U.S. House Poised to Vote Thursday on Health Plan; Would Massively Weaken Federal-State-Local Partnership

NACo briefs congressional staff on Medicaid and the role of counties in local health care systems at a Capitol Hill event, Feb. 28.

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On March 23, 2017, the seven-year anniversary of the signing of the Affordable Care Act (ACA), the U.S. House of Representatives is expected to vote on a health care proposal that would overhaul the nation’s health care system and massively restructure the Medicaid program. The legislation, titled the “American Health Care Act (AHCA)” (H.R. 1628), was introduced on March 6, 2017 as a part of the fast-track legislative procedure called budget reconciliation that was put into play the first day of the new 115th Congress with the intent to repeal and replace the ACA. Having already cleared three of four U.S. House committees, the legislation is currently undergoing changes as President Trump and U.S. House Speaker Paul Ryan negotiate final details of the legislation to secure the 216 votes they need for passage (simple majority vote under budget reconciliation).

If the legislation is passed this week by the House, it would then go to the Senate where Majority Leader Mitch McConnell (R-Ky.) has indicated they would not be able to pass the House version of the legislation. However, he did signal a desire to quickly pass an amended version as early as next Tuesday, March 28. Republicans can only afford to lose two votes in the Senate to secure passage, and multiple Senators have expressed concerns with the AHCA and the additional changes. If a different version is passed in the Senate, it would then have to be sent back to the House for a final vote the week of week of April 3. Ready to move on to other priorities such as tax reform and infrastructure, President Trump is eager to complete his first domestic policy agenda item before Congress is scheduled to depart on April 6 for a two-week recess.

On March 13, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released their estimates of the AHCA, which provided more information about potential impacts of the proposal. They found that 24 million more people would be uninsured in 2026 compared to estimates under existing law. This would result in an estimated 52 million people being uninsured in 2026, close to the number of uninsured before the ACA was passed. These reductions would stem in large part due to an estimated 14 million fewer Medicaid enrollees by 2026 due to a $880 billion cut in federal spending on Medicaid over the next ten years. After accounting for all the savings and costs in the bill, the legislation is expected to reduce the federal deficit by $337 billion over ten years. 

According to estimates by CBO and JCT, the largest AHCA impacts include:

  • A Massive Restructuring of the Medicaid Program

The $880 billion reduction in federal Medicaid spending over the next ten years amounts to a 25 percent reduction of federal support for the program, and the 14 million fewer Medicaid enrollees over the same time amounts to a 17 percent reduction in the number of participants. While some declines in Medicaid spending and enrollment would begin immediately, most changes would begin in 2020 when the federal government would establish a limit on the amount it reimburses states for Medicaid through the implementation of per capita caps. Under a per capita caps model, states would get capped funding levels for different populations enrolled in Medicaid (e.g., the elderly, the blind and disabled, children and adults). At the same time, enhanced federal payments for new enrollees under the ACA’s Medicaid expansion would cease.

  • The Replacement of ACA Subsidies and Tax Credits with New Age-Based Tax Credits

Beyond cuts to Medicaid, the next largest cost savings—$673 billion—would come from eliminating the current ACA tax credits and cost-sharing subsidies, which are based on income, and replacing them with a much smaller, fixed-dollar and age-based tax credit program. Applicable to individuals who purchase health insurance in the individual market, the current program would be repealed beginning in 2020. The new tax credits, which would kick in at that time, would cost an estimated $361 billion.

  • The Conversion of ACA Mandates to a Potential Penalty 

The legislation removes the individual and employer mandates, which the CBO and JCT project will cause a reduction in federal revenues of $210 billion. The mandates are replaced by a 30 percent penalty on the premiums of people who enroll in insurance and were uninsured for more than 63 days in the previous year. Despite this penalty, CBO predicts that 14 million more people will be uninsured in 2018 under the new plan compared to the current law, a number that would rise to 24 million by 2026. The authors of the report suggest this is due to people electing to forgo purchasing insurance in the absence of a mandate or in response to higher premiums, which are expected to rise in the near-term before falling slightly over the ten-year window.

On Monday, March 20, House Republicans unveiled a set of changes they plan to officially adopt in the U.S. House Rules Committee on March 22. These include the ability of states to institute work requirements for Medicaid beneficiaries and the ability of states to accept a block grant for Medicaid, as opposed to just a per capita cap as proposed in the current version of AHCA. Other changes phase out ACA taxes earlier than originally proposed and provide states a bigger annual increase for Medicaid payments older adults and people with disabilities. It is unclear whether a new CBO and JCT analysis could be produced before the House vote and further changes may be in store to secure the needed number of votes.

As NACo’s initial analysis discussed, the nation’s 3,069 counties would be greatly impacted by AHCA in several ways:

1. The proposed legislation would fundamentally alter the important federal-state-local partnership for Medicaid and reduce Medicaid coverage levels.

The AHCA would fundamentally transform the nature of the Medicaid program, changing it from an open-ended entitlement program to one in which states would get a capped amount for each person enrolled in Medicaid. NACo opposes any efforts to cap federal spending to Medicaid, as it would shift costs to states and eventually counties.

In addition to changing the structure of the Medicaid program as it existed before the ACA, the proposed legislation would also impact ACA’s Medicaid expansion that has been adopted by 31 states and the District of Columbia. Under AHCA, enhanced federal funding for low-income individuals in Medicaid expansion would only remain through 2019 for those who are already enrolled and maintain continuous coverage. NACo opposes efforts to repeal the Medicaid expansion and supports maintaining the current eligibility and coverage standards.

2. The proposed legislation could have indirect and direct impacts on county health systems, including county public health departments.

In addition to its indirect effects, AHCA would also directly impact the nation’s 2,800 local public health departments, two-thirds of which are county-based, by eventually eliminating the Prevention and Public Health Fund after cutting it by $100 million in FY 2018. Created in 2010 by the ACA, the Fund provided $932 million for public health programs in 2016, including $324 million for immunization programs and $160 million in preventive services block grants—one of the few funding mechanisms that state and local health departments receive from the Centers for Disease Control and Prevention (CDC) that allow them to adapt to their unique needs. NACo opposes cuts to core local public health and prevention funding like the Prevention and Public Health Fund.

3. The proposed legislation retains the 40 percent excise tax on employer health benefits included in the ACA.

The proposed legislation only delays—rather than permanently repeals—the 40 percent tax on certain employer health benefits instituted under the ACA, or the so-called "Cadillac Tax." Under AHCA, the Cadillac Tax would be retained as a revenue mechanism, though its implementation is delayed from 2020 through 2024. NACo supports efforts to fully repeal taxes on employer health coverage.

Counties already invest $83 billion annually—or about one of every five dollars of our budgets—in community health systems. Counties help support 961 hospitals, 883 skilled nursing facilities, 750 behavioral health authorities and 1,943 public health departments. In addition to providing care to Medicaid beneficiaries, we help some states administer the program and contribute to the non-federal share of Medicaid funding in 26 states. Since 1965, the Medicaid program has been essential to helping our counties meet their often-mandated obligations to provide healthcare to low-income individuals. In addition to our roles providing and administering health services to over 300 million residents, we are major employers—employing 3.6 million and spending approximately $25 billion annually to provide high quality health benefits. 

Provisions in the AHCA would severely weaken the federal-state-local partnership for Medicaid, reduce health coverage levels and shift costs to counties. NACo will continue to track legislative developments and conduct further analyses on impacts to counties. To read NACo’s initial analysis of the AHCA and view additional resources, click here. To read our press statement, click here

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