Repeal and Replace

Repeal and Replace

The Latest – February 17, 2017

While Congress is primed to take action on the Affordable Care Act (ACA), there is still no specified timeline on when federal officials will act to repeal and replace Obamacare. Congressional leadership hopes to hold a vote on repeal before they recess for Easter in early April, but President Trump recently indicated that the process could even “take until sometime into next year,” as his administration works with GOP leaders to develop a new plan.

The open enrollment period for 2017 has ended and the Department of Health and Human Services (HHS) reported that 9.2 million people purchased health insurance though the federal insurance marketplace. Based on past year’s enrollment, it is estimated that about 3 million more people likely purchased coverage on state-run exchanges. Also, roughly 10 million Americans qualified for coverage due to the expansion of Medicaid in a majority of states. This will make it more difficult to repeal Obamacare without a viable replacement given the large number of Americans who rely on the ACA for coverage.

President Trump has indicated that the details of his replacement plan will be released in early March now that former Congressman Tom Price has been confirmed as HHS Secretary. In the meantime, Republicans in the House and Senate are attempting to find a plan they can unite around. Two factions of the party - The Freedom Caucus on the far-right and The Tuesday Group of moderate republicans - are at odds with what type of legislation each group would be willing to vote for. The Freedom Caucus voted amongst itself to support a straight repeal effort in order to avoid getting bogged down in the details of a replacement plan, while The Tuesday Group has said they will not vote for a repeal bill without a viable plan for replacement in-hand. Without either group, the votes to pass legislation are not there for the Speaker, Paul Ryan. 

More details of Medicaid proposals have been released this week, indicating per capita allotments are the preferred method of Medicaid redesign in the Republican-majority Congress. There are many unknowns, including how non-expansion states like South Carolina can avoid being penalized for rejecting the Medicaid expansion provision of the ACA while not angering the many expansion states led by republican governors. 

The Players

 President Donald Trump made repealing the ACA a centerpiece of his campaign and vowed to eliminate the law during his first days in office. He has called on Congress to repeal and replace the law and issued an executive order to ease the “unwarranted economic and regulatory burdens” of Obamacare.

 Tom Price is a former Republican Congressman and physician from Georgia who is now serving as Secretary of Health and Human Servives. As a member of Congress, Price was a chief critic of the ACA and sponsored several of the GOP plans to repeal the law. As the Secretary of Health and Human Services, he will play a vital role in the GOP's efforts to repeal and replace Obamacare.

  Speaker Paul Ryan currently serves as the 54th Speaker of the United States House of Representatives having represented Wisconsin’s 1st congressional district since 1999. Even before ascending to the position of Speaker in 2015, Ryan was a vocal opponent of the ACA and has put forth his own plan to replace Obamacare. He is the face of the GOP in the House and will likely lead efforts to reform the ACA in the chamber.

  Seema Verna is a health policy consultant and President Trump’s selection to lead the Centers for Medicare and Medicaid services (CMS). She is credited with designing the Medicaid expansion plan implemented in Vice President Mike Pence’s home state of Indiana. Verna will likely play a major role in advising the Administration and Congress on a potential repeal and replacement to the ACA.

 Senator Mitch McConnell is the senior United States Senator from Kentucky who has served as the Majority Leader of the chamber since January 3, 2015. McConnell is charged with leading efforts to repeal the ACA in the Senate, although his home state of Kentucky has benefited greatly from the ACA through the health insurance marketplace and Medicaid expansion.

Alternative Plans

Patient Freedom Act (S.191) – Republican Senators Bill Cassidy of Louisiana and Susan Collins of Maine sponsored the first major legislative proposal to replace the ACA since President Trump has taken office. The Patient Freedom act of 2017 is considered compromise legislation that would preserve the ACA in some states while giving other states the opportunity to try something new. The bill is currently awaiting action in the Senate Committee on Finance.

Better Way for Healthcare – Speaker Paul Ryan introduced his Better Way for Health Care in June 2016. The plan maintains some of the popular provisions of the ACA like ensuring coverage for those with pre-existing conditions and allowing young adults to stay on their parents’ plan up to age 26, but also proposes Medicaid reform via block grants or a per capita allotment approach.

Empowering Patients First Act of 2015 (H.R. 2300) – Introduced by health secretary nominee Rep. Tom Price in 2015, the proposal is considered the basis for Price’s intentions to reform the ACA. Price’s previously proposed plan would offer tax credits for the purchase of individual and family health insurance policies and eliminate the ACA’s Medicaid expansion and federal health insurance exchange.

The Obamacare Replacement Act - Sponsored by Senator Rand Paul in the Senate (S.222) and Representative Mark Sanford in the House (H.R. 1072), the Obamacare Replacement Act eliminates the ACA's indiviudal mandate and minimums on coverage standards, and would present a two-year window for people with preexisitng conditions to sign up for care. The proposal would also provide a $5,000 tax credit for contributions to health savings accounts.

