Healthcare and health insurance are big issues in the economy, and particularly for nonprofit organizations and the people they serve. Half of U.S. hospitals are nonprofits, as are some of the nation’s largest insurers. Community health centers and community mental health centers, though federally funded, often are incorporated as local nonprofits. Some of the nation’s largest nursing home care providers are nonprofits, as are clinics operated by organizations like Planned Parenthood and adoption agencies operated by religious congregations. Many of the nation’s doctors, nurses, counselors, health aides, and other health professionals and paraprofessionals are educated by nonprofit educational institutions. Who gets covered by health insurance—whether private or government-paid—and how well they’re covered has a lot to do with what nonprofits are expected to do as part of the healthcare service system.
If a long-promised Republican proposal to repeal and replace the Affordable Care Act (ACA) hasn’t yet been presented, it’s not for lack of ideas being floated around in draft form. In the wake of the election, NPQ reported on potential sources to review when predicting what the GOP legislation might look like.
The challenge has been in arriving at program specifics acceptable to at least five different constituencies within the GOP—mainstream House Republicans; the approximately 40-member conservative House Freedom Caucus; mainstream Senate Republicans; conservative and libertarian Senate GOP members, including Ted Cruz (R-TX) and Rand Paul (R-KY); and the Trump administration itself.
There has been some confusion in recent days because the administration has insisted it would be presenting its own health care reform bill soon, while House Republicans are close to introducing their own legislation. New HHS Secretary Tom Price was present for much of a February 13th policy briefing for GOP House members, indicating support for a framework Price himself helped to create in 2015 and 2016 as part of House Speaker Paul Ryan’s “A Better Way” 2016 policy agenda. The briefing was intended to educate Republican members in advance of the Presidents’ Day recess of the legislation planned for introduction as soon as this week.
The central point of all the GOP efforts were summed up by President Trump during his speech last Friday morning at the Conservative Political Action Conference (CPAC):
But I tell them from a purely political standpoint, the single best thing we can do is nothing. Let [Obamacare] implode completely, it’s already imploding. You see the carriers are all leaving. I mean, it’s a disaster. But two years, don’t do anything. The Democrats will come to us and beg for help, they’ll beg and it’s their problem. But it’s not the right thing to do for the American people, it’s not the right thing to do.
The 19-page policy briefing is heavy with this message that Obamacare is failing due to unexpectedly high costs; lack of participation by younger, healthier people (whose insurance premiums were intended to help support older, sicker people), the failure of the federally subsidized health insurance coops (18 of 23 are no longer in business); and the withdrawal of many private insurers from the ACA-established state and federal health insurance exchanges following more than $1 billion in losses. Many people with insurance are facing sharp premium increases and increased out-of-pocket expenses for deductibles and copays.
Of course, this litany of the problems with the ACA ignores many good aspects of the legislation, from expanding covered conditions, assuring coverage of people with pre-existing conditions, coverage of children on their parents’ policies until age 26, and subsidies to assist individuals pay for health insurance purchased on the state and federal exchanges. Medicaid expansion, adopted in 31 states and the District of Columbia, has made insurance coverage available to millions of previously uninsured people. Moreover, the ACA was designed to incentivize wellness programs and integrated health care services that were expected to reduce overall health care costs and increase population health.
The leaked draft legislation, labeled a “discussion draft” without a bill number or sponsoring legislators, is dated February 10th. It proposes doing away with most of Obamacare, especially including the individual mandate to purchase insurance, income-based subsidies to purchase insurance, and all the law’s taxes. It would close access to Medicaid expansion by new enrollees in 2020. It would also reduce significantly the federal government’s participation in funding the costs of Medicaid expansion to support the declining number of people already enrolled and still meeting the income requirements to participate in the program.
The replacement as outlined in the discussion draft would include federal appropriations to states to fund high-risk insurance pools for the people most expensive to insure. The proposed law would replace the purely income-based subsidies of the ACA with income- and age-based tax credits, based on the observation that age is a significant factor in the cost of health insurance, just as income is a significant factor affecting affordability.
The costs of the plan would be covered by reducing the deductibility of employer-paid health insurance premiums from 100 percent of annual costs to the 90th percentile of current premiums. In effect, employers would be taxed for having high-cost (and presumably high benefit) employee health insurance.
Guaranteed access to health insurance is not affected under the bill. However, private insurers would be able to charge older and other higher risk customers up to five times the premiums charged to younger and healthier policyholders. The ACA restricted the spread to a multiple of three times. In addition, insurance companies would be able to impose a 30 percent premium surcharge on people who allowed their continuous coverage to lapse. This is designed to incentivize people to remain insured while providing insurers additional revenue to absorb the costs of issuing policies to people purchasing insurance after being diagnosed with an illness or condition requiring healthcare expenditures.
