Without any significant legislative victories and a frustrated base, Senate Republican leadership and most rank-and-file members of the Republican conference need to take a good, long look in the mirror and ask themselves this question: "What are we doing here?"
Most conservatives, including those of us at FreedomWorks, are ready to begin work on fundamental tax reform, but repealing ObamaCare remains an elusive part of the congressional Republican agenda. Conservatives didn’t expect the perfect bill, but we did expect Republicans to follow through on their more than seven years of promises to repeal ObamaCare. The Better Care Reconciliation Act, H.R. 1628, formerly known as the "American Health Care Act," fundamentally fails to keep those promises.
To be clear, there are some positive elements of the bill. Most of ObamaCare’s taxes are repealed, though not as quickly as the House bill, and the modernization of Medicaid is preserved. The individual and employer mandates are zeroed out but not repealed. (Yes, folks, those two provisions remain in statute. The penalties are only set to zero.) The expansion of health savings accounts (HSA) is also preserved.
Unfortunately, that’s largely where the good news ends, which is why four conservative senators — Ted Cruz (R-Texas), Ron Johnson (R-Wis.), Mike Lee (R-Utah), and Rand Paul — announced their opposition to the bill in its current form. They are, however, open to negotiation for improvements to earn their support.
ObamaCare’s Subsidies Are Sticking Around, Though Modified: As passed by the House, H.R. 1628 repealed ObamaCare’s tax subsidies, which are based on income and geographical location, and replaced them with an age-rated tax credit that was capped at a certain income threshold. The Senate’s version, however, simply modifies ObamaCare’s tax subsidies for households that earn between 100 percent and 400 percent of the federal poverty level (FPL) to 100 percent and 350 percent of FPL beginning in 2020. Subsidies would be tied to the "‘applicable median cost benchmark plan," which is defined as "actuarially equivalent to 58 percent of the full actuarial value of the benefits."
Age is taken into consideration in determining subsidy amounts. It’s assumed that an individual under the age of 30 who earns between 300 percent and 350 of FPL would spend 6.4 percent of his or her income on health insurance. An individual over the age of 59 in the same income threshold would spend 16.2 percent.
Likely Bailouts for Health Insurers: The bill would create a short-term fund to stabilize insurance markets around the country. Between 2018 and 2021, $50 billion would be paid directly to health insurance companies "to address coverage and access disruption and respond to urgent health care needs." The purposes of the fund aren’t specifically defined. The relevant section of the bill simply requires the administrator of the Center for Medicare and Medicaid Services (CMS) "[t]o establish or maintain a program to enter into arrangements with health insurance issuers premiums and promote State health insurance market participation and choice in plans offered in the individual market."
The concern with this language is that this $50 billion will be used to bail out health insurance companies that participated in ObamaCare or used to encourage to participate in this Republican version of ObamaCare. Claims from insurers for the 2014 and 2015 to the now-defunct risk corridors program established by the 2010 law are somewhere in the ballpark of $8.3 billion. Further losses occurred in 2016.
The risk corridors program was supposed to be funded by plans that made money on the exchanges. The program was underfunded and Congress prohibited the use of taxpayer dollars to fund it. The Better Care Reconciliation Act appears to reverse that course, ostensibly funding a bailout with taxpayer dollars.
There is a second, long-term pool of funds, $62 billion, that will be used to cover Americans in the nongroup market who are high-risk. These funds will be used to reduce out-of-pocket costs and otherwise stabilize health insurance premiums.
Medicaid Expansion Will Probably Stay Forever: As passed by the House, H.R. 1628 ended ObamaCare’s expansion of Medicaid at the beginning of 2020. The Senate version of the bill pushes back this deadline to the beginning of 2024. The federal match for expansion is reduced to 85 percent in 2021, 80 percent in 2022, and 75 percent in 2023. Medicaid spending growth would be limited to the rate of inflation rather than medical inflation, which means it would grow at a slower rate.
The problem here is that the proposed repeal of Medicaid expansion rests on the theory that a president and Congress will be in place to ensure that it actually happens. This was also a concern with the House version of H.R. 1628, though less of one because repeal was front-ended. This time, it’s on the back-end. Expect to hear rhetoric about a "Medicaid cliff," similar to the fiscal cliff back in 2012, and the Medicare "doc fix."
So, yes, Medicaid expansion will presumably be repealed in this bill, just like the Budget Control Act was supposed to cut the rates of spending increases and the Medicare Sustainable Growth Rate (SGR) was supposed to cut payments to doctors to make the program more fiscally viable. Of course, many of the cuts under the Budget Control Act have been reversed and the SGR was routinely fixed to avoid scheduled cuts. It’s more than likely, if one takes the previous actions of Congress into consideration, that Medicaid expansion will never go away.
ObamaCare’s Title I Structure Largely Untouched: Title I of ObamaCare is responsible for 44.5 percent to 68 percent of health insurance premium increases. The amendment proposed by Rep. Tom MacArthur (R-N.J.) was a way to address these cost drivers and provide states with flexibility.
In fact, the reason FreedomWorks went neutral on the House version of H.R. 1628 was because of the inclusion of the MacArthur amendment, which allowed states to receive waivers for ObamaCare’s community rating and essential health benefits provisions, which are found in Title I of the 2010 law.
The Senate version of the bill will expand ObamaCare’s age-rating ratio, from 3-to-1 to 5-to-1. This means that insurance companies will be able to charge older enrollees five times more than younger enrollees.
The MacArthur amendment would have allowed a state to seek a waiver to expand the 5-to-1 age-rating ratio even further. The amendment would have also allowed a state to seek a waiver to allow insurance companies to take the health status of enrollees into account, which was prohibited under the Affordable Care Act, provided that a state meets certain requirements to protect high-risk consumers.
Insurance companies would have still been prohibited from taking the gender of an enrollee into account when determining premiums for an enrollee. This is a provision of the Affordable Care Act that would have remained in place under the MacArthur amendment and the House-passed version of H.R. 1628.
The age-rating ratio is the only aspect of community rating that the Senate version of the bill addresses.
The Senate version of the bill does make changes to ObamaCare’s existing State Innovation Waivers, or Section 1332 of ObamaCare, which would allow a state, upon request by a governor or state insurance commissioner, to seek a waiver to change certain provisions of ObamaCare. These provisions include actuarial value standards, known as ObamaCare’s metal tiers, and essential health benefits. Again, community rating provisions for health status, which was waivable under the MacArthur amendment, are not waivable under Section 1332.
The secretary of the Department of Health and Human Services is required to approve a waiver as long as it would not increase the deficit. Waivers would last for a period of eight years and renewal may be requested by the state.
The House version would have sunset ObamaCare’s actuarial value standards, which require plans to cover a minimum of 60 percent of health care expenses.
Because the Senate version of H.R. 1628 leaves ObamaCare’s Title I structure largely intact, it will be extraordinarily difficult for Senate Republicans to say that they are doing anything that will bring down the cost of health insurance coverage. Ultimately, this is how Americans will judge the Republican effort.