The Better Care Reconciliation Act: the Senate bill to repeal and replace Obamacare, explained

Senate Republicans on Thursday revealed the Better Care Reconciliation Act, their plan to repeal and replace the Affordable Care Act.

The bill asks low- and middle-income Americans to spend significantly more for less coverage.

The bill would roll back the Affordable Care Act’s expansion of the Medicaid program, which currently covers millions of low-income Americans, and include additional cuts to Medicaid. It would rework the individual market so that enrollees get less financial help to purchase less generous health insurance with higher deductibles.

Here is how the Senate bill works:

• The Senate bill begins to phase out the Medicaid expansion in 2021 — and cuts the rest of the program’s budget too. The Senate bill would end the Affordable Care Act’s expansion of Medicaid to millions of low-income Americans. This program has provided coverage to more Americans than the private marketplaces
• It would also cut the rest of the public insurance program. Better Care would also limit government spending on the rest of the Medicaid program, giving states a set amount to spend per person rather than the insurance program’s currently open-ended funding commitment.
• The Senate bill provides smaller subsidies for less generous health insurance plans with higher deductibles. The Affordable Care Act provides government help to anyone who earns less than 400 percent of the federal poverty line ($47,550 for an individual or $97,200 for a family of four). The people who earn the least get the most help. The Senate bill would make those subsidies much smaller for many people, and only provide the money to those earning less than 350 percent of the poverty line ($41,580 for individuals and $85,050 for a family of four). The Senate bill will tether the size of its tax credits to what it takes to purchase a skimpier health insurance plan than the type of plans Affordable Care Act subsidies were meant to buy. Essentially, these tax credits buy less health insurance.
• The Senate bill seems to allow states to opt out of Obamacare’s marketplaces and essential health benefits requirement. A new waiver process would allow states to overhaul their insurance markets, including ending the essential health benefit requirement and specific subsidies that benefit low income Americans, so long as those changes do not increase the deficit.
• The Senate bill repeals the individual mandate — and replaces it with a six-month waiting period. The bill gets rid of the Affordable Care Act’s unpopular requirement that nearly all Americans carry health coverage or pay a fine. The most recent version of the proposal includes a six-month waiting period for those who want individual coverage but have had more than a two-month break in coverage in the last year.
• The bill would cut taxes for the wealthy. Obamacare included tax increases that hit wealthy Americans hardest in order to pay for its coverage expansion. The AHCA would get rid of those taxes. Obamacare was one of the biggest redistributions of wealth from the rich to the poor; the AHCA would reverse that.
• The Senate bill defunds Planned Parenthood for one year. This would mean Medicaid patients could no longer seek treatment at Planned Parenthood clinics. Experts expect this would result in low-income Americans getting less medical care and having more unintended pregnancies, as access to contraceptives would decline.
• All in all, the replacement plan benefits people who are healthy and high-income, and disadvantages those who are sicker and lower-income. The replacement plan would make several changes to what health insurers can charge enrollees who purchase insurance on the individual market, as well as changing what benefits their plans must cover. In aggregate, these changes could be advantageous to younger and healthier enrollees who want skimpier (and cheaper) benefit packages. But they could be costly for older and sicker Obamacare enrollees who rely on the law’s current requirements, and would be asked to pay more for less generous coverage.

The Senate bill will end Medicaid expansion in 2021 — and cut the rest of the program too

One of the main ways Obamacare increased insurance coverage was by expanding the Medicaid program to cover millions more low-income Americans. Prior to the health law, the entitlement was restricted to specific groups of low-income Americans (pregnant women, for example, and the blind and disabled).

Obamacare opened up the program to anyone below 138 percent of the poverty line (about $15,000 for an individual) in the 31 states (plus the District of Columbia) that opted to participate.

The Medicaid expansion gave states generous funding to cover this particular population. Typically, the federal government picks up about half the cost of the Medicaid program and states cover the rest.

For Medicaid expansion, however, the federal government currently pays 95 percent of the costs — an especially good deal for states meant to assuage their budget concerns during the original Obamacare debate.

