After an eight year effort to dismantle Obamacare, Republicans are closer than ever to redesigning significant portions of the law. While the politics in the Senate are quite similar to those in the House debate–conservative senators want an aggressive repeal and centrists warn of cutting entitlements too much and too fast–the Senate discussion draft deviates from the devastatingly unpopular House-passed bill in six significant ways.
Changes to Medicaid Expansion. Senate centrists oppose the House Medicaid cuts, including a phase out beginning in 2020 of the extra money the federal government has provided to states as an incentive to expand Medicaid program eligibility. The Senate discussion draft would gradually phase out the Medicaid match rate after seven years, not three, through 2024. This important modification should satisfy Republican senators from the 31 states that agreed to expand Medicaid coverage.
Changes in Subsidies, Tax Credits. The House bill replaces Obamacare’s income-based subsidies to help the poor buy insurance on the exchanges with refundable tax credits based on age. Critics argue the House tax credits would make health insurance substantially less affordable since the credit would not increase when premiums increased and there are not additional monies for those in higher-cost areas. The Senate measure uses people’s income, age and geography as the benchmark for helping those without workplace coverage to buy private insurance. The discussion draft also extends Obamacare subsidies down to 0 percent of the FPL which moderates asked for to make sure those cycling off Medicaid expansion would be eligible for the subsidies. However, opponents say the Senate bill could be further improved if it made tax credits more generous, particularly for older patients. The Senate draft set the income threshold at which credits are phased out at 350 percent of the federal poverty level ($42,210), a reduction from the 400 percent of FPL cap in Obamacare and a substantial reduction in general from the $115,000 cap in the House bill (with a gradual phase-out beginning at $75,000).
Modifies Preexisting Condition Provisions. The House bill was criticized for ripping away Obamacare’s protections for people with preexisting conditions. The politics got far ahead of the reality (the House bill includes essential health benefits and community rating), but the House plan did give states the option for applying for waivers from these two provisions if they can show the waivers will lead to lower premiums and broader coverage. The Senate discussion draft leaves in place the popular ObamaCare market protections like pre-existing condition protections, community ratings and essential health benefits. But the Senate draft also broadens the flexibility available to states under the ACA’s Section 1332 waivers including opting out of essential health benefits. Critics question whether the Section 1332 waivers set a higher barrier for states as compared to the House structure. However, Health and Human Services Secretary Tom Price has assured Senators that he has plenty of administrative flexibility in the 1332 waiver process to accomplish the goals the Republican conference are seeking.
Extends Cost Sharing Reduction (CSR) Subsidy Payments. The Senate discussion draft would provide money to insurance companies to offset the out-of-pocket costs for millions of lower income individuals through 2019. The “cost-sharing” reductions (which prompted a 2014 lawsuit from the House of Representatives) are available to the approximately 7 million consumers who fall between 100 percent and 250 percent of the poverty line to cover co-pays and deductibles. The House passed bill eliminates the CSR subsidies entirely. The Trump Administration has been threatening to discontinue these payments ($135 billion projected 10 year cost), and some insurance companies have cited uncertainty as a reason they are abandoning some markets and raising premiums.
Establishes a Short-Term Stabilization Fund. The Senate bill appropriates $50 billion over four years to try to stabilize ObamaCare’s exchanges. More specifically, the language seeks to “fund arrangements with health insurance issuers to address coverage and access disruption and respond to urgent healthcare needs within states.” Critics like Senator Rand Paul (R-Ky.) say the stabilization funding is a “new entitlement.” The stabilization money, combined with the continuation of ObamaCare’s cost-sharing reduction subsidies through 2019, have lead some conservatives to say the bill keeps too much of ObamaCare in place.
Creates Association Health Plans. The Senate discussion draft includes a provision that would allow small businesses to purchase large group coverage through associations largely free from state insurance regulation. Insurers could offer coverage regulated as large group coverage to small employers through these association plans, encouraging a Trump campaign promise to allow the sale of insurance across state lines. The House bill did not include these provisions, although the House has passed association health plan legislation in the past. It’s likely this provision will face a point of order challenge to being included in reconciliation since it’s an insurance provision that affects neither government revenue nor outlays.
Contrary to statements that the House bill was dead on arrival in the Senate, the new discussion draft does not rewrite the House bill – it simply modifies some of the more unpopular House provisions. Leader McConnell has considered how to fix the troublesome parts of the House bill so it will pass the Senate. He’s accomplished the first goal of tacking the unpopular House provisions, even as the politics surrounding Senate passage remains a challenge.
For Republicans who have made erasing ObamaCare a marquee pledge, failure in the Senate is not an option. And for millions of Americans who will suffer as the ObamaCare markets continue to deteriorate, failure is not an option, either.
