CHN: House GOP Moves Forward on Legislation to Repeal ACA and Dismantle Medicaid

March 13, 2017

On March 6, House Republican leaders unveiled legislation to repeal and replace the Affordable Care Act and dismantle Medicaid. The House Ways and Means Committee and the House Energy and Commerce Committee both took up relevant sections of the “American Health Care Act” on March 8 and passed these sections on March 9 on party-line votes after marathon sessions. On March 13, the Congressional Budget Office, the nonpartisan scorekeeper in Congress, estimated that 24 million more people would be uninsured in 2026 under the plan. Some of the key changes to the current law contained in the legislation are described below.

Health Insurance Exchanges: The subsidies that low-income people currently receive to help them buy insurance would be replaced with tax credits to be based on age that would phase out beginning at $75,000 for individuals. The credit would range from $2,000 for people under 30 to $4,000 for people 60 and older, but would not take into account the regional cost of the plan. According to the Kaiser Family Foundation, the House Republican plan would give consumers in the health insurance marketplace nationally an average of $1,700 less help with premiums in 2020, compared to the ACA’s premium tax credits. The losses would be larger for lower-income people, particularly those who are older and live in higher-cost areas. The Center on Budget and Policy Priorities (CBPP) found that consumers in 11 high-cost states would see their tax credits to purchase health coverage fall by more than $3,000 on average – more than 50 percent. This interactive KFF tool and this CBPP paper can be used to see how consumers in each state would fare. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated that average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law before 2020, but that by 2026 they would be roughly 10 percent lower.

The tax credits will only be available for the purchase of individual plans (not to subsidize the employee share of health insurance provided through work). Current requirements of minimum coverage would be overturned; individuals could limit their insurance to catastrophic coverage. Cost-sharing subsidies that help lower-income people reduce their out-of-pocket costs such as deductibles and copays would be eliminated in 2020. Although the new bill would end IRS penalties for people who do not purchase insurance, those who let their coverage lapse for 63 days would face new penalties instead paid to insurance companies to regain coverage. The CBO and JCT estimated that, in 2018 alone, “14 million more people would be uninsured under the legislation than under current law,”  with most of that increase stemming from the repeal of the individual mandate.

Tax Cuts for the Wealthy: While cutting coverage for low-income people, the House GOP legislation would repeal taxes on wealthy individuals and insurance and drug companies, as well as other fees that helped finance the ACA’s coverage expansions. The Joint Committee on Taxation estimates that the House bill’s tax cuts would cost about $600 billion over ten years. According to the Tax Policy Center, the wealthiest one-tenth of one percent of earners will gain on average more than $195,000 each. According to CBPP, millionaires would get tax cuts of more than $50,000 each, on average, in 2025, and the 400 highest-income taxpayers would get annual tax cuts averaging about $7 million each.

The GOP proposal would also greatly increase the amount that could be contributed to Health Savings Accounts (HSA’s), from $3,400 to $6,550 for individuals and from $6,750 to $13,100 for families, a change that would increase tax breaks to wealthier families. HSA’s are less effective for low-income families who don’t have as much money to save.

Medicaid: Among the biggest concerns to advocates is the plan’s dismantling of Medicaid, which serves 74 million Americans. The legislation calls for eliminating the open-ended federal commitment to match whatever states spend and instead instituting “per capita caps,” limiting the payments to states to a fixed per-person amount established for beneficiary categories such as aged, blind/disabled, children, or working age adults. A state could instead choose to receive its Medicaid money as a block grant. Either option would limit the amount of money available to states to serve their residents on Medicaid. Advocates believe both per capita caps and block grants would lead to damaging cuts to Medicaid. The Center for Law and Social Policy (CLASP), the Center on Budget and Policy Priorities and Families USA all have analyses showing how block grants and per capita caps would hurt low-income people and leave states with large additional burdens.

The House legislation would also effectively end the ACA’s Medicaid expansion. The legislation would repeal the enhanced federal matching rate for people who qualified for Medicaid under the ACA expansion at the end of 2019. According to CBPP, states that wanted to continue enrolling low-income adults in expanded Medicaid coverage after 2019 would have to pay 2.8 to 5 times their current-law cost for each new enrollee. The higher cost would apply both to enrollees who are new to Medicaid and to current enrollees who leave Medicaid for a month or more and then seek to return when they fall on hard times. Because most adult Medicaid enrollees use the program for relatively short spells, the higher cost would apply to the large majority of a state’s expansion program within just two or three years. CBPP estimates that these changes to Medicaid would require expansion states to increase their own spending on Medicaid by an estimated $370 billion over ten years, forcing states to end the expansion for low-income adults and cut coverage and services for other groups.

