It has been some time since we’ve weighed in on the ongoing efforts by Congressional Republicans to “make good” on longstanding promises to repeal and replace the Affordable Care Act (ACA), having written a blog back in March when the first replacement plan was created – dubbed the American Health Care Act (AHCA). Despite President Trump’s campaign trail pledge to immediately begin dismantling the ACA following his inauguration, the realities of D.C. politics and party infighting, among other reasons, have delayed delivery of a replacement plan.
But finally, on June 22, Senate leadership emerged from behind closed doors to reveal their version of the American Health Care Act (AHCA)—seven weeks after the House of Representatives passed their version along party lines by the slim margin of 217 to 213.
The “Better Care Reconciliation Act of 2017” (BCRA) does not represent an amended version of the AHCA; instead, the Senate has presented an entirely new piece of legislation amending the ACA, albeit with a number of similarities to the AHCA, but with some marked differences as well. Now that the bill has emerged, it remains to be seen if Republicans can garner enough support for passage in its current form via budget reconciliation, which requires a simple majority for passage. It may require compromise through amendments to gain the support of the 50 Senate Republicans needed (plus Vice President Pence), and some provisions may very well be challenged under the Byrd Rule, which stipulates that reconciliation legislation cannot include policies that have little or no fiscal impact. And if successfully passed by the Senate, the bill then goes back to the House for their approval as well.
We’ve let the dust settle for a few days following release of the BCRA draft, and widespread reaction comes as no surprise given the bill’s substantial reductions to Medicaid, among other provisions. On Monday, June 26, the Congressional Budget Office (CBO) released its score of the bill’s savings and costs, in dollars and enrollment, and it reports a reduction in spending from 2017 to 2026 of $321 billion. But the CBO also estimates that 22 million people would lose coverage by 2026. While it would reduce premiums under the ACA, the out-of-pocket costs for enrollees would increase exponentially with the elimination of cost sharing subsidies that will no longer be offered under ACA silver plans to subsidize copays and deductibles.
As of this writing, six Republican senators have indicated that they would oppose the bill as drafted, making passage this week highly unlikely. Since the bill was unveiled five days ago, many senators have expressed concerns regarding the rush to pass the bill before the Independence Day recess, and it was just announced that consideration of the bill will now wait until after the holiday recess. Predictably, far-right conservatives claim it doesn’t do enough to “repeal” ACA provisions, while left-leaning Republicans are concerned about provisions like defunding Planned Parenthood. And all of these competing priorities and concerns are now compounded by the hard numbers of the CBO analysis.
So, keeping in mind that we may see some provisions of the bill altered to appease those furthest left or right within the Republican Party, or provisions that don’t survive the Byrd litmus test as budget-related, let’s take a look at some highlights of what the bill proposes—what’s changing, what’s staying the same, and what we can expect next.
While much of the focus on ACA repeal and replace has been on the individual markets, the BCRA—like the AHCA before it—seeks to overhaul the Medicaid program, and much of the bill is dedicated to that aim. Like the AHCA, the BCRA would eliminate the current entitlement structure and allow individual states to largely administer the program at their discretion, with capped federal funding provided on a per capita or block grant basis for specific Medicaid populations. Significantly, under BCRA, those caps would be tied to the urban Consumer Price Index (CPI), rather than the medical CPI, after 2024, which would mean a further cut to funding. Beyond this fundamental change in Medicaid funding, below are additional notable changes to Medicaid under BCRA. If and when replacement legislation is passed, we’ll take a deep dive into the provisions as law.
ACA Medicaid Expansion
Like the AHCA, the BCRA would roll back Medicaid expansion that took place under the ACA in 31 states and the District of Columbia. Beginning in 2020, the gradual reduction in funding would take place annually until it reached non-expansion population levels by 2024. States have the discretion to continue to cover the expansion population, but the funding gap would come from the State’s budget rather than the Federal Government.
The BCRA, like the AHCA, would defund Planned Parenthood for one year, making those clinics unavailable to Medicaid enrollees for treatment, providing additional funding to community health centers to offset the loss, assuming they are available in the same geographic areas.
Elimination of Retroactive Eligibility
As in the AHCA, the BCRA reduces the retroactive eligibility period for Medicaid enrollees from three months to one month.
As in the AHCA, the BCRA allows states to enforce work requirements as a condition of eligibility for coverage for nondisabled, nonelderly, nonpregnant adults.
Provider Tax Limitations
The BCRA would limit states’ ability to enhance federal funding through provider taxes—a mechanism currently used in most states—limiting taxes to no more than 5% of net patient revenue by 2025.
