ACA Repeal and Replacement Update – March 9, 2017

Top takeaways from the week:

1) Republican leadership has released a repeal and replace bill; 2) the House Committees on Ways & Means and Energy & Commerce held lengthy markups of the bill, which has now moved to the House Budget Committee for consideration; 3) many lawmakers are unhappy with the bill, putting its passage into jeopardy in both the House and Senate; and 4) CMS Administrator Nominee Seema Verma is expected to be confirmed on March 10

This week, HHS Secretary Price described the Administration’s plans for three phases of ACA repeal: (1) passing legislation that would repeal and partially replace the ACA; (2) administratively changing existing rules related to the Marketplaces and Medicaid through regulation; and (3) passing other health care reforms that can’t be done through the budget reconciliation process. The first step in the process is now underway as the House considers the newly released American Health Care Act (AHCA).

House Ways & Means Committee Chair Brady (R-TX) has said that he expects the AHCA to be sent to the Senate by the end of March, Senate Majority Leader McConnell (R-KY) has indicated that he’d like to take up the AHCA in the Senate before the April recess, and the White House said it is hoping to be able to sign the bill into law by April. Even so, lawmakers, governors, and industry have raised concerns over major portions of the bill, including provisions related to Medicaid expansion, tax credits, and the continuous coverage penalty, as well as the speed at which leadership is moving.

House Action

On March 6, the House Energy & Commerce and Ways & Means Committees each released their respective portions of the American Health Care Act (AHCA), the House GOP plan to repeal and partially replace the ACA. The committees proceeded with lengthy markups Wednesday and through Thursday, ultimately voting their portions of legislative text forward. The legislation now moves to the House Budget Committee for consideration. The Congressional Budget Office (CBO) is expected to release its score of the legislation early next week, prior to the Budget Committee’s markup on Wednesday, March 15.

The Joint Commission on Taxation (JCT) released a set of estimates of revenue losses under the AHCA on March 7, projecting that based on a review of 11 of the 18 tax-related provisions, the bill would cost $266 billion over ten years. Estimates (JCX-16-17):

The AHCA would:

  • Repeal funding for the Public Health and Prevention fund, and allocate $422 million for community health centers in FY 2017;
  • Repeal the enhanced match rate for Medicaid expansion on January 1, 2020, but allow states to continue to receive enhanced match rates for continually enrolled expansion enrollees who enrolled before 2020. After January 1, 2020 states will only be able to enroll expansion enrollees at the state’s traditional FMAP. The bill would also give states that have not yet expanded eligibility until January 1, 2020 to do so;
  • Restore pre-ACA DSH payments and establish a five-year, $10B “Safety Net Fund” for non-expansion states to adjust payment rates for Medicaid providers;
  • Reform Medicaid financing from a federal match to a per-capita cap starting in 2020;
  • Establish a Patient and State Stability Fund – which would provide $100 billion in funding over 9 years to states for programs such as high-risk pools, promoting access to preventive services, or reducing out-of-pocket expenses.
  • Allow issuers to fine consumers failing to maintain continuous coverage – defined as having a lapse in coverage in the previous year no longer than 63 days – by increasing premiums by up to 30% for up to a 12-month period after enrollment beginning in benefit year 2018.
  • Repeal metal tiers and actuarial value standards and implement a 5:1 age rating limit.
  • Repeal the ACA’s cost-sharing subsidies starting in 2020, repeals the individual and small business mandate beginning in 2016, repeals the premium tax credit beginning in 2020, repeals the Health Insurance Tax, Tanning Tax, Prescription Medication tax, the net investment income tax, medical device tax, and amends the Cadillac tax so that it will not go into effect until 2025.
  • Provide an advanceable, refundable, age-adjusted tax credit for the purchase of state-approved coverage, tax credit amounts would be phased out for individuals earning more than $75k; and
  • Expand HSAs by allowing over-the-counter medications to count as qualified medical expenses for HSAs, taxing nonmedical distributions at 10% rather than the current 20%, and increasing the maximum contribution limit for HSAs to conform with maximum out-of-pocket limits.