The New Lexicon

With a new plan comes a new language including some familiar terms that conservative GOP leaders have been promoting for many years:

Block Grants –  States receive a set amount of federal funds annually, typically allocated by reference to a base year. The amount could be frozen or tied to an inflationary factor. GDP and CPI are being floated around as a national trend rate that may be used in this case. Each state may or may not have a spending requirement to receive funds.

Per Capita Allotment – States receive a fixed amount of federal funds per Medicaid enrollee based on per-enrollee spending in a base year tied to a national growth rate trend. The caps vary based on eligibility category, so a child would receive different funding than a disabled enrollee. A state spending match is likely required.

Work Requirements – Including some type of job, training, or job referral requirement in the eligibility criteria for Medicaid. Work requirements as a condition of Medicaid are not generally allowed under the current law, with the exception of some Medicaid waiver states. The Trump administration seems likely to expand opportunities for work requirements as a condition of Medicaid coverage.

Health Savings Accounts (HSAs) – A tax-advantaged medical savings account available to taxpayers who are enrolled in high-deductible health plans. Funds contributed to a health savings account are not subject to federal income tax at the time of deposit. Health savings accounts are a common tool among healthcare plans to replace the Affordable Care Act, with the intent to encourage consumers to “shop around” for value in healthcare services.

Advanceable Premium Tax Credit -  A credit to an individual’s tax obligation provided in advance to help with the purchase of health insurance in an individual market. Referred to repeatedly in Republican health plans, tax credits would replace means-tested financial subsidies provided through the Affordable Care Act. Proposals include age-adjusted premium support through “refundable” tax credits to provide more assistance to older individuals and less assistance to younger individuals.

The Process

Budget reconciliation is a process in the annual budget resolution that allows Congress to make changes to spending and revenues without the normal procedural hurdles. To trigger the reconciliation process, Congress must pass a resolution on the budget including instructions to applicable committees to report changes in law affecting the budget by a certain date. The instructed committees send their recommendations to the Budget Committee of their body, which constructs a single omnibus bill. In the Senate, a reconciliation bill is limited to 20 hours of debate and amendments are limited.

Committees instructed in the budget resolution vehicle to repeal the Affordable Care Act include:

The Byrd Rule, adopted in 1985, outlines which provisions reconciliation can be used for and which provisions cannot be done through this process. The Byrd Rule defines six cases which make a provision ineligible for reconciliation:

  1. It does not produce a change in outlays or revenues;
  2. It produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions;
  3. It is outside the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure;
  4. It produces a change in outlays or revenues which is merely incidental to the non-budgetary components of the provisions;
  5. It would increase the deficit for a fiscal year beyond those covered by the reconciliation measure; or
  6. It recommends changes in Social Security

In other words, reconciliation can only be used on provisions which affect federal spending or revenue. In the Affordable Care Act, there are many provisions that are eligible for reconciliation, but the provisions like extending dependent coverage to age 26 and non-discrimination for pre-existing conditions cannot be dealt with through reconciliation.

Only one reconciliation bill can be passed per budget year. The current vehicle for Affordable Care Act repeal is a resolution to the fiscal year 2017 budget, which goes through September 30, 2017. Another budget resolution and subsequent reconciliation bill could be constructed for other purposes when Congress is working on the fiscal year 2018 budget later this year.

Where We Stand

South Carolina hospitals are very concerned about the potential negative economic impacts for healthcare providers and the communities they serve if the ACA is repealed without a viable replacement plan. While much of the discussion pertaining to the repeal and replacement of the ACA has focused on the loss of health coverage, it’s important to know that hospitals have financially invested in transforming how they deliver care to comply with the payment and delivery reforms contained in the ACA. In addition, Healthcare providers were dealt steep cuts to Medicare and other payments with the idea that expanded health coverage would help mitigate those cuts. If the mechanisms of the ACA that expand coverage are repealed, we would urge that the ACA’s cuts to healthcare providers be restored.

As block grants and other capitated funding models are considered, we recognize that South Carolina would not receive equal benefits to the 31 states that expanded eligibility and coverage under the ACA. Under a capitated model, conservative states like South Carolina that chose not to expand Medicaid would be locked-in with less funding and less flexibility that ultimately hurts our ability to compete with other states for economic development and jobs.

Repealing the healthcare benefits provided by the ACA without reinstating the cuts to Medicare, Medicaid, and uncompensated care funding would result in a $6.5 billion negative impact on South Carolina’s healthcare providers.

What You Can Do

Contact your members of Congress and ask them to support a plan that protects patient coverage and restores essential cuts to hospitals.

Join LEAd, SCHA’s grassroots advocacy group, for updates and action alerts on pending legislation.

Documents and Resources