The CBO and JCT estimate “14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to current law.” The majority of the people who would lose insurance between 2018 and 2026 would do so in large part due to the Medicaid changes, “because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped.”

Other: The House GOP plan also immediately eliminates tax penalties on those who fail to buy or offer insurance. It would reinstate high risk pools, calling them “State Innovation Grants.” Funding provided to states for these grants could be used to reduce patient costs or to lower the cost of providing care to high utilization patients. Such funds could also fund preventive services, such as annual checkups that are now required in Affordable Care Act plans. The grants appear to allow subsidies to insurers or health providers. The purposes of the grants are broad enough to invite skepticism about their effectiveness in helping people with pre-existing and/or complex conditions to afford care. Overall, the CBO and JCT estimate that the legislation will reduce federal deficits by $337 billion over ten years, mostly through the elimination of the Medicaid expansion and the ACA’s subsidies that help lower-income people buy insurance.

Impact on low-income and vulnerable populations: Advocates believe the House GOP legislation would have a devastating impact on millions of low-income and vulnerable populations. They believe changes to the subsidies means millions would be priced out of the market or be forced to settle for inadequate coverage. They also believe the 11 million low-income Americans who were able to get health insurance through the Medicaid expansion would eventually lose that coverage if states are unable to assume large cost increases. As noted above, the CBO estimated that 14 million fewer people would be enrolled in Medicaid by 2026. AARP said in a letter, “We have serious concerns that the bill under consideration will dramatically increase health care costs for 50-64 year olds who purchase health care through an exchange,” saying changes in the bill would result in “an unaffordable age tax.” Families USA produced infographics to show how the House bill would increase the amount seniors and lower-income families spend out of pocket on healthcare costs. The Consortium for Citizens with Disabilities said, “Slashing federal support for Medicaid, which is already a lean program, will force states to cut services and eligibility that put the health and wellbeing of people with disabilities at significant risk.” Multiple hospitals and the American Medical Association came out in opposition to the bill. The CBO estimated that in 2026, 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.

Congressional reaction: Democrats on Capitol Hill were united in their opposition to the legislation, and several Republicans expressed concern as well. Many of the Republican senators whose states chose to expand Medicaid have expressed interest in keeping the additional funding their states received. In particular, four GOP senators – Rob Portman (PA), Shelley Moore Capito (WV), Cory Gardner (CO) and Lisa Murkowski (AK) – reportedly said they believe the House plan wouldn’t do enough to help low-income residents in states that expanded Medicaid. Some Republican governors from these states have reportedly started pushing back on major changes to Medicaid, too, since a cut in funding would force them to cut services for their residents.

Some members of the GOP’s ultra-conservative wing said the legislation doesn’t go far enough to repeal all of the ACA, and they objected to the tax credits because they continue the current law’s establishment of an entitlement to health coverage as well as their cost. Some GOP members want the tax credits to instead be a tax deduction, which would do little to help low-income people. Rep. Joe Barton (R-TX) offered (and then withdrew) an amendment in committee to freeze Medicaid expansion at the end of this year rather than at the end of 2019. The conservative House Freedom Caucus voted on Feb. 13 to oppose a repeal bill that does not go as far as the repeal bill Congress passed in 2015; it remains to be seen if they continue to hold this line. Eight House Republicans have indicated publicly they won’t vote for the current measure. Sens. Tom Cotton (R-AR) and Ted Cruz (R-TX) reportedly both said they didn’t think the legislation could pass the Senate as written. Several GOP members of Congress joined Democrats in objecting to the fact that the bill was being taken up in committees before the Congressional Budget Office released its analysis of the plan, including the cost estimate and the estimate of the number of people who will lose coverage.

Process: The House Budget Committee is expected to take up the legislation this week. The full House could vote on it as early as the week of March 20. If it passes the House, it will skip committee action in the Senate and go straight to the Senate floor, where amendments could be voted on in a marathon voting session known as vote-a-rama. The goal of some GOP leaders is to have the legislation clear both chambers by April 7 when Congress’s two-week Easter recess begins.

Advocates contend that members of Congress who vote to repeal the ACA with no plan in place to assure continued coverage, or a plan that reduces benefits or increases costs like the House GOP’s American Health Care Act does, are willing to put millions of people’s health and lives in peril. If all Democratic remain unified, the defection of three Republican senators would defeat specific ACA repeal/replacement plans. For more information on this latest GOP legislation, see this comparison piece from the Kaiser Family Foundation, this piece from Families USA, and CHN’s statement and blog post. For more information Republicans’ efforts to repeal and replace the Affordable Care Act, see the Feb. 21 Human Needs Report.



Categories: Affordable Care Act, Health, Health Care Reform, Medicaid