WASHINGTON ― A draft version of a House Republican bill to repeal and “replace” the Affordable Care Act shows how the move would weaken or eliminate coverage for an untold number of people on Medicaid and private health insurance.
House Republicans, led by Speaker Paul Ryan (R-Wis.), appear to be putting the finishing touches on the legislative vehicle with which they intend to eliminate former President Barack Obama’s signature health care law and put in place a new system ― one that would provide significantly less funding for people seeking health benefits and for states providing Medicaid coverage. Ryan has said that he hopes the House can begin advancing legislation when it comes back from recess next week.
The draft bill, first reported by Politico’s Paul Demko, carries a Feb. 10 timestamp, and Republicans may have revised their proposal since then. The text does not indicate which lawmakers or committees are responsible for it, and there is a blank space where normally the legislation would include the bill’s title.
But the draft is consistent with the principles Ryan laid out in his “A Better Way” agenda over the summer, and the basic shape of legislation closely resembles a bill that Health and Human Services Secretary Tom Price introduced when he served in the House.
Like those proposals, the draft legislation would generally reduce financial assistance for lower- and middle-income people buying private health insurance. It would also weaken standards for what those plans cover, roll back funding for the Medicaid expansion and create a new tax on employer-provided health insurance.
Taxes on wealthy people would fall, and the law’s controversial individual mandate ― a penalty for people who don’t get coverage ― would go away immediately, although most parts of the law with direct bearing on insurance coverage would not take effect until 2020.
Without a formal analysis from the Congressional Budget Office ― and without careful study by outside experts, most of whom hadn’t seen the legislation until Friday ― it’s difficult to say exactly how the law might affect premiums, generosity of coverage, the federal budget or the overall number of people with insurance.
Some people would clearly feel better off. Young people, for instance, could buy cheaper insurance ― particularly if they were willing to get less comprehensive coverage than the law currently requires.
But the number of uninsured Americans, currently at a historic low thanks to the 2010 law, would almost certainly rise if something like this proposal became law. Combined with changes to insurance benefits, the net result of the bill’s changes would likely be dramatically greater exposure to punishing medical bills and reduced access to care ― particularly for people who have serious health problems or who aren’t entirely able to pay for comprehensive coverage on their own.
Of course, with Republicans still deeply divided on how to proceed, this proposal would be just an opening bid. Some conservatives in the House and Senate don’t even want to replace the Affordable Care Act, while another, larger faction objects to providing financial assistance at all and has sneered at proposals that include tax credits, calling them “Obamacare-lite.”
The Senate, for its part, has made no apparent progress on health care legislation and isn’t expected to simply accept what the House proposes.
The Affordable Care Act’s Medicaid expansion poses more of a problem for the repeal effort in the Senate, as well. Sen. Lisa Murkowski (R-Alaska), for example, has already said she can’t support a bill that would cut funding for her state’s Medicaid expansion, while conservatives like Sen. Rand Paul (R-Ky.) say they won’t support a bill that doesn’t end the expansion.
All of this is taking place in a political environment increasingly hostile for Republicans. Angry constituents are flooding lawmakers’ town halls demanding more details about the “replacement” plan, while polling shows a marked upswing in public approval for the Affordable Care Act and a notable decline in support for repeal.
Here are some of the biggest changes that would take place if something like the House GOP draft bill were to become law:
Help paying for health insurance
Financial assistance for people buying coverage would change dramatically. Instead of tax credits that vary based on income, people would be eligible for tax credits that vary based on age, with older customers getting bigger credits.
This would work out as a nice tax break for people whose incomes, today, qualify them for only a little assistance or none at all. But it means that working- and middle-class people would tend to lose assistance that currently makes it possible for them to buy coverage in the first place.
Critically, the GOP proposal would also eliminate extra subsidies, available under the Affordable Care Act, that reduce out-of-pocket expenses for people whose incomes are below 250 percent of the poverty line, or about $60,000 for a family of four.
Younger versus older people
The Affordable Care Act doesn’t allow health insurance companies to charge older people more than three times the price for a younger adult. The House GOP plan would increase that limit to five times, although states would have flexibility to set their own rules. This might mean lower premiums for some younger consumers, but older people could pay considerably more.