On March 8, the House Ways & Means and Energy & Commerce Committees each held lengthy markups for their portions of the AHCA. While Democrats raised concerns over the rushed nature of the proceedings, the lack of a score from the CBO, and the potential impacts of the bill, Republicans largely justified the speed and legislation as necessary to provide immediate relief from the ACA.

  • The House Ways & Means markup lasted until the early morning of March 9, with members finally approving the last provision and moving the bill out of committee shortly before 4:30 am. Democrats prepared hundreds of amendments and raised procedural objections aimed at delaying the markup. Many of the amendments focused on the lack of a CBO score, the lack of a bipartisan solution, the release of President Trump’s tax returns, and the lack of transparency around the bill; all of which were rejected. After 18 hours, the Committee advanced the legislation along a party-line 23-16 vote.
  • The House Energy & Commerce markup went well into the afternoon of March 9. Similar to the markup in the Ways & Means Committee, Democrats offered hundreds of amendments, to no avail. Notably, Rep. Barton (R-TX) offered, and subsequently withdrew, two amendments supported by the Republican Study Committee and House Freedom Caucus, which would have sped up the repeal of Medicaid expansion and put an end date on the enhanced federal match. After 27 hours, the Committee advanced the legislation along a party-line 31-23 vote.

Despite the movement in the House, the bill faces considerable hurdles to its passage, including from conservatives in both the House and the Senate, moderate Republicans, Democrats, and from many major industry groups.

Conservative members of Congress, including the 36 members of the House Freedom Caucus, have referred to the bill as “Obamacare Lite,” critiquing its inclusion of tax credits, its continuation of Medicaid expansion until 2020, and its penalties for failure to maintain continuous coverage. President Trump met with leaders of conservative groups on March 8 in the hopes of assuaging these concerns and expressing his openness to changing certain aspects of the bill, including expediting the repeal of Medicaid expansion.

Additionally, many industry stakeholders have also weighed in against the bill as currently written, including AHIP, Blue Cross Blue Shield of America, the American Hospital Association, the Federation of American Hospitals, the American Medical Association,

Meanwhile on March 8, House Committee on Education and the Workforce advanced three bills as part of a broader ACA replacement effort. HR 1313 would help to promote employee wellness plans, HR 1304 would reaffirm self-insurance policies, and HR 1101 would allow small businesses to band together through association health plans to negotiate for lower costs.

Senate Action

While the House quickly moved to hold markups on the AHCA this week, Senate Republicans weighed in on the debate.

Prior to the release of the AHCA on March 6, Sens. Portman (R-OH), Capito (R-WV), Murkowski (R-AK), and Gardner (R-CO) sent a letter to Senate Majority Leader McConnell outlining concerns that the February 10th draft House GOP health care plan does not adequately protect individuals and families in Medicaid expansion programs or provide necessary flexibility for states. The Senators have since maintained their pledge not to vote for a repeal of Medicaid’s expansion. Press release with text of letter:

Additionally, both Sens. Blunt (R-MO) and Cruz noted that as it stands, the House bill is not likely to gain the required votes to pass in the Senate. Sens. Cotton (R-AR) and Graham (R-SC) have called on leadership to slow down the process, and Sens. Lee (R-UT) and Paul (R-KY) have also come out against the bill, arguing instead for a clean repeal. On March 9, Sen. Paul (R-KY) introduced the Obamacare Replacement Act (S. 554), which is largely based on the 2015 Reconciliation bill passed by both Houses of Congress and vetoed by President Obama, and would repeal the ACA without including replacement provisions. Press release: Summary: Bill text:

And on March 8, Senate Finance Committee Ranking Member Wyden (D-OR) released a letter dated January 10, 2017 from former CMS Acting Administrator Slavitt detailing that the repeal of the additional 0.9 percent payroll tax on high income earners will reduce the solvency of the Medicare Hospital Insurance (HI) Trust Fund by three years. Press release: Letter:

Meanwhile, the Senate voted to file for cloture on the nomination of Seema Verma to be Administrator of CMS by a vote of 54-44; it is expected to vote to confirm the nomination as soon as Friday.