Repeal & Replace
AMERICAN HEALTH CARE ACT
Republicans unveiled their long-awaited legislation to repeal and replace the Affordable Care Act, proposing to phase out key parts of the law over several years as they try to break a stalemate between moderates and conservatives in their party.
Called the American Health Care Act, the proposal includes a refundable, age-based tax credit to help people buy insurance. It ends Obamacare’s requirement to have coverage, and would eventually eliminate many taxes used to fund the 2010 law. Other changes, like a wind-down of an expansion of Medicaid, are phased in over a period of years.
Differences and similarities between the ACA and AHCA
|Insurance mandates||Individual mandate
Employer mandate on larger companies
|No individual or employer mandate
Insurers can impose a 30% surcharge on consumers with a lapse in coverage
|Aid for insurance consumers||Income-based subsidies for premiums that limit after-subsidy cost to a percent of income
Tax credits for out-of-pocket expenses
|Age-based refundable tax credits for premiums, phased out for higher incomes
No tax credits for out-of-pocket expenses
|Medicaid||Matching federal funds to states for anyone who qualifies
Expanded eligibility to 138% of poverty level income
|Federal funds granted to states based on a capped, per-capita basis starting in 2020
States can choose to expand Medicaid eligibility, but would receive less federal support for those additional persons
|Premium age differences||Insurers can charge older customers up to three times as much as younger customers||Insurers can charge older customers up to five times as much as younger customers|
|Health Savings Accounts||Individuals can put $3,400 and families can put $6,750 into a tax-free health savings account||Individuals can put $6,550 and families can put $13,100 into a tax-free health savings account|
|“Cadillac” tax||Cadillac tax on high-cost employer plans implemented in 2020||Cadillac tax on high-cost employer plans implemented in 2025|
|Other taxes||3.8% tax on investment income
0.9% tax on individuals with an income higher than $200,000 or families with an income higher than $250,000
|Repeal of both taxes|
|Essential health benefits||Insurers are required to offer ten essential health benefits||Private plans are required to offer the ten essential health benefits.
Some Medicaid plans are not required to offer mental health and substance abuse benefits
|Dependents staying on plan|
|Annual and lifetime limits|
Obamacare is rapidly collapsing. Skyrocketing premiums, soaring deductibles, and dwindling choices are not what the people were promised seven years ago. It’s time to turn a page and rescue our health care system from this disastrous law. The American Health Care Act is a plan to drive down costs, encourage competition, and give every American access to quality, affordable health insurance. It protects young adults, patients with pre-existing conditions, and provides a stable transition so that no one has the rug pulled out from under them.
House Speaker Paul Ryan (R-Wisc.)
It (Medicaid) will be phased out.
Prior to the Affordable Care Act (ACA), Medicaid was available to groups including qualified low-income families, pregnant women, children and the disabled. The ACA expanded eligibility to all individuals under age 65 who earn up to 138 percent of the federal poverty level (about $16,643 a year for an individual), but only in states that opted for the expansion. Thirty-one states and the District of Columbia have opted in to the expansion, which includes enhanced federal funding, so far. More than 11 million newly eligible adults had enrolled in Medicaid through March 2016, according to an analysis by the Kaiser Family Foundation of data from the Centers for Medicare & Medicaid Services.
Under the Republican health care plan, no new enrollment can occur under this Medicaid expansion after Dec. 31, 2019. States that have yet to opt in to the expansion by that date also will not be able to do so afterward.
“This is Obamacare lite. It will not pass. Conservatives aren’t gonna take it,
“Premiums and prices will continue to spiral out of control.”
Senator Rand Paul (R-Ky.) on Fox and Friends
The analysis, released late Monday afternoon by the Congressional Budget Office, predicts that 24 million fewer people would have health coverage over the coming decade, nearly doubling the share of Americans who are uninsured from 10 percent to 19 percent.
“They should abolish the Congressional Budget Office,” (Newt) Gingrich told host Martha McCallum on Fox News’ “The First 100 Days.”
The CBO “is corrupt, it is dishonest, it was totally wrong on Obamacare by huge, huge margins,” he said. “I don’t trust a single word they have published. I don’t believe them.”
The budget office’s estimates provide a detailed, credible appraisal of the Republican effort to unravel former President Barack Obama’s 2010 overhaul. The office has a four-decade history of even-handedness and is currently headed by an appointee recommended by Price when he was a congressman. Trump has repeatedly attacked the agency’s credibility, citing its significant underestimate of the number of people who would buy insurance on state and federal exchanges under “Obamacare.”
