Legislative Insight: The American Health Care Act (AHCA)

Posted: 4/2/17

After failing to muster 215 votes—with no support from Democrats—House Republican leaders pulled the American Health Care Act from a vote last Friday (March 24th). The decision to abstain comes after President Donald Trump and House Speaker Paul Ryan (R-WI) placated both wings of their party. While Trump and Ryan offered incentives to staunchly conservative representatives, they alienated their moderate colleagues.charles_w-_dent2c_official_photo_portrait2c_color

“After careful deliberation, I cannot support the bill and will oppose it,” said Rep. Charlie Dent, (R-PA) in a statement on Thursday.  “I believe this bill, in its current form, will lead to the loss of coverage and make insurance unaffordable for too many Americans, particularly for low-to-moderate income and older individuals.  We have an important opportunity to enact reforms that will result in real health care transformation–bringing down costs and improving health outcomes. This legislation misses the mark.”

Dent’s statement echoes other GOP centrists wary of the AHCA’s impact, as predicted by the Congressional Budget Office. Last week, The CBO and the Joint Committee on Taxation released the much-anticipated score of the American Health Care Act,

The scores assessment included several notable statistics:

  • Fourteen million people would be without health insurance in 2018 under the new law, compared to the Affordable Care Act. In 2020, that number would increase to 21 million before rising to 24 million in 2026;
  • AHCA would reduce the federal budget by $337 billion over 2017-2026;
  • The report estimates that premiums would jump 15 to 20 percent in 2018-2019 for single policyholders because of the individual mandate repeal. After 2020, a decrease in premiums will vary based on age and income;
  • Several Medicaid provisions would decrease spending by $880 billion over the next decade. By 2026, the CBO estimates that Medicaid spending would be about 25 percent under the current ACA.

The CBO’s assessment stems from several AHCA provisions, including:

  • Removal of the individual mandate. Instead of a penalty, the AHCA will implement a 30 percent surcharge on premiums of a year if previous coverage is dropped.
  • The AHCA issues tax credits based on age and income, whereas the ACA also included geography and cost of living in their subsidy assessment. Furthermore, AHCA caps refunds at $4,000 for those 60 and older, while a younger person with the same income would receive $2,000.
  • Under ACA, the Federal government has a matching program. Under the AHCA, the Federal Government would fund Medicaid by a per capita amount beginning in 2020.

Among the most debated items in the CBO’s report, was the overhaul of Medicaid expansion. Under the Affordable Care, Medicaid coverage extended to people at 138 percent of the federal poverty level. Prior to Obamacare, the federal and state government’s paid 50/50 in Medicaid costs. With the expansion (32 states accepted the Medicaid expansion), the federal government covered a significant portion of Medicaid expansion to cover low-income Americans. The American Health Care Act does not extend Medicaid coverage to new individuals between 100 and 138 percent at the federal poverty level, but would allow those already on the expansion to remain under a grandfathered clause. Furthermore, the AHCA creates a per capita formula for federal Medicaid funding. By 2020, the CBO estimates that 14 million fewer people will be on Medicaid. As a result, a larger tax burden for Medicaid would shift to the State’s covering Medicaid expansion. West Virginia, Nevada, Ohio, Arizona, New Mexico and Kentucky—states with high portions of residents at 100 to 138 percent of the poverty level—would experience the greatest impact.obamacare_replacement_brainstorming_session

In lieu of limited Medicaid funding, the AHCA would have provided age-based tax credits instead of ACA subsidies based on income, regional insurance costs and age. While the ACA did not cap subsidies, AHCA maxes tax credits at $4,000 for anyone older than 60 and making less than $75,000. Essentially, older, lower income people living in a high cost region will see a cap on the amount of money to help them purchase insurance under AHCA. Conversely, younger people with higher incomes will see an increased tax credit under AHCA compared to ACA.

Projected Annual Premium Tax Credit available in the Individual Market under the Affordable Care Act and the American Health Care Act, 2020
Income (2020 FPL) Age Affordable Care Act American Health Care Act
Reno, NV US Average Mobile, AL Reno, NV US Average Mobile, AL
$20,000 (160% FPL) 27 $2,899 $3,225 $4,522 $2,000 $2,000 $2,000
40 $3,745 $4,143 $5,725 $3,000 $3,000 $3,000
60 $9,030 $9,874 $13,235 $4,000 $4,000 $4,000
$40,000 (320% FPL) 27 $0 $103 $1,400 $2,000 $2,000 $2,000
40 $623 $1,021 $2,603 $3,000 $3,000 $3,000
60 $5,908 $6,752 $10,113 $4,000 $4,000 $4,000
$75,000 (600% FPL) 27 $0 $0 $0 $2,000 $2,000 $2,000
40 $0 $0 $0 $3,000 $3,000 $3,000
60 $0 $0 $0 $4,000 $4,000 $4,000
$100,000 (800% FPL) 27 $0 $0 $0 $0 $0 $0
40 $0 $0 $0 $500 $500 $500
60 $0 $0 $0 $1,500 $1,500 $1,500
Source: Kaiser Family Foundation analysis. Notes: In the 2017 ACA exchange markets, premiums in Reno, NV and Mobile, AL are approximates

 

AHCA’s Impact on New Jersey

The Garden State was recently ranked eighth in the nation in Medicaid usage, while also having the seventh lowest premium raises as a result of ACA, according to various reports. With AHCA’s proposal to slash funding and convert Medicaid dollars into block grants, New Jersey—which has a fifth of its residents covered by Medicaid—would have dropped a million people from coverage.