The policy brief issued to House GOP members simultaneously summarizes and fills some gaps in the discussion draft legislation, placing emphasis on the expansion of individual health savings accounts (HSAs). HSAs are savings accounts, like individual retirement accounts (IRAs), tied to a high-deductible major medical insurance policy. The theory is that the savings account can be funded with tax-free contributions that may be used for almost any healthcare-related expense or saved, tax-free, from year to year. The HSA may be used to pay the deductible and copays associated with the lower-cost, higher-deductible insurance policy. The GOP policy brief anticipates making the HSA option available to more people, increasing the annual amount that may be saved and restoring the broader eligible expenses (primarily for over-the-counter medications) that were removed in the ACA.
Federal support for Medicaid would change from an enrollee-based reimbursement formula to a per-capita allotment based on the number of people a state reported as being in a qualifying group multiplied by a base dollar figure for each person in that group, then adjusted for annual inflation.
The policy brief and the discussion draft bill share key components. What the proposals gain in individual healthcare choice and reduced federal costs (especially long-term costs), they lose in terms of the incentives for population health-based “one-stop-shopping” by individuals. People with HSAs are far less likely to be tethered to the “narrow networks” of insurance-paid providers promoted under the ACA. However, that very patient choice will inhibit the ability of healthcare providers to coordinate care and promote holistic, wellness-based approaches to population health. There is also no guarantee that the federal subsidies for state high-risk insurance pools will be adequate to meet the need, which means that states and individuals most in need of insurance (and not employer-covered) will be scrambling to find an acceptable solution.
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States, and especially states which have participated in Medicaid expansion, are very worried about the prospect of increased state expenditures to provide current Medicaid services. The policy brief asserts that federal Medicaid costs have tripled since the Clinton administration of the 1990s and are on an unsustainable trajectory. However, many state budgets are at least as stretched as the federal budget, without the same ability to incur additional debt, impose additional taxes across a large and growing population, or both.
As if we didn’t already know that the devil is in the details when it comes to complex, expensive federal legislation, any projected subsidies, tax credits, and federal budget impacts must be evaluated (“scored,” in technical terms) by the Congressional Budget Office (CBO). Any change to the proposed bill, or any actual bill under consideration, at any point, will trigger changes in costs, requiring CBO to update its scoring evaluation. This will make debate on costs, impact on the budget and national debt, and other financial considerations maddeningly difficult to follow, even for the Congressional members and committee staffers most intimately involved in the legislation drafting process.
Needless to say, there is a presumption that all Congressional Democrats will be united in their opposition to whatever health care legislation the Republicans will propose. NPQ reported that Senate Minority Leader Chuck Schumer (D-NY) will fight, going so far as to say the fight will “make our day.”
Section 108 of the discussion draft alone will be a flashpoint, as it creates a “prohibited entity” definition that has the effect of barring Medicaid funds from being used to pay for any services provided in facilities operated by Planned Parenthood. The draft language reads as follows:
The GOP solution to this opposition is to use the same tactic that facilitated the passage of the ACA—using the once-a-year budget reconciliation bill as the vehicle for ACA repeal and replace. Under Senate rules, budget reconciliation is not subject to filibuster and requires only a majority of votes to pass. As long as Senate Republicans hold together (they could lose up to two votes without requiring one or more Democrats to join them to pass reconciliation), the tactic will be successful. The GOP majority in the House could approve the bill without Democratic support if they vote as a bloc, and there is no filibuster rule in the House.
The tricky political calculation in both House and Senate passage is in the various GOP factions. The conservative House Freedom Caucus is insisting on as pure a repeal-and-replace bill as possible, firmly opposing anything that looks like fixing Obamacare or voting on an “ACA lite” government program. In the Senate, Sen. Rand Paul (R-KY) has introduced his own repeal plan, S. 222 (with a policy brief) and Sens. Bill Cassidy (R-LA) and Susan Collins (R-ME) introduced a different repeal-and-replace bill that is more moderate, allowing states to keep many of the ACA’s provisions if they choose to do so. Will the GOP’s ideological purists demand a strict bill that, in their view, fulfills a key campaign promise? Or will more moderate GOP legislators, aided by lobbying from governors and other constituencies, demand compromises to preserve what is best about the ACA while repairing its primarily financial shortcomings?
Market-based healthcare reform is coming as a replacement for the Affordable Care Act, but for all we know about it, many details remain to be fleshed out and many deals to be struck. The second-largest unknown is to what extent the Trump administration’s own proposals will shape the developing Congressional plan or plans. The largest unknown today is similar to that seven years ago at the time of the passage of the ACA itself—to what extent, and in what ways, will new federal legislation affect the structure of, access to, and the costs of health insurance and health care?—Michael Wyland