Health insurance benefits
Under the Affordable Care Act, all private plans must cover a variety of benefits, including hospitalizations, prescription drugs, contraception, mental health and maternity. Under the House GOP bill, states would be permitted to establish whatever “essential benefits” they wanted, and leave out the rest.
The bill also includes a clause that would allow insurers to continue offering “grandfathered” plans, which are exempt from the Affordable Care Act’s standards for benefits and pricing because insurers were selling them before the law took effect. It’s not clear whether these plans would be available to people not already enrolled in them. If they are, that could undermine other regulations on insurance.
Pre-existing conditions and the individual mandate
Insurers today cannot deny coverage or charge higher premiums because of health status, as long as people sign up during annual open enrollment or qualify for an exemption for a reason like a move or a new job. But under this proposal, insurers could increase premiums by 30 percent, for up to a year, on people who do not maintain “continuous coverage,” meaning that they let their coverage lapse for more than two months. This would have the biggest effect on lower-income people and people juggling jobs ― particularly because, under the GOP proposal, they would be getting less financial aid from the government.
The proposal would also eliminate the individual mandate. The mandate exists to make sure healthy people buy coverage, rather than waiting until they get sick. The continuous coverage provision is supposed to serve the same function, but many experts believe it is not as effective.
House Republicans propose repealing the Affordable Care Act’s Medicaid expansion by eliminating the additional federal funding for it. The federal government and states jointly finance Medicaid, and states historically paid 25 percent to 50 percent of the costs, but the Affordable Care Act provided at least 90 percent of the funding for the expansion population. This draft bill would reduce it to the share paid for other Medicaid beneficiaries.
The bill also calls for a far more radical change to Medicaid. Since its inception in 1965, Medicaid has been a federal entitlement like Medicare and Social Security, so the government has been obligated to cover the costs of any eligible person without limit. House Republicans want to eliminate this entitlement status and instead send states a flat sum ― known as a per-capita cap ― per enrollee.
This would leave states on the hook for any costs above that amount, which would be smaller than federal funding today. That would likely lead states to remove people from the rolls, trim benefits and/or cut payment rates to medical providers, reducing coverage and access to care.
In an attempt to make up for scrapping the Affordable Care Act’s guarantee of coverage for people with pre-existing conditions, the House Republican bill would set aside $100 billion over a decade to finance state programs that would cover people with the highest medical costs.
This could take the form of high-risk pools, which is a reform Republicans have long favored. Prior to the ACA making them obsolete, these high-risk pools existed in a majority of states, dating back to the 1970s. Inadequate funding, high premiums and lengthy waiting lists meant only a tiny percentage of people otherwise uninsurable had access to this coverage.
The proposed $100 billion investment would be substantially more than what previous proposals, such as Price’s, allocated. But even so, the investment would probably fall far short of providing coverage for all the people who need it. Both liberal and conservative health experts have speculated that high-risk pools really need more like $150 billion to $250 billion over that time period.
Paying for the plan
The proposal would wipe out much of the Affordable Care Act’s funding, including new payroll taxes that fall exclusively on the very wealthiest Americans. To make up for some of that loss, the bill would start subjecting a portion of the most generous health plans to taxes. Today the premiums for employer-sponsored insurance do not count toward taxes, so this would effectively be a new tax on the most expensive insurance policies, which many middle-class people hold.
Economists across the political spectrum have long called for such a change, and the Affordable Care Act actually has a version of this proposal, known as the “Cadillac tax.” But the idea of taxing health benefits is highly unpopular, which is one reason Congress voted two years ago to postpone introduction of the Cadillac tax.
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One question looming over all of this is how these features could become law. In order to advance legislation in the Senate, where it would normally take 60 votes to overcome a Democratic filibuster, Republicans hope to use the budget reconciliation process, in which a simple majority can pass a bill.
But reconciliation rules prohibit consideration of changes that don’t directly affect the federal budget, and some of the changes in the draft bill ― like those affecting insurance regulations ― might not pass muster with the Senate parliamentarian, an adviser to the Senate who interprets those rules.
Another question is how long the transition to a new system would take. The draft bill envisions full implementation by 2020, but that’s not actually a lot of time for insurers to prepare for what would be an entirely new insurance market. And with the individual mandate coming off the books right away, insurers, who are right now making plans for 2018 and are already worried about covering their costs, might worry about attracting enough healthy customers to make their policies financially sound.