Healthcare: ACA Repeal-and-Replace

The House on Thursday, May 4, narrowly approved 217-213 a revised bill (HR 1628, “American Health Care Act”) to repeal and replace the Affordable Care Act (Obamacare), although the measure faces uncertainty in the Senate. The House passed the bill without Congressional Budget Office (CBO) estimates of the number of Americans likely to lose health insurance coverage or the legislation’s overall cost. Below is a summary of the bill’s impact and cost approximations based on previous versions of the bill.

First, it is useful to put Obamacare in context. America has a diversity of healthcare approaches:

  • About half of all Americans have employer-provided insurance.
  • About 1-in-5 have Medicaid, which is an entitlement for low-income Americans, under which the Federal and State governments share the cost of paying healthcare providers.
  • About 1-in-6 have Medicare, which is government-provided national health insurance (otherwise known as “single payer”), paid for by payroll taxes, general tax revenues, and premiums.
  • About 2%, most Veterans, Military, and some Indian Tribes, receive care at government facilities from government physicians.
  • Others, who can afford it, purchase private health insurance.
  • Obamacare is aimed at providing access to health care for uninsured Americans through a hybrid approach: (1) expanding Medicaid to cover Americans up to 138% of the federal poverty level (31 States and DC participate); and (2) government subsidies to purchase private insurance on State or Federal exchanges for people between 138% and 400% of federal poverty level.

The House-passed bill would:

  • Phase out the Obamacare Medicaid expansion.
  • Replace the Obamacare insurance subsidies with more limited tax credits of $2000 to $4000, unrelated to actual insurance costs;
  • Eliminate subsidies for out-of-pocket costs.
  • Create a new Patient and State Stability Fund aimed at reducing premiums in the individual market.
  • Scale back the pre-Obamacare Medicaid program by making it a”capped entitlement,” under which federal reimbursements to States for enrollee health expenses would no longer be open-ended; instead, the payments would be “capped” and would grow more slowly than projected medical inflation. This change, plus repeal of the Medicaid expansion, would cut overall Medicaid spending by $800 billion over 10 years.
  • Repeal taxes–enacted to fund Obamacare–by $592 billion, primarily benefiting upper income taxpayers. The two largest tax cuts would eliminate a 0.9% increase in payroll taxes for couples earning over $250,000, and a 3.8% surcharge on several types of investment income.  Also repealed: the annual fee on health insurance providers.
  • Repeal the penalties for individual and employer mandates, but require insurance companies to charge a 30% penalty up to 12 months for people who haven’t maintained “continuous coverage,” i.e., people who let coverage lapse for more than 63 days.

CBO projected that the earlier version of the House bill would result in 24 million losing health coverage by 2026, as compared with continuation of Obamacare.

House bill would permit States to opt-out of pre-existing conditions protections — allowing insurers to set higher rates for patients who have pre-existing conditions; number of people impacted is unclear until CBO releases estimates.  The bill would provide funds for States to set up high-risk pools as an alternative, but their effectiveness is disputed.

Obamacare requires insurance plans to cover 10 categories of essential health benefits, such as maternity care, mental health treatment, and preventive care. The House bill would shift to States the responsibility to establish essential health benefits standards; aimed at allowing insurers to sell less comprehensive plans at lower cost to young people, although opponents argue this will drive up costs for older, sicker patients.

The House bill would allow insurers to charge older Americans under 65 up to 5 times as much as young adults (compared to 3 times under the ACA) — expected to cut premiums for young people and increase premiums for older Americans.

The House bill would also allow larger deposits to Health Savings Accounts for those who can afford to put money aside; would bar Federal funding for Planned Parenthood; and would prohibit the use of tax credits to purchase health insurance plans that cover abortion services.

What’s next:  Bill moves to the Senate, where it is protected from filibuster (as a fast-track Budget Reconciliation Bill) and requires only 50 votes for passage. However, the Senate will likely have to modify the bill to secure 50 votes (for example, mitigating Medicaid cuts, restoring protections for pre-existing conditions and older patients, and increasing tax credits to purchase insurance).

Any legislation brought to the Senate Floor under the fast-track Budget Reconciliation process must comply with the Senate’s Byrd Rule which strictly prohibits including non-budgetary provisions in the bill.

Senate Majority Whip John Cornyn (R-TX) told The Hill, “We’ll start with the House bill, but we’ll need to work with every member of the Senate conference to see what they need to get to yes….There is no timeline.”   Link to our ACA Webpage for more details.