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Is this the new face of healthcare in America?
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Who needs soap operas when we have Congress?
Earlier this week, Senate Republicans unveiled yet another version of their healthcare plan, dubbed the Better Care Reconciliation Act (BCRA), which is designed to repeal and replace Obamacare (officially called the Affordable Care Act). This marks the second version of the Senate's bill and the fourth incarnation overall of healthcare reform from the GOP since early March.
A repeal of Obamacare was expected to be easy considering that Republicans have control of the legislative branch of the government, but intraparty disagreement and public dislike for all versions of the newly proposed healthcare bills in the House and Senate have slowed any real progress to a crawl. Republicans have to find a way to satisfy more conservative members of their party who want to see Obamacare's regulations disappear, while also appeasing more moderate Republicans who fear their constituents will lose too much with the BCRA.
Image source: President Donald J. Trump's official Facebook page. Photo by Shealah Craighead.
Enter the Better Care Reconciliation Act, version 2.0. Here's everything you need to know about this potentially game-changing healthcare bill introduced in the Senate this week.
Though this probably comes as no surprise, the latest version of the BCRA, as with all prior incarnations of a Republican healthcare replacement plan, eliminates the individual and employer mandates, which required individuals to purchase health insurance, and employers to offer full-time equivalent employees health coverage options. It also eliminates the Shared Responsibility Payment (SRP), which is the penalty you'd pay for not purchasing health insurance. For 2016, the average SRP per household was estimated at $969 by the Kaiser Family Foundation.
Under Obamacare, we witnessed the introduction of mandates that required insurers to accept all members, regardless of whether they had preexisting conditions or not. This will continue with the latest version of the Senate's GOP healthcare bill, with insurers required to accept all applicants, regardless of their health.
Surprisingly, the Senate GOP broke with the passed House bill, entitled the American Health Care Act (AHCA), by moving away from age-based tax credits and back to income-based subsidies, as with Obamacare. The move back to income-based subsidies should add some protections to low-income folks who fear losing access to subsidies that help them afford their monthly premiums.
However, building on the previous point, these subsidies aren't nearly as generous. Under Obamacare, individuals and families earning up to 400% of the federal poverty level can qualify for the Advanced Premium Tax Credit to help offset some of the costs of their monthly premiums. Under the BCRA (both versions), this limit is reduced to 350% of the federal poverty level, leaving some in the middle class to face considerably higher premiums.
Additionally, older adults can be charged more as a percentage of their annual income relative to younger adults, which is a concession to insurance companies since older adults are responsible for the lion's share of medical expenses.
Cost-sharing reductions (CSRs), which help offset the costs of copays, coinsurance, and deductibles tied with heading to the doctor's office, are still on track to be eliminated after 2019. This provides near-term protection for those earning between 100% and 250% of the federal poverty level who qualify for CSRs, but it also could make getting medical care unaffordable for millions beginning in 2020.
Medicaid expansion allowed roughly 11 million people earning between 100% and 138% of the federal poverty level to enroll for health insurance under Medicaid under Obamacare. BCRA version 2.0 would allow Medicaid expansion to continue as planned under Obamacare through 2020, with phaseouts beginning in 2021. In 2021, and each of the three subsequent years, the amount of federal funding to the 31 participating Medicaid expansion states will drop by 5% (e.g., 85% in 2021, 80% in 2022, 75% in 2023). By 2024, federal support would be restored "to preexisting law," per the Senate BCRA website.
Image source: Getty Images.
As with the previous version of the BCRA, introduced last month, the new version calls for Medicaid funds to be doled out to states on a per-capita basis. In plainer terms, this means that funding is given out to states based on the number of Medicaid enrollees they have, not what their annual Medicaid expenditures are.
However, another new addition to BCRA version 2.0 from the previous bill is that the inflationary tether for Medicaid would change after 2025. The plan calls for the Medical Consumer Price Index (CPI-M), plus 1 percentage point, to be used through 2025. For more than 50 years, the CPI-M has averaged about 5.5%, implying Medicaid disbursement inflation of around 6.5%, based on historical averages.
After 2025, though, this tether would switch to the Consumer Price Index for All Urban Consumers (CPI-U), which has grown at a rate of closer to 2% for the past decade. In other words, considerably smaller federal payouts to the states would begin in 2026 and thus a greater responsibility of funding Medicaid would be shifted to the states.
Another new addition is the allowance for states to apply for waivers to go above their annual Medicaid spending cap to provide home- and community-based services (HCBS) for people with disabilities. The new plan calls for $8 billion in HCBS waivers between 2020 and 2023, as well as a $5 billion aggregate limit for public-health emergency expenditures between 2020 and 2024. This added funding is designed to appeal to more moderate Republicans who fear that those with disabilities would lose too much if the previous version of the BCRA passed.
