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News Alert- March 8, 2017

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Republicans fast-track ACA repeal despite deep divisions

 

            Two House committees are marking-up legislation today that would repeal and replace key provisions of the Affordable Care Act (ACA), without public hearings or a cost estimate from the Congressional Budget Office (CBO). 

 

            The rush to move forward comes as internal divisions among Republicans threaten to derail their pledge to roll-back the landmark health insurance reform law.  While Republicans cannot repeal the entire law without Democratic support, the American Health Care Act (AHCA) introduced this week would remove most of its funding starting in fiscal 2019 by repealing the majority of its revenues, including penalties for the individual and employer mandates and taxes on insurers, drug and device makers, and wealthy Americans.  The bill also would eliminate the premium tax credits and cost-sharing subsidies relied upon by roughly 85 percent of Marketplace consumers and phase-out the Medicaid expansion that extended coverage to 11 million Americans.        

 

            Although the ACA’s ban on pre-existing condition denials would remain in place, the AHCA would impose a 30 percent premium surcharge for those who do not maintain continuous coverage (which is defined as a lapse of more than 63 days).  In many cases, this penalty could equal or surpass those under the individual mandate (which was capped at $2,000 per year).      

 

            In place of the ACA subsidies that varied by income and geography, the AHCA would offer premium tax credits that vary by age.  They start at $2,000 for those under age 30 and extend to $4,000 for over age 60.  Persons earning up to $150,000 per year could receive tax credits, as opposed to the ACA, which cutoffs tax credits at 400 percent of the federal poverty level ($47,250 in 2017). 

 

            According to the Kaiser Family Foundation, Marketplace consumers received an average of nearly $3,600 per year in ACA premium tax credits last year (not including their cost-sharing reductions).  As a result, they will receive 36 percent less in financial assistance under the tax credits offered by the AHCA (an increase of roughly $1,540 in average out-of-pocket costs per year). 

 

            However, Medicaid enrollees would be most dramatically impacted by the AHCA, as the bill not only phases-out the Medicaid expansion in 2020 but fundamentally restructures Medicaid so that federal spending is capped per enrollee.  In exchange for greater flexibility to raise premiums, impose work requirements, or rely more heavily on managed care, states would assume the risk for costs that go above the federal caps (or block grant) and would have to drastically cut benefits or provider payments if economic downturns resulted in significant increases in enrollment.  (A report sought by the National Governors Association found that the caps would cut federal Medicaid spending by 35-40 percent).

 

            House Republicans are trying to fast track the bill through budget reconciliation, which would require only 50 Senate votes instead of the 60 needed to break a filibuster.  However, they acknowledge they currently do not have the bare majorities needed to pass the bill in either chamber.  The opposition has caused them to take the nearly unprecedented step of marking-up the bill without a CBO score, which is expected to predict that roughly ten million Americans could lose coverage under the AHCA while an equivalent number could face higher out-of-pocket costs.

 

            Due to the phase-out of the Medicaid expansion, at least seven Senate Republicans already oppose the bill and Republicans can only lose three.  These are mostly moderate Senators from expansion states.  The 11 Republican governors that expanded Medicaid also largely are against eliminating the ACA expansion, creating an impasse with conservative groups that are demanding any ACA repeal effort include the expansion.  They are also concerned about accepting per capita caps with only the Administration’s promise of greater flexibility (which is not written into the bill).

 

            However, the most conservative lawmakers have also lined-up against the premium tax credits offered by the AHCA, calling them a new “welfare entitlement.”  The House Freedom Caucus (a group of more than 40 members that largely aligned with the Tea Party) are demanding even more changes to the ACA, referring to the new bill as “Obamacare lite” and threatening to withhold all support.  Most conservative groups apart from the American Legislative Exchange Council are also criticizing the bill.     

 

House Speaker Paul Ryan (R-WI) guaranteed this week that the Freedom Caucus would ultimately come onboard and give Republicans the needed 218 votes.  However, strong opposition from most provider and consumer groups, including the American Medical Association, the American Hospital Association, and AARP could derail the bill in the Senate. 

 

The critical factor for Republicans is likely to be whether insurers continue to participate in the ACA Marketplaces during the repeal debate.  The uncertainly already led Humana to pull out of all Marketplaces for 2018 and the CEO of Molina Healthcare announced that they are evaluating whether to do so, as they would need to increase premiums by roughly 30 percent to offset the expected lack of healthier consumers in the risk pools once the individual mandate is eliminated.

 

Pharmaceutical groups have largely stayed behind the scenes during the debate, as the AHCA makes few changes to prescription drugs apart from eliminating the ACA taxes they shouldered.  (It does not change the reduction in the Medicare Part D coverage gap mandated by the ACA).  However, President Trump hinted this week that he may seek additional reforms to reduce prescription drug costs, including measures long-opposed by drugmakers such as allowing re-importation from abroad and giving Part D the authority to negotiate prices.

 

RELATED LINKS

 

http://www.reuters.com/article/us-usa-obamacare-idUSKBN16D2RC

 

http://www.nbcnews.com/politics/congress/gop-leaders-push-health-care-bill-amid-rank-file-opposition-n730246

 

https://www.wsj.com/articles/house-gop-releases-plan-to-repeal-replace-health-law-1488842133

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