What's in the Health-Care Bill the House Just Passed?

The American Health Care Act just passed the House, but what does it do?

The arguments on the floor—and the House’s decision to vote before the bill could be scored by the Congressional Budget Office—suggest that even many of the people who just passed it don’t even know everything about the bill. That’s to be expected: A collection of amendments written to garner political support since the original draft of the AHCA could have sometimes obscure interaction effects, and many of those are still being uncovered, even as the bill moves on to the Senate. But the broad strokes are known, and even with the official CBO report not expected until next week, health-policy experts have most of the AHCA figured out.

The basics of the AHCA are still the basics. The initial bill, introduced by the House Energy and Commerce and Ways and Means committees back in March, aimed to sunset the Affordable Care Act’s Medicaid expansion to low-income healthy adults. Although it didn’t strip coverage away from newly-covered adults, it would stop states from enrolling new people under Medicaid expansion, and it incentivized states to drop the expansion altogether. That approach remains intact in the bill passed Thursday.

The AHCA also aims to radically restructure the Medicaid program via per-capita caps on federal spending on Medicaid enrollees. That should reduce federal spending over time, but also carries a significant risk of reducing the number of people covered and their benefits. There are also some tricky local effects to a broad slashing of Medicaid funds using such caps, since so many local programs depend on Medicaid funding for survival. The New York Times reports that one of these is special education, as school districts rely on the Medicaid program to pay for equipment and services for students with disabilities.

House Speaker Paul Ryan’s first “manager’s amendment” to the law also allowed states to take the option of a block grant for Medicaid funding, and allowed states to create a work requirement for people on Medicaid. A CBO report on the first “manager’s amendment” to the AHCA found that the Medicaid provisions would reduce the number of covered people by 14 million by 2026 and slash costs by 25 percent.

The original version of the AHCA also seemed likely to slough millions of people off private insurance. The bill allowed insurers to raise rates more for older people, penalized people who go more than two months without continuous  coverage, and replaced Obamacare’s income-based and cost-based subsidies for exchange coverage with a tax credit that only adjusted for age. The result for the 11 million people on exchange coverage is a system that inherently rewards healthier people with lower costs, but might increase premiums for near-elderly people tenfold. Since those people tend already to be sicker, the base AHCA already constituted an abridgment of Obamacare’s protections for pre-existing conditions.

People who found some stability in employer plans may not have such stability going forward. The AHCA repeals the employer mandate, while also offering companies an out in the form of the universal tax credit, which according to the CBO would result in a decrease in employer coverage. Some of that decrease might be mitigated by other insurance laws like those requiring companies to cover employees if they cover executives.

The AHCA also repeals the tax penalty for Obamacare’s individual mandate, which the CBO found would increase the ranks of the uninsured more than the changes to subsidies. “The individual mandate has a surprisingly large impact,” says Jocelyn Guyer, a managing director for the health policy shop at the Manatt,  Phelps & Phillips law firm. In essence, what CBO and Manatt found is that at least initially, a law that made coverage more expensive for lacking continuous coverage, while also eliminating the yearly mandate, would result in mass defections from the market among healthy people while actually compelling some of the sickest people—facing rate hikes on top of continuous coverage penalties—to sign up when they could.

In order to help defray at least some of the costs for those newly endangered sick people under the AHCA, the bill also provides $100 billion under the “Patient and State Stability Fund” to states to help manage some of the costs of the most expensive patients, including the creation of “high-risk pools.” The CBO concluded that the effects of this fund would likely not come close to offsetting the 24 million people fewer people it estimated would be covered under the law, but it became central to Republican efforts to make the AHCA more palatable. Ryan’s first manager’s amendment to the AHCA provided $85 billion in tax relief that he claimed would go toward defraying costs for sick individuals, but it would require restructuring in the Senate, and the actual mechanism by which it would do so is not yet known. A second manager’s amendment explicitly appropriated an additional $15 billion to the Patient and State Stability Fund for maternity, mental-health, and substance-abuse coverage.

The latest two amendments also revolve around that fund. One, from Representative Fred Upton ,gave the bill enough political strength to pass, but its addition of $8 billion to the Patient and State Stability Fund over five years is likely a drop in the bucket. Even with those added dollars, the fund will probably struggle to fulfill its mission of defraying costs. The MacArthur amendment added to the law last week was more consequential policy-wise, and would allow states that participate in the fund to relax community-rating requirements for exchange patients without continuous coverage. That means states could allow insurers on the exchanges to charge more (with no upper limit) for patients with pre-existing conditions, although they still cannot be technically denied coverage. The number of people affected by this provision would likely be small, especially since states may not want the political repercussions of allowing sick people to be charged more.

The MacArthur amendment also allows states to elect to define essential health benefits for exchange plans that receive tax credits. This could allow insurers to sell bare-bones plans on the exchange markets, and could also have effects on employer plans that use those plan offerings as benchmarks for what they cover. Lifetime limits and exclusions for certain employees for certain types of coverage might be back on the table. The plans available to those purchasing insurance in individual markets might offer little more than catastrophic coverage, if that.

All in all, the baseline projections of reducing coverage by over 20 million people and federal savings of $300 billion will still apply to the AHCA, which must be officially scored by the CBO over the next few weeks in order to pass by the reconciliation process in the Senate. If passed there and signed by President Trump, the Medicaid program will be slashed, and fewer older, low-income, and sick people will be able to afford insurance. The Patient and State Stability Fund will likely provide financial relief and affordable coverage for thousands of sicker Americans, but it still appears that more people of similar health status will be ejected into the ranks of the uninsured. Fewer people will be offered employer coverage as well, although it’s unclear how much changes in essential benefits will affect them. The amendments will mostly affect those at the extremes. “In terms of their marginal effect, it all depends on what states will take them up,” Guyer said.

As the forthcoming CBO report will probably document, the basic framework of the law hasn’t changed that much. There are likely to be plenty additions to the AHCA as it goes through the more moderate Senate, and there will probably be tweaks that eliminate some of the current provisions in the House version. But as things stand, sick people and families that make less money will be less able to afford coverage than they are under the current law. Each change may necessitate a trip through the policy weeds to fully probe all of its effects, but the big picture doesn’t appear to be changing.