The Senate bill would begin ratcheting down that Medicaid expansion funding in 2021. By 2024, states would get that same match rate they typically get to cover other populations. In 2021, for example, the match rate would fall to 90 percent, then decline in steps to 75 percent by 2023.

The Congressional Budget Office has projected in a separate analysis that this policy change would mean no additional states expand Medicaid — and that some current expansion states would drop out of the program, resulting in millions losing coverage.

“CBO anticipates some states that have already expanded their Medicaid programs would no longer offer that coverage,” the agency wrote in its analysis of the House bill, which makes a similar change.

The Senate bill would cut the rest of the Medicaid program too

There are significant changes to Medicaid in the Senate bill outside of the expansion too. This bill would convert Medicaid to a “per capita cap” system, where states would get a lump sum from the federal government for each enrollee. Or states would have the opportunity of a block grant — a sum of money untethered from the number of people involved.

This is very different from current Medicaid funding. Right now the federal government has an open-ended commitment to paying all of a Medicaid enrollee’s bills, regardless of how high they go.

The Senate bill would set different amounts for different groups of people. It envisions, for example, likely higher payments to cover Medicaid enrollees who are disabled (and tend to have higher costs) than Medicaid enrollees who are kids (generally healthy with lower costs).

The rate at which these payments grow is also important. The Senate bill would have the funding growth tethered to the Medical Consumer Price Index plus 1 percentage point through 2025, and then switch to the urban Consumer Price Index. Analysis of this type of proposal suggests this change would amount to funding cuts for Medicaid, as the program’s spending typically goes up faster than these growth rates.

We do not know exactly how much this bill would cut the Medicaid program because we are still waiting on an analysis from the CBO, which is expected to be released early next week.

The Senate bill would cut the subsidies for people on the individual market

The Affordable Care Act provides financial help to low- and middle-income Americans who purchase their own health coverage. It provides subsidies to people who earn less than 400 percent of the federal poverty line ($47,550 for an individual or $97,200 for a family of four) and gives the most generous help to people who earn the least.

For example: People who earn $17,000 are only expected to spend 3 percent of their income on premiums for a midlevel insurance plan — the government will kick in the rest. People who earn $40,000, however, are expected to spend 9.66 percent of their income on those monthly payments.

The Senate bill would overhaul these tax credits. It would make fewer people eligible for the help, limiting the subsidies to people who earn less than 350 percent of the poverty line ($41,580 for individuals and $85,050 for a family of four).

It would also allow people who earn less than the poverty line to qualify for tax credits; the Affordable Care Act makes those people ineligible for the subsidies because they were expected to receive coverage through the Medicaid expansion.

This became problematic, however, when the Supreme Court ruled that the Medicaid expansion had to be optional and 19 states decided not to adopt it. So this change would be an improvement for low-income Americans who live in places like Texas and Florida, which did not expand the program. They currently have access to no subsidies under the Affordable Care Act.

It would also change the definition of what counts as “affordable” health insurance to amount for a greater chunk of Obamacare enrollees’ income. Right now the Affordable Care Act counts health insurance as “affordable” if it costs less than 9.7 percent of an individual’s income (and a lower amount for lower-income Americans). You can see the table here:

The Senate bill would raise the amount individuals are expected to kick into their health plans for people who are low to middle income. A 60-year-old who earns $35,640 (300 percent of the poverty line) would be expected to spend 16.2 percent of her income ($5,773) before she gets any help from the government. You can see the chart that spells this out here:

Under the Affordable Care Act, she would only be expected to spend $3,442.

The Senate would subsidize less generous insurance. Under the health care law, the size of the tax credit is tethered to how much it costs to buy a midlevel health plan. The Affordable Care Act defines “midlevel” as a plan that, on average, covers 70 percent of enrollees’ costs. In insurance terms, this number is known as the “actuarial value,” and it’s used to give a sense of how much the typical enrollee pays out of pocket for coverage.

