House Republicans Repeal and Replace Proposal
Part one, the Medicaid Expansion. The ACA allows states to increase eligibility for their Medicaid programs for all residents with incomes under 138% of the federal poverty level (about $16,000 for an individual). Thirty one-states have done so, attracted by the 100% federal financing, phasing down to 90% in 2020. The House Republicans would continue funding that expansion until 2020 (a Presidential election year) then freeze and cap each state’s enrollment. Californians impacted are close to 4 million.
Part two, the Medicaid per capita cap. The ACA continues Medicaid as an open-ended entitlement program – i.e. states set their eligibility, reimbursement and benefit levels and the federal government matches them within federal minimums and maximums. All states have Medicaid programs for the poor, but they vary widely in eligibility, services covered and costs to the state and federal government. The House Republican proposal would cap state spending per person – i.e. a per capita cap. States that exceeded this cap in any year would pay 100% of the extra costs. This caps spending growth but not enrollment growth in state Medicaid programs. Californians impacted are 13-14 million.
Part three, the refundable tax credits for individual coverage. The ACA has refundable tax credits based on an individual’s income that help pay premiums, and refundable tax credits based on income that help pay for copays and deductibles. The premium tax credits phase out by 400% of the federal poverty level (about $48,000 for an individual); the copay and deductible tax credits phase out at 250% of federal poverty level (about $30,000 for an individual. Lower income and older individuals in the most expensive health insurance markets in the country get the most help in this model. The House Republican model would instead employ a flat tax credit of $2,000 for an individual; it would be age adjusted such that a 60 year old would receive a $4,000 tax credit. The credits would phase down when an individual’s income reaches $75,000 a year or roughly six times the federal poverty level. This approach would increase federal assistance for the higher income and dramatically reduce it for low and moderate-income individuals and families covered in the individual market. Californians impacted are 1.5-2 million.
Part four, rate bands. The ACA established an age rate band of 3/1 such that a sixty four year old can be charged premiums three times higher than a 21 year old. The House Republican proposal would increase the age rate band to 5/1 so that the sixty four year old would pay premiums five times higher than the twenty-one year old.
Part five, the individual mandate. The ACA taxes individuals who do not purchase health insurance for themselves at $695 a year or 2.5% of taxable income, whichever is higher. The House Republican proposal would charge individuals 30% higher premiums if they have a lapse in health insurance coverage of more than 62 days a year. In other words, if your family’s coverage costs $10,000 annually and you fail to have coverage for more than 62 days, your coverage would cost $13,000 annually.
Part 6, the financing. The ACA financed its coverage expansions with taxes on high-income individuals, medical device manufacturers, insurers and tanning salons. The ACA has been running at a surplus, thus both reducing the federal deficit and extending the financial viability of the Medicare program by another decade. The House Republican proposal would repeal all the financing for the ACA’s coverage expansions in 2018 (an election year), but there is no proposal as to how they will finance the coverage expansions and refundable tax credits under the House bill. They would also repeal the employer and individual responsibilities to offer and take up health coverage. There is no Congressional Budget Office analysis of the federal budget costs and changes in coverage associated with these changes.
Prepared by: Lucien Wulsin
Dated: March 7, 2017