Medicaid are affected, as the bill gives states the flexibility to forgo covering essential health benefits and a full range of preventive services.
What’s in the plan?
Mandates: The House Republican plan eliminates the individual mandate, which means that people would not have to pay a penalty if they went without insurance, and instead proposes a “continuous coverage incentive,” which would charge those in the individual market a 30% penalty for lapses in health insurance coverage. The plan also eliminates the requirements for large employers to provide insurance to their employees or face financial penalties.
Subsidies for purchasing insurance: The ACA currently provides tax credits an income-based sliding scale, to help offset the cost of premiums and deductibles. The House Republican plan uses age, then income, as a way to calculate subsidies. The annual amount of the credit is age-adjusted as follows: under age 30, $2,000; age 30-39, $2,500; age 40-49, $3,000; age 50-59, $3,500; and over age 60, $4,000. The tax credit is additive with respect to the five oldest individuals, and is capped at $14,000. The credit is fully available to individuals with an income up to $75,000 per year ($150,000 for joint filers). Married couples are required to file joint returns to determine eligibility. The credit amount is reduced by 10% of the amount above the income threshold until it is phased out to zero (e.g., $100 reduction for every $1,000 above the income threshold). This would start January 2020.
Insurance mandates: The ACA requires insurers to cover preventive services and defined essential health benefits. The ACA also waives cost-sharing for certain preventive services in Medicare, such as colorectal cancer screening (although not polyp removal). The ACA also requires insurers to cover those with pre-existing conditions, as well as dependents up to age 26.
Under the ACA, plans can currently charge their oldest customers 3x the prices charged to the youngest ones. The House Republican plan allows insurers to charge older customers 5x as much.
The Republican bill expands the health plans that qualify for subsidies. The legislation does not change essential health benefit requirements, or patient cost-sharing. The legislation also does not change the pre-existing condition requirements, or age of dependents remaining on a health plan. Many Republicans also support these services, or at least do not want to change these provisions out of political safety. Republicans are also limited to what they can pass in the bill due to House and Senate budgetary procedural rules. Republicans are using the budget reconciliation process in hopes of quickly passing legislation through Congress by a simple majority in the Senate. However, the reconciliation process is subject to the “Byrd rule.” Under the Byrd rule, the Senate is prohibited from considering extraneous matter as part of a reconciliation budget or resolution and conference reports. The definition of what constitutes as “extraneous matter” is set forth in the Budget Act. However, this is subject to considerable interpretation by the presiding officer (who relies on the Senate Parliamentarian). The Byrd rule is enforced when a Senator raises a point of order during the consideration of a reconciliation bill. If the point of order is sustained, the offending title, provision or amendment is deemed stricken, unless its proponent can muster a 3/5 (60) Senate majority vote to waive the rule.
Medicaid: The Republican plan makes many changes to Medicaid, and these changes have stimulated the most consternation, among both Democrats and Republicans. ACG is concerned that the plan repeals the current requirement that Medicaid plans must provide the same essential health benefits package that health plans offered through the commercial exchange. It is unclear at this time how this provision can be included in any budget reconciliation package.
The plan also changes Medicaid expansion rules, providing that states have the option through Dec. 31, 2019, to expand Medicaid eligibility, but not thereafter. The bill also changes the federal medical assistance percentage (or FMAP) for states choosing to expand Medicaid coverage on or after Jan. 1, 2020. However, the plan maintains the increased FMAP under the ACA for individuals who were enrolled on or before Dec. 31, 2019 and who do not have a break in eligibility for medical assistance for more than one month after Jan. 1, 2020.
Among the most contentious proposed changes to Medicaid is the “block grant” reform. The plan reforms the Medicaid program to establish a “per capita cap” model, starting in FY 2020. The base year would be set to FY 2016 for establishing a state’s targeted spending for each of the following categories of enrollees: elderly, blind and disabled, children, expansion adults, and other nonelderly, nondisabled, non-expansion adults. The targeted spending amount would increase annually by the percentage increase in the medical care component of the consumer price index for all urban consumers (CPI-U) from Sept. 2019 to Sept. of the applicable year. If any state were to exceed its targeted aggregate amount for a given fiscal year, that state would be subject to reductions in federal Medicaid funding for the following fiscal year.
What’s ACG watching?
ACG is monitoring the challenge of getting a bill palatable for conservative House Republicans, but also striking a balance to maintain support among Senate Republicans. Many House Republicans have criticized the plan, saying that the Medicaid changes do not go far enough, and the tax credits in the plan are essentially a new entitlement.
The Medicaid tug of war. The House Republican leadership may include changes to win over House conservatives who have balked at the Medicaid provisions in the bill. These changes may end Medicaid expansion enrollment under the enhanced federal match rate two years earlier than under the proposed plan. However, U.S. Senators Rob Portman (R-OH), Shelley Moore Capito (R-WV), Cory Gardner (R-CO), and Lisa Murkowski (R-AK) believe the House plan does not go far enough to help low-income residents in states that have expanded Medicaid. While a simple majority is needed for passage of a reconciliation bill in the Senate, Republicans only have a 52-48 advantage. Thus, every vote matters in this delicate process. Vice President Pence would serve as any potential tie-breaker.
Tax deductions vs. Tax Credits. While many House conservatives have previously voted for ACA repeal packages that included federal tax credits as a replacement strategy, some are now balking at this idea, and prefer tax deductions. Deductions reduce the amount of income subject to tax. For example, someone with $50,000 in income who pays a single flat-tax rate of 20% would owe $10,000. A $5,000 deduction would reduce the taxable income to $45,000, and lower the tax bill to $9,000. The value of deductions depends on the person’s tax rate. The value of credits doesn’t vary by tax rate. House Republican leadership prefer tax credits, because more than 40% of U.S. households don’t pay federal income taxes. Thus, the people who need the most assistance in paying for health insurance are typically the ones who don’t earn enough money to owe income taxes. Advanceable credits are paid before tax-filing time, meaning that taxpayers shopping for health insurance don’t have to wait until taxes are due in April of the following year to get government assistance. According to proponents of the bill, Americans can file any time during the year, and the government will pay the tax credit directly to the insurance company. Proponents also counter the tax deduction argument by noting that the tax credit subsidies in the House plan are based on income, age and family size– information that the Internal Revenue Service either already has or can easily obtain. Doing this without tax credits, however, would first require setting up a system to collect and verify the accuracy of all of this information.
Other House Republicans. According to a CQ Roll Call article, 11 House Republicans will be expected by party leadership and the White House to support the Republican plan. However, they represent districts where at least 6% of their constituents are enrolled in ACA insurance exchanges. The vast majority of these 11 members are in Florida, which, according to CQ Roll Call, had one of the highest uninsured rates of any state in the country before the ACA went into effect. This is important because the Republican majority in the House may be tighter than it appears. According the U.S. House of Representatives Press Gallery, House Republicans hold a 237-193 majority. So you can see why Speaker Ryan is looking to keep the conservative wing of the party happy. Yet, alienating these other House Republicans could threaten passage as well. Ironically, 4 Republican seats that would have helped pad this majority are currently vacant, because they belonged to individuals who joined the Trump Administration, including Dr. Tom Price (new HHS Secretary). Others include Mike Pompeo (CIA Director), Mick Mulvaney (OMB Director), and Ryan Zinke (Interior Secretary).