If New Jersey were to maintain the current Medicaid eligibility levels, the state would be on the hook for an additional $8.8 billion over the next decade with reduced Federal assistance. If the ACA was repealed, New Jersey would have to contribute about $2.1 billion annually instead of its current $461 million.

According to New Jersey Policy Perspective, half a million New Jersey residents would lose coverage in the next three years under AHCA, with the largest percentage increases occurring in Republican held congressional districts.

While the House did not hold an official vote, three Garden State Congressional Republicans took note of the bills potential impact and voiced their opposition. In the end, only two of New Jersey’s five Republican congressmen supported AHCA, while all the Democrats opposed the bill.

frank_lobiondo2c_official_portrait2c_c112th_congressRegrettably, the current healthcare proposal is not better for South Jersey,” Rep. Frank LoBiondo (NJ-2nd) said in a statement before the vote. LoBiondo’s district would haveexperienced a 77-percent increase in uninsured if AHCA was passed. “Simply put, this bill does not meet the standards of what was promised; it is not as good as or better than we currently have. Accordingly, I will vote “no” on this healthcare plan.”

Rep. Leonard Lance (NJ-7th) also said he would vote against AHCA days prior to a scheduled vote.

“The legislation congress was considering this week missed that mark and did not meet my goals for an Obamacare replacement plan: greater access for the American people, better options for all patients and lower costs across the healthcare market,” Lance said in a statement. “I am hopeful future legislation will achieve these goals and I will work with President Trump, Speaker Ryan and all those who wish to improve the healthcare system in this country.”

Rep. Chris Smith, New Jersey’s 4th district, also voiced opposition. Meanwhile, GOP congressmen Rep. Tom MacArthur (NJ-3rd) and Rep. Rodney Frelinghuysen (NJ-11th) made statements in support of AHCA.

“This bill was not perfect—no bill is—but it was a dramatic improvement from where it started,” said MacArthur after Ryan withdrew the bill from the House. MacArthur’s support of AHCA came in lieu of a 94-percent increase in uninsured within his district. “It didn’t have enough votes to pass but I stand by my efforts to improve it. The only way we’re going to repair our broken healthcare system is if we work together to fix the problem.”

Highlights from the Congressional Debate Surrounding AHCA

us_congress_02After the Congressional Budget office released its findings, both Democrats and Republicans began publicly denouncing the House GOP’s healthcare mandate. House Minority leader Nancy Pelosi (D-CA) appeared alongside Senate Minority leaders Chuck Schumer (D-NY) for a joint statement following the report’s release:

“This is – to take 20 million off of their coverage, and as they do so, they are implementing the biggest transfer of wealth in our history – $600 billion dollars going from working families to the richest corporations in our country,” said Pelosi.  In terms of insurance coverage, it’s immoral.  In terms of giving money to the rich at the expense of working families, it is indecent and it is wrong.”

While the backlash from congressional Democratic leadership seemed predictable, right-wing members of the Republican House also criticized the bill.

“…We didn’t tell the American people we were going to repeal Obamacare but keep some of the taxes in there,” said Rep. Jim Jordan (R-Ohio), chairman of the House Freedom Caucus, during a Fox News Sunday interview with Chris Wallace, a day before the CBO score was released. “We didn’t tell them we were going to repeal Obamacare and get rid of the mandate but yet bring back this 30 percent penalty that’s in the bill.  We didn’t tell them we were going to have this insurance subsidy in the bill either.  So, let’s do what we said.”

Meanwhile, at the moderate end of the GOP spectrum, Rep. Illena Ros-Lehtinen, located in Miami, announced her intention to vote against the AHCA. Citing her elderly and poor constituents, Ros-Lehtinen said in a statement released on March 14: “The bill’s consequences for South Florida are clear: too many of my constituents will lose insurance and there will be less funds to help the poor and elderly with their healthcare.” She added, “we should work together to write a bipartisan bill that works for our community and our nation without hurting the elderly and disadvantaged among us.”