Image source: Getty Images.
A potentially exciting development for moderate Republicans is the addition of $70 billion in funding on top of $112 billion that was previously set aside, to aid states in controlling premium inflation for higher-risk patients (essentially those with preexisting conditions) and low-income folks.
This $182 billion in aid is broken down on the Senate BCRA webpage into two parts. First, $15 billion per year in 2018 and 2019, and $10 billion a year in 2020 and 2021 ($50 billon in aggregate), would go to a Short-Term Stabilization Fund that's geared toward promoting more insurance choices and curbing access disruption. And secondly, $132 billion would go to a Long-Term State Innovation Fund over eight years to assist high-cost and low-income individuals purchase health insurance.
Catastrophic plans, also known as "skinny plans," which offer substantially lower premiums but much higher deductibles, would be fair game for BCRA income-based subsidies. Under Obamacare, subsidies couldn't be used to purchase skinny plans. The idea here being that more choices -- especially lower-cost premium options -- should encourage younger, healthier people to enroll.
In addition to so-called skinny plans being fair game, the Cruz amendment, named after Republican Texas Senator Ted Cruz, who introduced it, would offer more choices to consumers. As long as health insurers follow title 1 regulations (i.e., Obamacare's insurance mandates) in offering healthcare coverage in a state, they would also be allowed to offer an unregulated health plan as well.
In other words, insurers wouldn't have to adhere to the 10 minimum essential health benefits requirement, or stick to the community rating, which requires all people of the same age and location to be charged the same premium. Such a move would clearly be beneficial to young, healthier adults, who could probably snag a low premium, and not so helpful to those with preexisting conditions who could be pigeonholed into only a few plan choices.
A pretty common theme throughout both the House and Senate healthcare replacement plans has been the idea of significantly increasing the annual contribution limit for health savings accounts (HSA). In 2017, individuals and family contribution limits for these tax-advantaged plans that allow consumers to pay for eligible medical expenses on a tax-free basis were $3,400 and $6,750, respectively. Under the Senate's plan, these contribution limits would soar in 2018 to $6,650 for individuals and $13,300 for family coverage.
If there is one component of the Better Care Reconciliation Act 2.0 that could speak to Democrats, it's the newest language that would allow consumers to use their HSA funds to pay for health insurance premiums. No prior bill has allowed HSA funds to be used for premiums, but it could be an ingenious way to encourage consumers to use this tax-advantaged plan to their benefit.
Another encouraging new addition to the Senate healthcare bill is $45 billion in state grants to support treatment and recovery support services for those suffering from opioid addiction. According to the American Society of Addiction Medicine, opioid-related overdose deaths totaled 20,101 in 2015. Opioid addiction is a clear problem in the U.S., and this added funding to the BCRA version 2.0 could help sway moderate Republicans.
The Shared Responsibility Payment may be no more under the BCRA, but you'll still be "punished" for not purchasing health insurance. Under the new bill, if an individual is uninsured for a period of longer than 63 days within the last year, he or she would be disallowed from enrolling for health insurance for a period of six months. The move seems somewhat counterintuitive given the desire to reduce the uninsured rate, but it's in place to protect insurers from consumers who only enroll because they got sick.
Image source: Getty Images.
Remember those Obamacare taxes that the GOP couldn't stand? Well, they're not all going away. The net investment income tax, which is a tax of 3.8% on investment income for individuals and couples earning more than $200,000 and $250,000, respectively, in modified adjusted gross income is staying put in the latest version of the Senate's healthcare bill.
Building on the previous point, the Medicare surtax for wealthier Americans is staying, too. Working Americans pay a 2.9% payroll tax to Medicare on earned income, with their employer often covering half of this tax (1.45%) up to the $200,000 level. For those earning more than $200,000, an additional 0.9% surtax is added, which is entirely paid for by the worker, not the employer. Earned income above and beyond $200,000 would face at least a 2.35% Medicare payroll tax and possibly a higher level (3.8%) if you're self-employed.
However, one tax that's definitely going away, much to the chagrin of the medical device industry, is the medical device excise tax. This was a 2.3% tax on revenue for many medical devices that was suspended a few years ago by Congress. A number of medical device executives had argued that a tax on domestically produced medical devices would drive businesses overseas.
Finally, just like the House's AHCA, the Senate Republican health bill would also delay the implementation of the Cadillac tax, a 40% excise tax on employer-sponsored plans with exceptionally high annual premiums, until 2026.
Will this bill be the new face of healthcare? We'll find out next week when a vote is scheduled on the Senate floor.