Taking a Look at the New ACA Replacement Bill

Posted by Ryan Kelly

A flood of information has come out recently regarding the first of likely several proposed pieces of legislation to replace the Affordable Care Act of 2010.

No question, replacing the largest healthcare bill in our nation’s history is no small task. This is only magnified when you consider that practically every aspect of modern medicine has been re-crafted to fit the direction and funding mechanisms prescribed in the ACA.

Read the full bill

But, is it too late to find a better alternative?  Do Republicans have any chance at getting this right?  Media pundits would make you think No.  I am not so pessimistic.  Here’s why.

What’s in the bill?

The replacement legislation is fairly targeted in its approach.  In summary, it will:

  1. Keep two popular provisions of the ACA, children staying on parents’ insurance until the age of 26, and not allowing insurance companies to exclude patients due to pre-existing conditions.
  2. Eliminate the individual mandate for insurance coverage, but replace this clause with an allowance for insurance companies to charge up to a 30% premium for those that dropped coverage and then switched or renewed (a penalty similar to the “fees” prescribed by the ACA)
  3. Tax credits for any citizens that purchases health insurance up to income of $75,000 for individuals or $150,000 for a couple filing jointly, with a cap on the tax credit of $14,000 per family per year.
  4. Allowance of insurance companies to increase it’s age-based formula for insurance premiums to 5:1.  Currently the ACA allows no more than 3:1.
  5. Freeze on any federal funding to Planned Parenthood and a complete ban of any federal dollars paying for abortion services.
  6. Elimination of most taxes and fees expressed in the ACA
  7. Increase in the amount of money eligible for flexible spending accounts of health savings accounts
  8. Revision of Medicaid funding with a phase out of Medicaid expansion*

My Analysis

I placed an asterisk beside #8 above because it is one of the more contentious elements of the proposed law.  Phasing out Medicaid expansion will not affect Mississippi directly, but the revision of Medicaid funding will.  The big question is, how?  At our trip to Washington several weeks ago we spoke to lawmakers about Medicaid block granting (a proposal given by President Trump during the campaign).  Lawmakers were unsure if block granting would indeed happen, and if it did, what it would look like.  Little has changed on this front today.

Aside from Medicaid, there are several good components of the bill.  First, one of the largest complaints against the ACA is that it is “not affordable.”  Few can argue with this, as individual insurance premiums have skyrocketed in the last three years.  I can attest that my personal insurance premium has increased 60%!  One reason for this are the requirements placed on plans due to ACA mandates.  The increase of a 5:1 rate based on age should help to lower premiums for younger, healthier insured citizens.  The question is, will it raise prices for older, less healthy individuals?  Again, yet to be determined.

Income tax credits have been proposed by Republicans for years now, so it’s no surprise that it is a principle way to help pay for health insurance.  One argument against the ACA from insurers is that the tax credits are not based on age.

Many feared that the elements of #1 above were going to be eliminated.  I would have put money on the fact that they would not.  They are widely supported by Republicans and Democrats, and it’s almost certain that they would stay.  Similar, the individual mandate is not supported at all by Republicans and only marginally supported by Democrats.  It was almost certain that it would be in the replacement language s well.

What does this mean for Mississippi?

That’s the big question, and most of it revolves around the Medicaid question.  If Medicaid block granting occurs, it will depend on what cap is placed on Medicaid funding federally, and what regulations are or are not placed on it.  If the threshold is high, Mississippi could actually benefit from the funding as it could actually reduce state burden on funding Medicaid (especially if there is no match requirement) and possibly allow for additional services.  It seems that the smart money is on a lower cap, which would mean that Mississippi may have to pay more in state-funded Medicaid services, which would be very hard on an already over-strained state budget.  We will see…

Certainly the elimination of the individual mandate at first glance seems hard on healthcare providers.  But, with most of those using the federal exchange signing-up for the Bronze plan with a $5000 deductible, it minus well be no insurance since rarely is that cap actually met.  My hope is that with reduced premiums and tax credits to help pay for the insurance plans, more people will gain meaningful coverage and it will actually benefit healthcare providers.

Many are wondering about the future of ACO, Practice Transformation Networks, and bundled payment initiatives.  Rest assured, there is no sign of any of these going away. And, even if they did, the benefit of belonging to one of the two aforementioned groups is very beneficial to a practice.  I would not let this deter you from participation.

What happens from here?

This is why I am not pessimistic.  This is a first shot at the legislation, not the only shot. This will go through rounds of markups by two committees made of Democrats and Republicans.  It is likely that special interest groups (including MRHA and NRHA) as well as others will guide lawmakers into different directions on some of these items, and will end up eliminating many of the concerns that you hear about in news articles and on television.

Once the markups are made, it will go to the Rules Committee for dissemination and revision.

One important final note – this bill is being passed through budget reconciliation.  This means that there is only so much that can be done for revision.  With only 52 Republicans vs. 48 Democrats in the Senate, there will never be a 60+1 vote to repeal the ACA. Therefore, budget reconciliation is the only way to pass repeal by targeting each element of the ACA that deals with funding.  This limits Republicans in what can be changed, and it will mean that some elements of what we would like to see in a replacement bill will not happen at first.

 

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