On September 13, 2017, senators from opposing parties introduced two bills in the Senate embodying radically different approaches to health care reform. This post will analyze the non-Medicaid provisions of a block-grant bill introduced by Republican senators Lindsay Graham (SC), Bill Cassidy (LA), Ron Johnson (WI), and Dean Heller (NV) late morning. A later post will describe the single-payer bill introduced by independent senator Bernie Sanders (VT) and sixteen Democratic co-sponsors mid-afternoon, while a third post will address the Medicaid provisions of Graham-Cassidy.
With only days left before budget reconciliation authority—which would allow Republicans in the Senate to pass ACA repeal and replace legislation without Democratic votes—lapses on September 30, the Graham-Cassidy bill is probably the Republican’s last chance at ACA repeal. The Sanders bill, on the other hand, does not stand any chance at being even considered until the Democrats retake Congress. It does mark the fact that the single-payer approach—long a fringe idea—is beginning to receive serious attention.
What’s In The Bill?
Earlier iterations of the Graham-Cassidy bill have been around for some time. See here and here and here. Two versions were released today. This summary follows the version on Senator Cassidy’s website, which reflects the official summary linked in the press release, rather than the version released with the press release itself.
The fundamental idea of the Graham-Cassidy bill is to terminate the ACA’s Medicaid expansions, premium tax credits, cost-sharing reduction payments, small business tax credits, and Basic Health Program as of 2019 and redistribute the money funding those programs to the states, using a complex formula described below. The bill would also impose per capita caps on Medicaid funding generally, also offering the states the alternative of a broader Medicaid block grant. Finally, the bill contains a number of tax cuts and health care regulation changes taken from earlier Senate repeal bills.
Graham-Cassidy bill would also repeal the individual and employer mandate penalties retroactive to 2016. It would prohibit premium tax credit or small business tax credit payments for health plans that cover abortions other than those that threaten the life of the mother or in cases of rape and incest after 2017, impose strict penalties on health plans that violate current abortion restrictions, and prohibit 1332 waivers that would limit HHS enforcement authority.
The bill would repeal the ACA’s prevention and public health fund after 2018. It would prohibit funding through federal payments for Planned Parenthood or similar groups for one year. It would allow all individuals purchasing coverage in the individual market to purchase catastrophic coverage as of 2019 and incorporate catastrophic plan purchasers into the individual and combined market single risk pools.
The bill would repeal the medical device tax as of 2018, but leave the other ACA taxes in place. It would include all of the changes other Republican proposals have made lessening restrictions on health savings accounts, including allowing over-the-counter medications to be paid for through tax subsidized HSAs, reducing the excise tax for non-qualified HSA expenses to 10 percent, allowing the purchase of high-deductible health insurance through HSAs, permitting HSA funds to be used to pay fixed periodic fees for primary care service arrangements for individuals with high-deductible coverage, raising the maximum contribution rate for HSAs to match the out-of-pocket limit, allowing both spouses to make catch-up contributions to the same HSA, and permitting HSA funds to be used for medical expenses incurred up to 60 days before an HSA was established. HSAs would not be allowed for high-deductible plans that cover abortions.
The Graham-Cassidy bill would create a short-term market stabilization program for 2018 and 2019,” to assist in the purchase of health benefits coverage by addressing coverage and access disruption and responding to urgent health care needs within States.” The bill would appropriate $10 million for 2019 and $15 million for 2020 for the program. The Administrator of the Centers for Medicare and Medicaid Services would be responsible for developing procedures and criteria for distributing these funds and health insurers would apply for the funds to the Administrator.
Transforming ACA Money Flows Into Grants For States
At the heart of the bill, however, as noted earlier, is its provision of money to the states for years following 2019 in lieu of the money the ACA provides for premium tax credits, cost-sharing reductions, the Medicaid expansions, and the Basic Health Plan Program. Annual funding would begin at $136 billion for 2019 and increase to $190 billion for 2026 and thereafter. The Center on Budget and Policy Priorities estimates this would reduce funding by $239 billion from ACA levels over this period of time. Funding could be used for a broad range of purposes, including assistance with premiums, reductions in cost-sharing, direct payments to providers for services, or reinsurance or other market stabilization measures. Up to 20 percent could be used for coverage for traditional Medicaid beneficiaries. States would not be required to provide matching funds under this program, but many states would have to spend a considerable amount of their own funds to continue current levels of coverage.
The money would be distributed through a complex formula that would change over the 2020 to 2026 time period. It would begin distributing the money among the states primarily based on each state’s population with incomes between 50 and 138 percent of the federal poverty level. This ignores the facts that current Medicaid expansion coverage could in some states cover people with incomes below 50 percent of poverty and premium tax credits in all states cover individuals with incomes up to 400 percent of poverty, while cost sharing reductions are available to persons with incomes up to 250 percent of poverty.
After 2024, a new formula would phase in that would focus on the percent of the 50 to 138 percent of poverty population that actually had coverage with an actuarial value at least equal to CHIP coverage (with reductions for states that offered coverage with lower actuarial values.) Beginning in 2021, a risk adjustment formula would also begin to phase in that would account for state-specific clinical risk categories reflecting severity of illness and factors such as demographics, wage rates, income levels, and other factors determined by HHS. There would also be an adjustment to favor states with low population density and states that did not expand Medicaid for 2020 and 2021. In general, the program would move money away from states that have expanded Medicaid and succeeded in signing up a higher proportion of their population for ACA coverage to states that have not taken advantage of the ACA’s coverage expansions.
Waiver Provisions Could Neuter Prohibition On Pre-Existing Condition Exclusions
The final version does not seek to amend section 1332 as have earlier bills. It does provide, however, that states that receive funding under the bill can obtain waivers to permit insurers to charge different premiums based on health status, age, or any other factor other than sex or membership in a constitutionally protected class (such as race or national origin). States could also obtain waivers of the ACA’s essential health benefit requirements and the ACA’s medical loss ratio rebate requirements. The bill would prohibit pre-existing condition exclusions, but the requirement would seem meaningless if insurers could charge unaffordable rates based on preexisting conditions. The waivers would only apply to insurers that receive funding under the program and individuals who receive benefits under the program, apparently a move to avoid the objections based on the Byrd amendment—which limits the types of provisions that may be included in budget reconciliation measures—that changes to health insurance regulations in other Republican bills have faced.
The bill will probably need to receive a score from the Congressional Budget Office before it can be considered on the floor. Since all the time allotted to debating a budget reconciliation bill has now been used up, it could proceed quickly as an amendment to the House bill currently before the Senate if 50 senators (plus the Vice President) would support it.
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