The Senate bill would tether its tax credits to less generous health insurance. Specifically, it would provide subsidies that make a plan with a 58 percent actuarial value (meaning, on average, it covers 58 percent of enrollees’ costs) affordable.

This means that the plans people could afford under the Senate bill would likely have more copays and higher deductibles as a way to bump up the amount enrollees have to chip in for their own coverage. Someone who has earnings right around the poverty line (about $12,000) would still be expected to spend 2 percent of her income on premiums. But in return, she’d get a health plan that covers less than what she gets under the Affordable Care Act.

The Senate bill would also bar Americans from using their tax credits to purchase a health plan that covers abortion. This requirement would take effect immediately, while other changes would not phase in until 2020.

The Senate bill allows states to opt-out of big Obamacare provisions, like the requirement to cover essential health benefits, through a re-vamped waiver process

The Senate bill overhauls a section of the Affordable Care Act that allows states to experiment with different ways to provide health insurance coverage. Under current law, states are allowed to propose different ways to deliver health insurance so long as the new plans “provide coverage that is at least as comprehensive as the coverage” defined under the ACA” and “cover at least a comparable number of residents.” In other words: as long as states can cover the same number of people with a similar plan, they’re allowed to experiment with things such as single-payer health care.

The Senate bill would allow states to seek waiver from key Obamacare requirements, things like the essential health benefits package, which requires health plans to cover key services like maternity care and prescription drugs. But the Senate bill would not require these new plans to cover as many people or provide comparable plans. It eliminates those requirements, and says states can get waivers as long as they don’t increase the deficit.

You can see the language that gets removed in this helpful tweet:

Under these requirements, a state could ask for a waiver to allow insurers to longer cover things like maternity care or mental health services — two things that individual plans often left out before the Affordable Care Act mandates. They would not be bound by the current Affordable Care Act requirement that coverage under these waivers be just as generous as the standard plans.

The Senate bill eliminates the individual mandate — and replaces it with a six-month waiting period to penalize the uninsured

One of the Affordable Care Act’s least popular provisions was the requirement that nearly all Americans carry health insurance coverage or pay a fine. The reason this mandate existed was to convince healthy people to buy health insurance, which would hold down premiums for everyone else.

The Senate would eliminate the individual mandate by setting the penalty for not carrying health insurance to zero dollars. They can’t completely wipe it off the books due to the complex rules of the budget reconciliation process, but this would have the same effect.

The Senate bill replaces the individual mandate with a six-month waiting period for those who fail to maintain continuous health insurance coverage. Specifically, this means that those with a break in coverage longer than 63 days would have to wait at least six months from the date they file an application for health coverage to enroll in a plan. This is on top of the health care law’s open enrollment periods, which would still exist under the Senate plan.

The six-month waiting period fills a big policy gap in the first draft of the Better Care Reconciliation Act, which required health plans to accept all patients — but didn’t require all Americans to purchase coverage, as the Affordable Care Act does. Experts expected that this would cause a death spiral, where only the sickest patients purchase coverage and premiums skyrocket.

The new six-month waiting period aims to fix that problem. It is meant to nudge healthy people into purchasing coverage because they may fear the consequences of getting locked out of the market down the road.

The Senate bill repeals a long list of Obamacare taxes

The Senate bill will eliminate many of the taxes that financed the Affordable Care Act’s insurance expansion. It includes the repeal of:

• A tax on investment income
• A tax on the wealthy to finance the Medicare program
• A tax on tanning salons
• A tax on the health insurance industry
• A tax on the medical device industry

Many of these tax changes would, as my colleagues have previously written, disproportionately benefit high-income Americans.

“The typical American, in short, isn’t going to see any money from these tax cuts,” Matt Yglesias has written. “But when you take all that money out of the system, something has to give. And in the case of the various iterations of Affordable Care Act repeal, the thing that gives is the quality of health insurance provided to Americans with below-average incomes or above-average health needs.”

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The Senate health bill: poor people pay more for worse insurance

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