Jordan and Ros-Lehtinen’s comments highlight the challenges AHCA architects Ryan (R-WI) and House Majority Leader Rep. Kevin McCarthy (R-CA) face in getting the bill through congress. The House Speaker also had to work with the Trump administration which promised “insurance for everybody” on the campaign trail, and doubled-down on it following his victory in November. Furthermore, as one of the bills architects, Ryan must pass the bill through the budget reconciliation process. This parliamentary maneuver circumvents a filibuster by Democrats in the Senate with only 50 votes needed. However, reconciliation means the bill must relate to the budget, and can’t target provisions in ACA. The bill also had comply with the “Byrd Rule”in the Senate. Named after the former West Virginian Senator Robert Byrd, it stipulates that a reconciliation measure is prohibited from considering “extraneous matters,” as determined by the Senate parliamentarian.

In an effort to woo both moderate and conservative GOP votes, House leadership amended several aspects of the bill on Monday night. Among the revisions aimed at centrists included $85 billion in funding for tax credits to help Americans between 50 and 64 years old deal with rising premiums. The GOP leadership also deleted a provision that would have allowed consumers to place their tax credit in a health savings accounts, which could then be used for an abortion. Other revisions included work requirement for able-bodied Medicaid recipients, and state options for converting Medicaid programs into block grants.

Rep. Mark Meadows (R-NC), the House Freedom Caucus Chairman, told reporters the revisions weren’t enough to give Republicans the required votes to pass the House. With 27 members, the House Freedom Caucus remains a major barrier to the GOP’s healthcare reform plan. The Freedom Caucus maintains that it will not vote for a plan that mandates services a healthcare provider must carry. The caucus believes this stipulation prevents costs from coming down, but it can’t be changed under budget reconciliation rules.

On Wednesday, Rep. Lou Barletta (R-PA) announced he would vote for the bill following a meeting with Trump and Ryan. His flip comes after receiving a guarantee to have a vote on his bill that bans illegal immigrants from receiving tax credits.

“The president gave his full support to legislation I will introduce to deny health care tax credits to illegal immigrants, and the speaker promised to bring the bill to the House floor for a vote,” Barletta said in a statement. “Because my concerns were met, I will vote for the bill with the understanding that my bill will receive full consideration on the House floor next month.”

While the House bill ultimately failed, other options in the Senate remain. Senator Bill Cassidy (R-LA) has introduced a bill known as the Patient Freedom Act. The bill gives states three options: 1) Keep the ACA intact 2) Create a new state alternative 3) Design an alternative solution without federal assistance. The Senate resolution was introduced in January before it was sent to the committee on Finance. It includes five cosponsors; Lindsey Graham (R-SC), Mike Rounds (R-SD), Shelly Capito (R-WV), Johnny Isakson (R-GA) and Susan Collins (R-ME).

“Our plan represents a growing coalescence of Republican ideas on health care while returning power to states and fulfilling President Trump’s pledge to bring health care coverage for all,” said Cassidy in a statement following the bills introduction.

Following the release of the AHCA CBO score, Cassidy told the Washington Post the score was “eye-popping”

“President Trump said that he wants as many people covered as under Obamacare,” Cassidy said Monday. “He said that health care should be affordable. If there’s 14 million people losing insurance, of course it’s concerning.

While the bill replaces Obamacare, it mirrors the ACA’s taxes, benefits and subsidies, as well as the individual mandate and the stipulations on pre-existing conditions. Cassidy’s bill is the best attempt at reaching out to moderates from both parties, but most Democrats have opposed any repeal of Obamacare.

At the other end of the GOP Spectrum, Senator Rand Paul’s (R-KY) Obamacare Replacement Bill represents the most conservative option put forth by a Senate Republicans. Paul’s plan, which has a single co-sponsorship from Sen. Pat Toomey (R-PA) would strip away the ACA’s regulations and requirements, including the individual mandate and a restriction on inexpensive healthcare plans. The bill also gives states more control of their Medicaid programs but does not provide detail on the entitlements expansion. On February 15, Rep. Marshall Sanford (R-SC) introduced companion legislation, which included six House GOP cosponsors.

The bill mirrors a similar resolution that Paul attempted to pass in 2015.

While GOP lawmakers debate the best path forward, several organizations have voiced their support and opposition:

Key Organizations against AHCA

  • AARP
  • The American Hospital Association
  • The Federation of American Hospitals
  • The American Medical Association
  • The American Nurses Associations
  • Heritage Action
  • Club for Growth
  • Americans for Prosperity

Key Organizations favoring AHCA

  • Americans for Tax Reform
  • Association for Mature American Citizens
  • Council for Citizens Against Government Waste
  • Log Cabin Republicans
  • Independent Women’s Voice
  • Institute for Liberty
  • Market Institute
  • Small Business and Entrepreneurship Counsel

Following the bill’s withdrawal, Ryan spoke to the media about the future of the Affordable Care Act:

“Obamacare is the law, and it’s going to remain the law of the land until it is replaced,” Ryan said. “We did not have quite the votes to replace this law, and so, we’re going to be living with Obamacare for the foreseeable future.”

Danny Restivo Contributed To This Report

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