The ACA and leading replacement proposals rely on refundable tax credits to help individual market enrollees pay for premiums, although the credit amounts are set quite differently. The House Leadership proposal released on March 6, the American Health Care Act, proposes refundable tax credits which vary with age (with a phase-out for high-income enrollees) and grow annually with inflation. The tax credits under the ACA vary with family income and the cost of insurance where people live, as well as age, and grow annually if premiums increase.
These various tax credit approaches can have quite different implications for different groups of individual market purchasers. For example, the tax credits under the ACA are higher for people with lower incomes than for people with higher incomes, and no credit is provided for individuals with incomes over 400% of poverty. The current replacement proposal, in contrast, is flat for incomes up to $75,000 for an individual and $150,000 for a married couple, and so would provide relatively more assistance to people with upper-middle incomes. Similarly, the ACA tax credits are relatively higher in areas with higher premiums (like many rural areas), while the replacement proposal credits do not vary by location. If premiums grow more rapidly than inflation over time (which they generally have), the replacement proposal tax credits will grow more slowly than those provided under the ACA.
Under the ACA in 2020, we project that a typical 40-year-old making $20,000 per year would be eligible for $4,143 in premium tax credits (not including the additional cost-sharing subsidies to lower his or her deductibles and copayments), while under the American Health Care Act, this person would be eligible $3,000. For context, we project that the average ACA premium for a 40-year-old in 2020 would be $5,101 annually (meaning the tax credit in the ACA would cover 81% of the total premium) for a benchmark silver plan with comprehensive benefits and reduced cost-sharing. A $3,000 tax credit for this same individual under the American Health Care Act would represent 59% of the average 40-year-old benchmark silver premium under the ACA.
Generally, the ACA has higher tax credit amounts than the replacement plan for lower-income people – especially for those who are older and live in higher-cost areas – and lower credits for those with higher incomes. Unlike the ACA, the replacement plan provides tax credits to people over 400% percent of the poverty level (phasing out around 900% of poverty for a single person), as well as to people current buying individual market coverage outside of the marketplaces (not included in this analysis).
Kaiser Family Foundation
Despite campaign promises of repeal, legislatively, this is a nonstarter. This is worth a brief review as many think a simple repeal bill from the House is possible.
Could President Trump use executive orders to dismantle Obamacare? Perhaps, but lawsuits will follow, thwarting each executive order, as is happening with Trump’s immigration orders. Eventually the Supreme Court would weigh in. After John Roberts twisted himself into a legal pretzel to find Obamacare constitutional, I wouldn’t bet on him having a change of heart if Trump starts swinging a wrecking ball at Obamacare.
So how can President Trump activate the cancer which is buried within Obamacare? It won’t be a cancer doctor, but close. How about a bone cruncher, an orthopedic surgeon by the name of Tom Price?
Most don’t remember how “the Secretary” is sprinkled generously throughout the Affordable Care Act. Dormant cancer cells waiting to be activated. For a good summary, read Philip Klein’s excellent piece from 2010 in The American Spectator. When the bill was signed into law, Kathleen Sebelius was “the Secretary” of Health and Human Services. Not so today. Now it’s Dr. Price.
Within the bill there are 2,500 references to “the Secretary”. 700 times the Secretary “shall” do something, 200 times the Secretary “may” do something, and 139 occasions when the “Secretary determines” what should be done.
These “shall” and “may” determinations cover things like what type of insurance coverage Americans are required to have, how insurance networks and exchanges are organized, how grant money is doled out, what the “essential health benefits” that every insurance policy must cover are.
Suppose the new Secretary determines that Americans “shall” only be required to have catastrophic insurance? Or no insurance at all? What if the “essential health benefits” are left to the discretion of the purchaser of the insurance policy? What if the Secretary “determines” that there will be no insurance mandates or penalties? Or that insurance “may” be sold across state lines?
Like the ACA itself, the American Health Care Act includes refundable tax credits to help make premiums more affordable for people buying their own insurance. This might seem like an area where a replacement plan could preserve a key element of the ACA. However, the tax credits are, in fact, structured quite differently, with important implications for affordability and which groups may be winners or losers if the ACA is repealed and replaced.
Kaiser Family Foundation
The first involves repealing the Affordable Care Act through the reconciliation process, a mechanism that allows only budget bills to be passed in the Senate without being subject to the filibuster. This would effectively change the threshold for passage in the upper chamber from the 60-vote super majority to a simple majority of 51.
The second involves executive actions through the Department of Health and Human Services following the confirmation of Georgia congressman Tom Price, who has been nominated by President Trump to lead the department. The third would be a separate standalone bill.
Modified: March 13, 2017
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