Capitol Correspondence - 06.22.17

Senate Health Care Bill Deepens the Cuts of the House AHCA

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On June 22, Senate majority leader Mitch McConnell (R-KY) released a discusion draft of the “Better Care Reconciliation Act of 2017,” (BCRA) the Senate’s response to the House-passed American Health Care Act (ACHA). Though the name is different, the Senate bill keeps most of the AHCA’s harmful provisions, including deep Medicaid cuts, a change in the Medicaid financing structure to per capita caps, and a growth rate that will fall well short of projected health care costs. The draft bill is the product of a small and select workgroup of thirteen Republican Senators, who have drawn sharp criticism from Democrats as well as several Republicans for the non-transparent process by which it was written. It is expected that the Congressional Budget Office (CBO) will release a cost report on June 23. The bill is expected to go up for a vote on Thursday, June 29, following a “vote-o-rama” where Senators offer multiple amendments. It is possible that the draft language in the BCRA would be replaced in full by another amendment whose contents are as of yet unknown. 

Some highlights of the BCRA follow:


The bill would change the structure of Medicaid financing from an open-ended entitlement based on state spending to a per capita cap model starting in 2020. The annual Medicaid growth rate for states would be calculated using a base rate comprised of the average state expenditures of eight consecutive quarters between FY2014 and FY2017. The state could choose which eight consecutive quarters to use. Once the baseline is established using this formula, the inflation rate of the Consumer Price Index for Medical expenses (CPI-M) plus 1% would be used for individuals with disabilities. However, there is no provision that funds that come into a state calculated for that category would be required to be spent on services for that population. The Senate bill also dials down the rate, from CPI-M+1 to CPI-U (CPI for all Urban markets) in FY2025. CPI-U is a lower index than CPI-M, resulting in further reductions to funding starting in 2025. (For an idea of the impact this will have, see this Urban Institute article. CPI-M is projected to grow around 3.7% in the next ten years, whild CPI-U is projected to grow only at 2.4%.)

Also notable in the per capita cap provision is that the bill would decrease the per capita cap allotment by 0.5-2.0% for states that have per capita spending over 25% of the national average, while increasing the per capita cap allotment by 0.5-2.0% to states that have per capita spending under 25% of the national average. This provision would bring states more in line with one each other over time. This is a further reduction in Medicaid funding from the House-passed AHCA.

Some categories of beneficiaries are excluded from the per capita caps, including CHIP-covered children, blind and disabled children, certain individuals eligibile for coverage of breast and cervical cancer treatment, individuals covers through the Indian Health Service facility, and some partial-benefit enrollees, including individuals dually-eligible for Medicare cost sharing.

After 2020, states could opt to receive Medicaid funds as a block grant, by creating “Medicaid Flexibility Programs” that would fix a baseline spending rate for two years using the calculation for per capita caps, and for each year thereafter use the baseline plus the inflator of CPI-U. 

Apart from changing the structure of Medicaid and cutting overall funding, the BCRA would also end new enrollment in the Medicaid expansion by the end of 2019. Current enrollees and those enrolled prior to 2021 would still be eligible for an enhanced match, however the enhanced match would phase out over three years. The bill also expressly gives states the option to implement work requriements for non-disabled, non-elderly working age Medicaid beneficiaries, with an exception for beneficiaries who are the sole caretaker of a child under 6 or a child with disabilities. States also have the option of imposing premiums, cost sharing, and deductibles on Medicaid beneficiaries, provided these measures do not total more than 5% of the total household income. 

The BCRA would sunset Medicaid Essential Health Benefit (EHB) requirements by 2020. 


HCBS waivers are mentioned specifically, with the bill saying that the Secretary of HHS should “encourage States to adopt or extend waivers related to the authority of a State to make medical assistance available for home and community-based services…if the State determines that such waivers would improve patient access to services”. 

The 1915(k) Community First Choice Option, which was created by the Affordable Care Act, will no longer get an enhanced FMAP rate of 6% starting in January 2020.

Individual Mandate/Individual Subsidies

The BCRA zeroes out the penalty for individuals that were required to purchase private insurance under the Affordable Care Act (ACA), effectively ending the individual mandate. 

Individuals would still be eligible for income-based subsidies, but only for those with incomes lower than 350% of the Federal Poverty Level. This is a change from the ACA which provided subsidies for individuals that earned up to 400% FPL. 

Employer Mandate

The BCRA zeroes out the penalty for employers that were required to provide affordable health coverage for employees under the ACA. 

Other provisions

The 142-page discussion draft contains many other provisions, but some that may result in additional negotiation or that carry particular weight include: 

  • The retention of the ACA’s protection for people with preexisting conditions
  • Defunding of Planned Parenthood for one year
  • Excluding coverage of elective abortion services from qualified health plans (for purposes of small employer tax credits)
  • DSH payments will remain at the same level in Medicaid expansion states; non Medicaid expansion states will see a gradual increase in DSH payments until 2020
  • Changing the permissible age-based community rating ratio from 3-to-1 to 5-to-1, making it possible to charge seniors higher premiums based on age
  • Repeal of most of the taxes included in the ACA (one exception is the “Cadillac tax” on high-cost health plans)

At this time, the status and viability of the bill are uncertain. Several Republican Senators as well as a sizable contingent of Republican Representatives have expressed concern over aspects of the bill. We will continue to keep members apprised of breaking developments, and urge members to continue to call Senators voicing concern over the deep Medicaid cuts present in the latest version of the bill. Click here to read the action alert we sent out immediately following the draft bill’s release.