Summary of the House Republican Plan – “A Better Way”? Part 1

Summary of the House Republican Plan – “A Better Way”?

Part 1


In most ways, the new plan is same old, same old. It proposes block grants of the Medicaid program to the states, creates Medicare vouchers, adds in a Cadillac benefits tax for employer plans, repeals most but not all of the Obamacare consumer protections and payment reforms. It adds in a flat refundable tax credit for the uninsured. It keeps some consumer protections for those who maintain continuous and uninterrupted coverage and repeals them for most every one else.

Here are the summaries on the Medicaid and Medicare portions. I would urge you to read the full 37 pages of text, so you are well-educated in these times of electoral confusion and potential tumult. I will follow up with blogs on the refundable tax credits, the cost containment provisions and on the consumer protections.


Medicare Summary: fewer seniors covered, more out of pocket and quality incentives repealed

1.    It would repeal the Obamacare reduction in Medicare Advantage funding and its shift to quality bonuses. Obamacare reduced Medicare Advantage funding so plan payments did not exceed the equivalent payments for fee for service and then provided financial incentives for those plans that improved quality.

2.   It would repeal the Independent Payment Advisory Board. Obamacare had created the IPAB to recommend changes in provider reimbursement so that Medicare lives within its annual budget. IPAB’s recommendations became policy unless overruled and replaced with a different approach with equal savings by Congress.

3.   Repeal of the Center for Medicare and Medicaid Innovation. CMMI was created by Obamacare to test and evaluate innovative payment and delivery system reforms.

4.   Repeal the ban on physician owned hospitals. Obamacare had instituted a moratorium on physician owned hospitals, which had been the center of a number of egregious frauds and scandals.

5.    Repeal the “Bay State Boondoggle”. Medicare payments to hospitals are based on their costs. Medicare’s hospital reimbursement rates are based on the cost of prevailing wages in the local hospital industry. This particular policy advantages those institutions in high hospital wage states and disadvantages those hospitals in low wage states. The Republican proposal would move towards national (rather than local) reimbursement rates.

6.   Flexibility in benefit design for Medicare Advantage Plans. This would allow Medicare Advantage Plans to have different and higher out of pocket for seniors.

7.   Restrictions on the ability Medigap (Medicare Supplemental) plans from covering “too much” of Medicare copays and deductibles for seniors.

8.   Combining Medicare Part A (Hospitals) and Part B (Doctors) into a unified program with combined cost sharing and a maximum annual out of pocket cap.

9.   Permits doctors and patients to agree on a personalized care demonstration project. This appears to allow concierge care.

10.  Repeal the cuts in Medicare and Medi-Cal DSH uncompensated care payments for two years. Then after 2021, combine the DSH programs into a single national DSH program based solely on uncompensated charity care.

11. Develop Medicare Compare so that consumers can compare the relative effectiveness of Medicare Advantage plans and traditional Medicare fee for service.

12. Delay the start of Medicare eligibility to match eligibility for Social Security beginning in 2020 – i.e. eligibility for Medicare would start at age 67 instead of 65

13. Begin Medicare vouchers (premium support) through a Medicare Exchange in 2024. Lower income seniors would get more support towards their cost of coverage and higher income seniors would get less support. The amount of premium support would be based on the health plan’s bids – i.e. those choosing the more expensive plans pay more of the premium.


Medicaid: makes it a block grant, fewer covered, fewer services, higher out of pocket

Medicaid covers 98 million Americans over the course of a year; it costs about $545 billion. It covers most nursing home costs, most births and about 1/3rd of hospitalizations in the nation. It covers well over 13.5 million Californians and nearly half the state’s children.

The House Republicans propose to give Medicaid to the states as a block grant in one of two forms: a block grant or a per capita cap. Their analysis is highly critical of the administration of Medicaid by states, then they propose block grants to states – a non sequitur – maybe they should have started by praising state innovation if they want to make the case for a block grant to states.

1.    The per capita cap would cap the growth in Medicaid spending per eligible at the CPI inflation rate. The states would be on the hook for any growth in public spending per capita above the cap and would retain the savings they achieve below the cap. The federal government would be on the hook for the growth in program eligibles or wouls benefit from their decline.

2.   States, which have not yet expanded their Medicaid programs, would not be permitted to do so. Thus for example Texas, which has opposed the Medicaid expansion, would be frozen out while New Mexico, which adopted the expansion, would be ok.

3.   The enhanced state matching formulas under Obamacare would be reduced to the state’s traditional match on a phased approach beginning in 2019. For California, this would mean a reduction from a 90/10 match for new eligibles in 2020 to a 50/50 match.

4.   Financing ratios for State CHIP programs for uninsured children would be reduced from an 88/12 match to the 2/1 match (which was in effect prior to the ACA).  

5.    States could impose work requirements as a condition of receiving coverage, could use a premium support model to pay for coverage offered through work or a limited benefit program for any adults able to work.

6.   States could use enrollment caps, waiting lists or phase down and out the coverage of the Medicaid expansion and other optional populations.

7.   States could require Medicaid populations to enroll in managed care with or without a waiver.

8.   States could exclude providers who perform elective abortions from the program.

9.   The pure block grant proposal would require states to cover the low income seniors and the disabled who receive SSI public assistance for the mandatory services (which includes doctors and hospitals but does not include either prescriptions or intermediate care nursing homes). All other coverage and services would be optional and states can pocket and retain any federal and state savings they achieve by eliminating the program eligibles and services.


Prepared by: Lucien Wulsin

July 5, 2016


Summary of the House Republican Plan – “A Better Way”? Part 2

Summary of Hillary Clinton’s Tax Proposal