Thoughts on Republican Repeal & Replace

The House Republicans dropped two bills yesterday, that they say they will vote on Wednesday, before the CBO even has a chance to score the bills’ impact on insurance coverage, Medicare, Medicaid and the deficit (they aren’t rushing to suppress good news–many fewer will be covered and they get rid of Medicare payment cuts and cut the taxes used to pay for Obamacare, so it will increase the deficit). The House Energy and Commerce bill focuses on Medicaid, while the Ways and Means bill focuses on tax credits for private health insurance.

A few key thoughts.The most consequential part of the two-bill proposal are cuts to the Federal Share of Medicaid. Several Republican Senators in States that have expanded Medicaid and/or Blue States have said Medicaid expansion had to be maintained in any repeal and replace bill. House Republicans dislike Medicaid expansion quite a lot, so it is hard to find a bill that can get 50 votes in the Senate (in which case the VP would break the tie) and 218 in the House.

  • This attempts to thread the political needle by keeping Medicaid expansion, with enhanced Federal share of the cost in the ACA until 2020. From 2020 on, anyone who is continuously covered by Medicaid will retain the enhanced cost match until the become ineligible for Medicaid; then the enhanced match will be lost. There is tremendous churn in and out of Medicaid, and so this will mean that almost no enhanced cost match beneficiaries will be left within a year or so. This effectively sunsets Medicaid expansion.
  • Equally consequentially, the funding agreement between the federal government and state will be converted to a “per capita cap” version of a block grant. In 2020, the Medicaid funding levels will revert to those that existed in 2016 for the non-ACA Medicaid pool. From this point forward, the federal match will rise at medical CPI. This is like your employer saying I will give you raises until 2020. In 2020, your salary will revert to your 2016 salary and then we will go from there.
  • The effect will be a great reduction of the federal cost of Medicaid over time, with States given “flexibility” to figure out who to pay for and how.
  • The political question is whether the Senate Republicans who are worried about Medicaid expansion will go for this. They could say, we kept expansion until 2020….and there might be a lot of wink-wink, nod-nod that during the election we won’t go through with this, and then you get a 2 year can kick. Then another, etc and your recreate the SGR/Doc Fix fiasco.

The Structure of the Private Insurance Aspect of the bill is very similar to the one we have in the ACA, just with lots smaller subsidies spread across more people.

  • The individual mandate and the employer mandate are not actually repealed in this–instead the penalty for an individual being uninsured is set to $0 as is the penalty for an employer over 50 employees dropping coverage (that is because this is a Budget Reconciliation vehicle, that can only change things that directly impact federal spending).
  • In place of the individual mandate is a continuous coverage provision that says if you are uninsured for more than 63 days after December 31, 2017, if you come back to sign up for private coverage in a State exchange than you have to pay a penalty of 30% of the value of the premium (so if monthly is $100, then you have to pay $130). Note that this is not a tax in the bill–the penalty has to be paid to your insurance company. Basically, the law tells insurers to charge more to people with gaps in coverage of 63+ days.
  • This looks nearly designed to blow up the individual insurance market to me. Under the individual mandate we have now, there is a problem with too few healthy folks signing up. The penalty is supposed to incentivize staying covered, but the penalties will be lower than they are now for many young folks. I am interested in CBO’s take here, but I think there is worse adverse selection than the current ACA.
  • Tax credits are age-based, with a means test. Basically, more people get smaller tax credits and with ending of mandated benefits (states will now decide) the key issue will be what can  you buy with the tax credits. The answer will be not much. People between $75,000 (single)-$150,000 (couple) incomes who if buying coverage now get nothing, will get a tax credit, based on their age. This is probably the one group better off in health policy terms (hospitals that get DSH cuts restored immediately, and rich folks who get tax cuts will be better off).

Extra interim money for non-expansion states. There is a provision of $10 Billion over 5 years for states that have not expanded Medicaid, but note that this is for the entire nation and is not more than a few hundred dollars per member, per month for a state’s Medicaid program. The state of N.C.’s cost of Medicaid expansion from 2017-2026 is estimated at $6.2 Billion. This provision is very little money to states.

Cadillac Tax is not repealed, but delayed until 2024 and no other financing mechanism noted. There had been talk of replacing the cadillac tax with a capping of the tax exclusion of employer sponsored health insurance, which has long been a Republican think tank thing to be for. However, they instead keep the Caddy Tax and delay it (this will help make the CBO score less of a shit-show, but they will plan to can kick this too).

  • The bills remove the financing for coverage expansion (increased taxes on high income folks, and it reinstates DSH payment cuts immediately).
  • They don’t identify alternative financing mechanisms, other than the cadillac tax in years 2024 and out (which they will later want to delay). So, this is basically a deficit financed tax cut, with a Medicaid expansion that is preserved until 2020, and after that a huge reduction of federal Medicaid cost share with the state’s left holding the bag.
  • The fact that the Commerce and Ways and Means Committees are supposedly voting on this before getting a CBO score, should put to rest once and for all that the Republican Party cares about fiscal responsibility.

I will say more later. I don’t see how this can pass the House and the Senate. I have no idea what impact President Trump will have on this debate, or really anything else–that is an hour-by-hour determination.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: