4 Key Takeaways From Senate Republicans' Plan to Overhaul Healthcare

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Republicans moved closer to their goal of replacing the Affordable Care Act Thursday, with Senate Republicans issuing a plan that significantly restricts access to Medicaid and eliminates billions of dollars in taxes for companies and higher-income people.

The plan was hatched in a matter of weeks by a small group of senators meeting in secret. In many key ways, it's similar to the American Health Care Act, passed by the House in May after several failed attempts.

Thursday’s legislation, dubbed the Better Care Reconciliation Act of 2017, gives the public—as well as senators who weren’t in on the discussions—the first detailed look at how the Senate proposes to amend the AHCA.

Though the 142-page bill resembles the AHCA in many respects, there are also some major differences. The unpopular provision in the House version that gave states the okay to waive protections for people with pre-existing conditions is gone. However, the Better Care Act proposes even deeper cuts to Medicaid and less financial assistance to low-income Americans.

Q: What Are the Main Differences Between the Senate Bill and the AHCA?

Medicaid expansion is phased out more slowly. Under the ACA, the Medicaid expansion brought health insurance to 14 million Americans who didn't previously qualify. The Senate pledges to continue to fund the expansion through 2021 and phase it out over three years. The House bill would have phased out and then stopped funding in 2020.

But funding for Medicaid is cut more drastically. Beyond the expansion, both the House and Senate legislation make fundamental changes to how the federal government pays for Medicaid, changes that have nothing to do with ACA provisions. But the Senate proposal would make even deeper cuts than the House plan. It would shrink the annual growth rate in federal funding to state Medicaid programs to align with consumer inflation—not medical inflation, which grows faster.

Protections for people with pre-existing conditions are preserved—sort of. One of the most controversial parts of the AHCA eliminated protections for people with health issues. The AHCA allows states to apply for waivers to let insurers charge higher premiums to sicker people if their coverage has lapsed. The Senate struck that provision but kept others that could give insurers the green light to eliminate benefits that sick people especially need, like prescription drug coverage.

The way tax credits are awarded is different. Under existing ACA law, tax credits to subsidize premiums are based on income. The House bill bases tax credits on age, with younger people receiving more help than older ones. The Senate bill bases tax credits on income, but the income threshold to qualify is lower.

Addresses a major uncertainty for insurers the AHCA failed to address. Since the AHCA was introduced, the insurance market has been roiled by uncertainty over federal funding for what are known as cost-sharing reductions. Insurers participating in 2018 ACA exchanges are deciding now how to price policies and are particularly concerned about whether the federal government will reimburse them for $7 billion in cost-sharing reductions (CSRs) they must provide to low-income consumers. The Trump administration has been paying the CSRs on a month-by-month basis without making a future commitment. The AHCA didn’t address funding for the CSRs. The Senate bill would remove that major uncertainty for the near term by fully funding them—but for only two years.

Q: How Could the GOP Plans Affect Me?

It depends on whether you get health insurance through your job, Medicaid, or on the exchanges. Here’s how it would play out if you get insurance . . .

. . . on the exchanges. The bills eliminate the individual mandate that requires people to buy health insurance or pay a penalty. That's likely to reduce the incentive for healthy people to buy insurance. States could also apply for waivers that could eliminate many insurance regulations the ACA put in place, such as a requirement that insurers offer 10 essential health benefits, such as maternity care, prescription drug coverage, and mental health services.

Also, insurers wouldn't have to cover as large a portion of your medical bills. Currently, an insurer must cover about 70 percent of costs in the ACA’s benchmark Silver plan. The GOP wants to allow insurers to cover as little as 58 percent. You'd be making up the difference. The result: "People would be paying more for a skinnier product and have higher out of pocket costs," said Caroline Pearson, senior vice president for policy and strategy at Avalere Health, a healthcare consulting firm that has analyzed the GOP legislation.

Insurers could also charge older people up to five times more than younger people. And the subsidies that lower-income people get toward premiums would be less generous and cover fewer people. Under the Better Care Reconciliation Act, the threshold for people who can receive financial assistance goes from 400 percent to 350 percent of the federal poverty level, or about $42,000 for a single person. Under both plans, cost-sharing reductions that can significantly reduce out of pocket costs for low income people would eventually be eliminated.

Bottom line: If you’re younger and healthy and live in places where healthcare is relatively inexpensive, insurance could be less expensive for you than it is today. Though you're likely to be getting less comprehensive coverage at that lower price and your risk of big out of pocket costs go up. If you’re older, poorer, or live in an area where healthcare is more expensive, insurance will likely be less affordable.

. . . through Medicaid. More than 70 million people get their health insurance through this government program and this is the group that will feel the biggest changes. Both plans phase out Medicaid expansion and fundamentally change how Medicaid is funded. The federal government currently matches what states put toward Medicaid, even if those costs continue to rise. The GOP wants to cap the amount of federal funding that states can receive. That means that when costs go up, states would either have to reduce coverage or find another way to fund the extra expense. That could mean by taking from another budget item such as infrastructure or public safety or even raising taxes.

The Congressional Budget Office estimates that under the House plan, 14 million people will have to drop out of Medicaid coverage in the next decade because of changes to how the program is funded. Collins from the Commonwealth Fund said she doesn’t expect those numbers to change much when the CBO analyzes the Better Care Act.

. . . through your job. More than half of Americans get health insurance from their employer. The CBO estimated that about 3 million people with job-based insurance would lose health insurance under the AHCA. That's partly because, without the threat of a penalty if you don't have to buy insurance, some people will opt out of their employer plans. Both bills also eliminate the penalty imposed on companies with 50 or more employees if they do not offer insurance to their workers. Still, not a lot of employers are expected to drop health care coverage or significantly cut it back. “Large employers will likely continue offering insurance,” said Collins from the Commonwealth Fund. “It’s still a competitive labor market.”

However, if states redefine the essential health benefits insurers must cover, large employers could reduce their coverage to match the standard of any state they do business in, according to Matthew Fiedler at the Brookings Institute. That could also put another important ACA protection in jeopardy: A ban on private insurance plans imposing annual or lifetime limits on the dollar amount of care covered and caps on how much any individual has to spend out-of-pocket for healthcare annually.

Q: What Are the Biggest Sticking Points Between Moderate and Conservative Republicans?

Medicaid is the biggest area of contention among Senate Republicans. Moderates say the proposed cuts are too drastic, while conservatives say they don't go far enough. Other issues dividing senators: the ability of states to waive keys parts of the ACA and whether there is enough funding to provide financial assistance to lower-income and older Americans.

Q: What's Next?

The Congressional Budget Office’s analysis of the Senate legislation’s impact is expected early next week. The Senate cannot vote until the CBO, which will estimate how the Senate bill could change the number of Americans who are insured and the cost of implementing the bill, has weighed in. The CBO’s analysis of the AHCA estimated that 23 million fewer Americans would have insurance. McConnell said he wants a vote on the bill before Congress leaves for the July 4 recess next Friday.

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