Capitol Correspondence - 02.27.17

Leaked Draft of ACA Bill Repeals Medicaid Expansion, Imposes Per Capita Caps

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On Friday, a draft Affordable Care Act (ACA) repeal bill (attached) was circulated widely among news organizations. The bill was reported to have been leaked, but no further explanation of its source was given. The draft bill is dated February 10, 2017, which is earlier than more recent meetings held by House Republican leaders to outline their plan. (See WICs article, “House GOP Leaders Unveil ACA Repeal Plan,” February 17, 2017.) It is important to note that this draft has not yet been introduced, and may not reflect what proposed or final legislation will look like. However, it is an indicator of the vision House Republicans have for health care reform, as well as an overhaul of the Medicaid system. Some highlights from the draft bill include:

  • Repeal ACA Medicaid Expansion: The bill would phase out the expanded Medicaid funding the ACA made available for the population of single adults earning between 100 and 138 percent of the federal poverty level. The increased matching funds that were included with the ACA to cover this population will phase down to zero by December 31, 2019. 
  • Convert Medicaid to a per capita cap program: The bill would convert the entire Medicaid program from an open-ended entitlement (where the federal government matches funds expended by states) into a capitated system, where the federal government will expend only a set dollar amount per enrollee. There would be five categories of enrollees: 1) elderly, 2) blind and disabled, 3) children not enrolled in CHIP, 4) expansion adults, and 5) other non-expansion adults. None of these categories (or persons within the categories) would be subject to a carveout. To determine the capitated rate, the baseline year of 2016 would be used, adjusted for inflation using the CPI-Medical +1 index. (Currently, state spending varies widely between populations, and across states for the same population. Kaiser Family Foundation published an issue brief that looks at this variation, as well as a more recent data note that breaks data down by state and by category.) The capitated system would begin on January 1, 2020. Not included in the capitated system are the Medicaid portion of Medicare cost sharing, partial benefit Medicaid beneficiaries, administrative spending, disproportionate share hospital payments, CHIP enrollees, Indian Health Service enrollees, and breast and cervical cancer eligible individuals. 
  • Repeals Community First Choice Option Enhanced Match: The bill would eliminate the 6% enhanced FMAP contained in the ACA’s creation of the Section 1915(k) Community First Choice Option authority. The enhanced funding would cease as of January 1, 2020. States that currently have approved CFC state plans are California, Maryland, Montana, Oregon and Texas. There are several other states that have submitted CFC applications, and are awaiting CMS approval.
  • Repeal Essential Health Benefits (EHB): The bill would repeal the federal EHB requirements, which set forth minimum requirements for all plans. The requirements are listed in ten categories and include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health services and addiction treatment, prescription drugs, rehabilitative services and devices, laboratory services, preventive services, wellness services and chronic disease treatment, and pediatric services. The repeal would leave decisions on what minimum coverage must be in plans to individual states to determine. The concern about repealing the EHB requirement is that states will set a lower bar, and health plans that do not cover comprehensive services will cost significantly less, attracting participants with lower premiums, who then may discover when a service is needed that it is not included, resulting in higher cost emergency care, negative health outcomes, or both. 
  • Elimination of Individual Subsidies: Starting in 2020, the bill would eliminate individual subsidies used to purchase insurance in state insurance marketplaces. Instead, individuals would get tax credits based on age – the lowest amount would be available to the youngest individuals, with the credit amount increasing with age. 
  • Limiting of Employer Tax Benefits: The tax exemption for employer-sponsored insurance would be capped at the 90th percentile of current premiums. Benefits above that level would be taxed. 
  • State Innovation Grants: The bill earmarks $100 billion for state innovation grants to help states subsidize the costliest Medicaid beneficiaries. This is seen as a way to partially address the challenge of individuals who, without the ACA’s pre-existing condition protections, are likely to lose coverage and not be able to regain it. 

The Congressional Budget Office (CBO) has not yet released an estimated cost of the bill, but on its face, it has only one revenue generator (the new limitation on employers receiving tax benefits), which is not likely to completely offset the cost. Though specific numbers are not included on what the reduction in federal spending to the Medicaid program would be under the new structure, it is likely that is where most of the cost savings will be found to pay for the bill. 

Though the plan is consistent with Republican talking points over the past three Congressional terms, constituents are pushing back on full repeal of the ACA, which may give some lawmakers pause. Last week, while on recess, several Congressmembers were greeted at town hall events by constituents angry over the prospect of losing their health coverage. John Boehner (R-OH), former Speaker of the House, said the day before the leak that a full repeal and replace of the ACA is “not what’s going to happen”. He said, “They’ll fix Obamacare…fix the flaws and put a more conservative box around it.”