Is the Republican Health-Care Plan 'Obamacare Lite'?

What’s in the House GOP’s new scheme to repeal and replace the Affordable Care Act

J. Scott Applewhite / AP

On Monday evening, the House Energy and Commerce and Ways and Means committees released the two long-awaited components of the House GOP’s plan to repeal and replace Obamacare. Although intense secrecy from House aides and a hunt for the bill last week involving Senator Rand Paul and a gaggle of reporters had raised expectations of dramatic changes, the bills that will go into markup Wednesday in the committees look pretty similar to a draft version of the bill that leaked a few weeks ago.

The two components—called the “American Health Care Act” in tandem—are intended to be passed by the reconciliation budgetary process, and as such only contain provisions that pertain to budgetary items, like the amount of the Affordable Care Act’s individual mandate tax or the Medicaid funding granted to states. The whole bill has yet to be scored by the Congressional Budget Office, a critical step that will determine both the number of people projected to gain or lose coverage under the law, and the amount of spending or saving it would incur.

In advance of that scoring, the general shape of the bill has been criticized from both sides even within Republican circles. Some, like the members of the more conservative Freedom Caucus in the House and Senator Rand Paul, have derided the tax credits as “Obamacare lite.” On the other side, some have blasted the idea of pulling Medicaid coverage away from sick, rural Americans who just became eligible under the ACA and enjoy their coverage. With the bill now public, it’s clear that while the framework does maintain some key Obamacare provisions, it also still would fundamentally reshape health policy—and reassign who reaps most of the benefits. Here’s a breakdown of what’s in the drafts:

The American Health Care Act would reshape the Medicaid program and roll back Obamacare’s Medicaid expansion.

First, the bill would roll back the ACA’s commitment to providing Medicaid funding for the so-called “expansion population,” or otherwise able-bodied, non-pregnant adults who qualified by their incomes under the ACA’s new rules. The bill doesn’t automatically take coverage away from those people, but it does end what’s called the “enhanced federal medical assistance percentage,” or FMAP, for them, whereby the federal government pays the vast majority share of their Medicaid costs. After 2020, states will no longer be allowed to enroll additional expansion adults, though those already covered will be allowed to remain covered if they don’t become ineligible for more than a month.

There’s a much more radical change to Medicaid in the bill, though, and it involves the restructuring of the program’s federal funding to a hard per-capita cap. The full ramifications of that restructuring can be viewed in detail here, but suffice to say that states will probably be receiving less federal funds than before, and will have much less flexibility year-to-year in their spending. Additionally, the funding increases scheduled to allow Medicaid funding to keep up with medical inflation have been reduced from the original draft bill. Further provisions:

  • Bar providers that provide abortions from receiving Medicaid funding.
  • Remove some state flexibility in increasing the home-equity limit for Medicaid eligibility, whereby people are barred from Medicaid coverage if they have too much home equity.
  • Eliminate Essential Health Benefits requirements for certain Medicaid-covered plans, including requirements for mental-health services funding parity with other services.
  • Increase the frequency at which Medicaid enrollees are tested for eligibility.
  • Grant extra Medicaid provider reimbursement funds to states that didn’t expand Medicaid under Obamacare. Automatically disqualify any non-expansion state that chooses to expand before the expansion’s sunset in 2020.

The American Health Care Act would replace Obamacare’s cost-sharing and tax credits with a refundable, age-rated, income-capped tax credit.

The bill repeals the ACA’s cost-sharing reductions, where the federal government paid insurers to reduce the cost-sharing burden on enrollees based on their incomes. It also replaces the ACA’s age-rated, income-adjusted, cost-adjusted premium tax-credit for exchange plans with a more general refundable tax credit. That credit would still increase with age to accommodate their higher costs and would also contain some degree—though less on average than that of the ACA—of adjustment for income, but it would still not be adjusted to the average costs of the plans in particular markets.

In order to quell that attacks that it is “Obamacare lite,” this new bill also places an income cap on the refundable tax credit, where individuals making over $75,000 would have their credit reduced by 10 percent of each additional dollar, meaning that for many people the tax credit for insurance would completely disappear over $100,000. Further provisions:

  • Reduce the qualifications that insurance has to meet to qualify for the credit, but also eliminate all grandfathered and “grandmothered” plans from creditability.
  • Establish that a person’s main tax-credit-qualifying insurance can’t cover abortion, but they can purchase supplemental coverage that provides it.
  • Keep the ACA’s ban on barring people from insurance for pre-existing conditions.
  • Establish a penalty for not having continuous insurance, where insurers can charge people 30 percent more in premiums for a year if they went two months or more without insurance recently. It’s not quite an individual mandate, but it’s still kind of an individual mandate.

The American Health Care Act would repeal the mandates and just about all of the other taxes that pay for the Affordable Care Act.

This is where it gets really tricky for the CBO scoring. The new proposed bill cuts almost all of the revenue-generating pieces of Obamacare, from its tanning taxes to its medical-device taxes. The individual mandate to purchase insurance and the employer mandate to provide it are levied as taxes, and the Republican plan would repeal those as well. Although this plan will probably lower long-term Medicaid outlays, it’s unclear if the relatively generous tax credit and its rescission of revenue-generation will lead the bill as a whole to have a positive impact on the deficit. Further provisions:

  • Repeal several taxes used to pay for tanning, health insurer, Medicare investment, HSA, medical device, and Medicare taxes, in addition to the “Cadillac tax” on expensive insurance plans.
  • Repeal Obamacare’s excessive remuneration rule for insurers, meaning insurance providers can deduct payments to physicians and other qualified individuals in excess of $500,000.
  • Repeal the small-employer insurance tax credit.

The American Health Care Act would change federal funding in some other places too.

The newly proposed act would increase annual contribution limits for health savings accounts for people with high-deductible health insurance plans, which also reduces people’s taxable income and the revenues for the federal government. On the other side of the revenue coin, the bill would cancel unobligated funding for the Prevention and Public Health Fund after 2018. That fund allows the Centers for Disease Control and Prevention to supplement lagging public-health funding and respond to public-health crises via a wide range of mechanisms, including block grants to states. That fund also covers the CDC’s childhood lead prevention program.

The bill would also establish a “Patient and State Stability Fund” to provide states with grants to pursue certain innovations to reduce the cost and risks of health-care, including things like creating high-risk pools, providing preventative care, and establishing state-based cost-sharing reductions.

In all, the American Health Care Act is roughly a repeal of the Obamacare mandates, a steep rollback of current and future federal commitments to covering people via Medicaid, a replacement of the existing tax credit with one that’s less generous for low-income people but still applies to middle-class people, and a repeal of most of the revenue-generating taxes of the ACA. At first glance, it appears that the most likely result nationally would be a net loss of coverage and a decrease in insurance affordability for many people who are the most vulnerable, but at least some of that effect might be offset by some enhanced state Medicaid payment capabilities and the stability fund. For now, it’s on to markup and the CBO.

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