Some of the most popular provisions of the ACA were left intact under the AHCA, and that is also true of the Senate version, though that may be because of both the steadily growing unpopularity of ACA replacement in the polls, and the limitations of the budget reconciliation process. In any case, the following ACA provisions remain:
A foundation of the ACA was the Individual and Employer Mandates, which required individuals to obtain, and employers to provide, health insurance. Failure to do either would result in penalties for non-compliance. These provisions were intended to ensure a robust risk pool with lots of insured healthy individuals, keeping premiums in check. Under the BCRA (like the AHCA), the individual and employer mandates are repealed, retroactive to the end of 2015.
Continuous Coverage Penalty
Interestingly, the BCRA does not have the continuous coverage penalty proposed by the AHCA, which called for late enrollees (those with a gap in coverage) in the individual market to be subject to a 30% premium surcharge for that plan year. A lack of negative consequence for individuals who don’t obtain insurance or maintain continuous coverage raises serious questions about the long-term impact on risk pools and viability of the individual markets.
Much like the AHCA, the BCRA rolls back the ACA’s many taxes. Effective in 2017, taxes for over-the-counter medications associated with Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) would be repealed, along with the tanning tax and Medicare unearned income tax. In 2018, the medical device tax would be repealed. In 2023, the repeal of the Medicare payroll tax surcharge for high earners would go into effect, and the “Cadillac tax” would be lifted in 2026.
Age-Based Premium Caps
Under the ACA, premium rates for older enrollees were capped at no more than three times those of younger individuals. Under both the AHCA and now the BCRA, that ratio is increased to no more than five to one. Taken in combination with the bill’s treatment of Advanced Premium Tax Credits (addressed below), older Americans’ premiums will rise with the BCRA.
Advanced Premium Tax Credits
The BCRA doesn’t adopt the credits proposed under the AHCA that would be bracketed by age group and limited by income, but instead amends the Advanced Premium Tax Credits (APTC) provisions of the ACA. A detailed evaluation of the amended APTC provisions would certainly warrant its own blog once legislation is passed, given the complexities involved, but since this is just the proposed amendment, we’ll take a high-level glance.
Beginning in 2020, APTC eligibility would extend to enrollees with income up to 350% of the Federal Poverty Level (FPL), a reduction from the 400% cap currently in place under the ACA. But it also allows APTC for those below 100% of FPL and non-Medicaid eligible, which hadn’t existed under the ACA (as Medicaid expansion was intended to cover this gap). Also beginning in 2020, older enrollees would find themselves having to spend a greater percentage of their gross household income on premiums than younger enrollees before they would be eligible for APTC credits—another departure from the ACA. Lastly, under the BCRA, the plans used as the benchmark plan for calculating APTC would also change.
Cost Sharing Reduction
As with the AHCA, the BCRA would eliminate Cost Sharing Reduction (CSR) subsidies for lower-income enrollees, which reduced out-of-pocket expenses much like APTC reduced the amount of premium paid. Beginning in plan year 2020, CSR would be eliminated, although the bill does actually appropriate funding for the subsidies through CSR repeal, which would bring an end to the ongoing litigation around the issue that began during the Obama administration and has been a major contributor to instability in the individual market.
ACA Section 1332 Expansion
ACA section 1332 outlines the state innovation waiver program, that beginning in 2017 allows states (upon application and approval) to waive certain ACA provisions and implement alternate methods to provide coverage so long as they were no less comprehensive or affordable, and is budget neutral. The BCRA expands section 1332, relaxing the standards for approval, increasing the waiver effective period from five to eight years, and granting states far more latitude around critical provisions. States could redefine the Essential Health Benefits (EHB) as currently defined under the ACA, and then eliminate or increase out-of-pocket limits, or lift the ban on annual and lifetime limits through a reimagining of EHB. Taken in combination, these could have a significant impact on not only the individual market, but also employer-sponsored health plans. Safeguards against catastrophic costs provided by the ACA could essentially be eliminated.
The Congressional Budget Office score regarding costs and enrollment under BCRA is now defined, but the lack of full party support for the bill has forced the vote until after the Independence Day holiday. This likely means that constituents will be speaking to their party leaders during the holiday break, imposing on them their thoughts and feelings about the new bill. Whether they will have the requisite votes to pass the bill, or if the bill as drafted can survive the likely challenges under Byrd, remain to be seen. If this needle can be threaded, we’ll be sure to weigh in on what the final version looks like. If they go back to the drawing board, we’ll report back as developments warrant. Stay tuned.
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