Significant challenges ahead in Senate for ACA overhaul bill

Senate will try to balance AHCA tax cuts with restoring health protections,  major changes expected

On May 4,  the House narrowly passed the American Health Care Act (AHCA), H.R. 1628, legislation that would reshape the nation’s health care system.

The complex legislative package, which has already undergone multiple revisions since first being introduced in March, now goes to the Senate, where it is expected to be significantly changed.

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Key Provisions in the AHCA

AHCA also faces stricter procedural rules and different policy dynamics in the Senate, where Republicans can only lose two votes. Both chambers must agree on a final bill before it can be sent to President Trump for his signature.

AHCA passed the House by a vote of 217–213, with 20 Republicans and all Democrats opposing the bill. While the legislation would only repeal certain provisions of the Affordable Care Act (ACA) and makes further structural changes to the nation’s health care system, it is widely viewed as an effort to “repeal and replace the ACA,” a campaign promise made by President Trump and Republican members of Congress.

Senate Majority Leader Mitch McConnell (R-Ky.) has already set up a health care working group of Republican senators, who are meeting regularly to discuss a path forward. Like House Speaker Ryan, he must unite conservative and moderate Republicans. However, he faces an even higher hurdle, only being able to afford to lose two Republican votes, even with Vice President Pence breaking a tie.

On matters of substance, the steep Medicaid cuts and phasedown of the Medicaid expansion in AHCA will be more of an issue for senators, since they are more in sync with their governors. There are 20 Republican senators from states that have expanded Medicaid.

The Senate will grapple with balancing how to preserve tax cuts in the AHCA while trying to restore health protections. Both typically drive up federal deficits, and the final package must in fact reduce the federal deficit over the next 10 years to comply with the budget reconciliation requirements.

If the Senate can get an altered version of AHCA passed over the next few months, as it plans to do, differences would have to be reconciled with the House through the conference committee process before a bill could be passed and signed into law.

 

A Complicated Path to Passage

AHCA has faced multiple fits and starts, including a pulled vote in late March, before Republicans negotiated additional amendments to win over different factions of their party. Originally the bill was scheduled to be voted on March 23, the seven-year anniversary of the signing of the ACA. Still lacking the votes, another change was made to the bill with a vote scheduled for March 24. However, at the last moment, Speaker Paul Ryan announced they were pulling the vote on the House floor because they still did not have the votes necessary for passage.

On April 6, immediately before Congress left for a two-week recess, an amendment was offered by Reps. Gary Palmer (R-Ala.) and David Schweikert (R-Ariz.) that would appropriate $15 billion over the next nine years to create a federal “invisible risk-sharing” program to supplement a patient stability fund included in the original AHCA. Coming off the recess after facing constituents in town halls, House leadership was eager to bring AHCA back to life.

To win support from the Freedom Caucus, Rep. Tom MacArthur (R-N.J.), a member of the moderate Republican group known as the Tuesday Group, negotiated with Freedom Caucus Leader Rep. Mark Meadows (R-N.C.) on an amendment on April 25 to allow states to opt out of certain ACA insurance regulations. For instance, states could opt out of ACA’s essential health benefits, which require insurers to cover 10 main benefits, including maternity and newborn care as well as mental health and substance abuse disorder services. The amendment would also let states waive the requirement that prevents insurers from charging enrollees more based on their medical history or pre-existing conditions.

While the “MacArthur Amendment” gained support from the Freedom Caucus, it still failed to gain enough votes from Republicans, who were primarily concerned about the ability of states to waive requirements to cover pre-existing conditions. In response, Rep. Fred Upton (R-Mich.), one of the most influential hold-outs, negotiated an amendment on May 3 that would add $8 billion over five years to high-risk pools, through which states can subsidize more expensive premiums for people with pre-existing conditions. While it is debatable if this would be enough money or effective, it was enough to win over enough Republicans, including key moderates.

President Trump and the House celebrated immediately at the White House, intent on moving on other priorities such as tax reform as they punt the heath care bill over to the Senate. Immediately key Republican Senators including Dean Heller (R-Nev.) and Rob Portman (R-Ohio) issued statements signaling their concerns with the current version of AHCA.  

Under procedural rules, the Senate cannot officially take up the package until CBO scores the final package, which is currently expected the week of May 22 at the earliest.

NACo will continue to monitor developments and work with members of the Senate, the administration, states, and other partners to ensure counties can continue to serve the health needs of residents in any final legislative package. “We remain ready to identify strategies to strengthen our nation’s health system by improving health outcomes and access to care while being responsible stewards of local taxpayer dollars,” NACo Executive Director Matt Chase said.

Key provisions of the AHCA

While the final version of the House-passed AHCA is still being scored, an earlier estimate by the Congressional Budget Office (CBO) projected that AHCA, in sum, would reduce the federal deficit by approximately $150 billion over the next 10 years.

This would be achieved by cutting over $800 billion to the Medicaid program over the next 10 years, or approximately 25 percent of federal support. The replacement of ACA’s subsidies and tax credits with a new age-based tax credit, provides additional savings.

These provisions, according to the CBO, would result in 24 million fewer Americans having health coverage, including 14 million fewer Medicaid beneficiaries, by 2026.

AHCA would eliminate approximately $900 billion in taxes imposed by the ACA on high-income earners and health care providers or insurers.

While AHCA is very complex and will face additional changes in the Senate, the current bill:

• Structurally changes the core Medicaid program by converting federal funding for Medicaid into a per capita cap or block grant starting in 2020. (Currently, states are guaranteed at least $1 in federal funds for every $1 in state spending on the program.)
• Phases out enhanced federal funding for 32 states that expanded Medicaid— eliminating entirely in 2020 —  and prohibits new enrollees under expansion criteria.
• Adds a state option to require work as a condition of eligibility for nondisabled, nonelderly, nonpregnant Medicaid adults.
• Repeals funding for the Prevention and Public Health Fund (annually provides approximately $1 billion for public health) at the end of FY18.
• Eliminates most taxes and tax increases imposed by the ACA (the Cadillac tax, which has already been delayed until 2020 is further suspended until 2025).
• Removes the individual and employer mandates immediately.
• Imposes a penalty on individuals who do not maintain continuous coverage.
• Allows states to waive ACA’s essential health benefit requirements for health plans in individual and small group markets such as emergency services, maternity and newborn care, mental health and substance abuse treatment.
• Allows states to obtain waivers that would allow insurers to charge higher rates to individuals with preexisting conditions under certain circumstances.
• Ends the ACA’s subsidies and tax credits for people with incomes up to 400 percent of the poverty line as of 2020 and replaces them with age-adjusted fixed-dollar tax credits not based on income.
• Allows insurers to charge older customers in the individual and small group market as much five times higher as young adults (age rating ratio of 1 to 5), as opposed to the ACA’s limit of three times as much.