The American Health Care Act: Overview
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- Katrina Hood
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1 The American Health Care Act: Overview The Congressional Republican leadership has unveiled its long-awaited ObamaCare Repeal Bill. While it has several good elements, it does not live up to the GOP leadership s promise to repeal ObamaCare, root and branch. Enacting it in its current form would leave key elements of ObamaCare in place, and would likely aggravate, rather than reduce, skyrocketing premium costs. Visit for more information. Speaking to the Conservative Political Action Conference on March 15, 2013, Senator Mitch McConnell said, ObamaCare should be repealed root and branch. Almost four years later to the day, the congressional GOP leadership introduced The American Health Care Act. The draft legislation contains several good items, but fails to repeal ObamaCare root and branch. Worse, it leaves in place the very elements of ObamaCare that are driving premium costs higher. The draft legislation effectively repeals ObamaCare s individual mandate (the requirement that everyone who doesn t get insurance from his employer must purchase it on his own) and employer mandate (the requirement that every business with at least 50 employees must make health care available to its employees). The draft legislation repeals ObamaCare s subsidies for those who purchase health insurance on the ObamaCare exchanges, beginning in 2020, but replaces them with a new advanceable, refundable tax credit available to those who don t receive health care benefits from their employer. The draft legislation repeals ObamaCare s Medicaid expansion, beginning in 2020, and significantly reforms the Medicaid program, effectively ending its status as an entitlement. Instead of its open-ended commitment, Medicaid funding would be capped on a per-capita basis, saving $880 billion over 10 years. According to the Congressional Budget Office estimate, these savings ending the subsidies and the Medicaid expansion combine for a $1.2 trillion reduction in federal spending over 10 years. The draft legislation repeals almost all of ObamaCare s tax increases. The Congressional Budget Office scores it as an $883 billion tax cut over 10 years. Consequently, the Congressional Budget Office score says the draft legislation would reduce the federal deficit by $337 billion over 10 years. The draft legislation virtually doubles the size of the maximum contributions to Health Savings Accounts, increasing them to $6,550 for individuals and $13,100 for families, beginning in Unfortunately, the draft legislation doesn t do anything about the insurance company mandates that are driving up premium costs principally, Guaranteed Issue (the requirement that insurance companies provide health insurance to all, including those with pre-existing conditions), Essential Health Benefits (federal mandates that require every insurance policy to contain certain kinds of coverage, whether the policy-holder wants it or not), and Community Rating (which replaces individual risk evaluation in the writing of a policy and replaces it with pricing based on age and geography). Congressional GOP leaders say they cannot repeal those provisions in the reconciliation because they are policy changes that do not have a direct effect on federal taxes or spending, and therefore do not qualify for inclusion in a reconciliation bill. Seven years of experience with ObamaCare shows that these mandates on insurance companies have led to significantly higher costs for insurance, which has led to significantly higher federal outlays for the subsidies used to pay for that insurance. By any reasonable standard, they should qualify for inclusion in a reconciliation bill. But Republican leaders won t even try to include them in the reconciliation bill. Our allies in the Congress fear that a termination of the Medicaid expansion that does not happen until 2020 is a termination of the Medicaid expansion that will never happen. They fear a future Congress could, and likely would, repeal that provision in 2019, before the 2020 elections, to prevent negative headlines about people being thrown off Medicaid. In the meantime, not terminating ObamaCare s Medicaid expansion until 2020 could encourage states that have not yet opted to expand to do so immediately, further swelling the Medicaid rolls. While the draft essentially repeals the legal requirement that people who don t get health insurance from their employer must purchase it on their own, it contains a new one-year 30% surtax on premiums for people who let their coverage lapse for 63 days as a means to encourage people to get and maintain coverage. If the draft legislation is enacted in its current form, it will likely lead to higher costs for insurance, not lower. It will actually make the problem worse, not better.
2 Understanding the Mandates on the Insurance Industry in the American Health Care Act The American Health Care Act requires that insurance companies abide by several regulations, which have had the effect of either driving up insurance costs for everyone or forcing companies out of the market. Obamacare contains two related mandates: 1) the mandate on insurance companies that they must cover preexisting conditions; and 2) the mandate on individuals that they must carry government-dictated essential, minimum coverage. The two mandates are related because the guarantee that insurance companies will issue coverage to all, regardless of their health status, requires them to raise premium prices to the point that healthy individuals would simply opt not to pay for health insurance until the moment they needed it. The individual mandate was designed to offset this problem for insurance companies, by requiring healthy individuals to be in the insurance market continuously. The individual mandate is an affront to individual liberty and economic freedom and represents the biggest change in the relationship between the federal government and the individual in our nation s history. Tea Party Patriots has opposed the individual mandate since before Obamacare was passed. Obamacare contains a second mandate on insurance companies, called Community Rating. Community Rating ends the insurance companies previous practice of assessing an individual policy-holder s risk levels in determining the pricing of the premium, and replaces it with a requirement to offer policies within a certain geographic territory at the same price to all persons within certain age ranges. Under Obamacare, the cost of the most generous policy for older policy-holders can be no more than three times the price charged for the most generous policy for younger policy-holders. This has the effect of raising prices significantly for younger policyholders. Obamacare contains a third mandate on insurance companies, called Essential Health Benefits. Every policy sold must contain coverage for 10 benefit categories, including emergency services, maternity and newborn care, mental health and substance abuse disorder services, and pediatric services, among others, whether the policy-holder wishes to include such benefits in the policy or not. These three mandates on insurance companies Guaranteed Issue, Community Rating, and Essential Health Benefits are the main reasons insurance premiums have spiked since the enactment of Obamacare. The American Health Care Act, the GOP-led healthcare bill, continues Obamacare s mandate that insurance companies cover people with pre-existing conditions, regardless of their health insurance coverage in the past. The AHCA leaves the Essential Health Benefits requirement untouched. The AHCA also leaves in place Community Rating, but liberalizes the age ratio from its current 3:1 to 5:1. Because the AHCA leaves these three insurance company mandates intact, for the most part, it will do little to address the biggest concern most people have regarding their health insurance skyrocketing premium prices. The American Health Care Act ostensibly eliminates the individual mandate, but it replaces the individual mandate with a new onerous regulation, requiring health insurance companies to charge 30% more for premiums for a year for those who allow their insurance coverage to lapse more than 63 days. The pre-existing condition mandate on health insurance companies means that, once again, we have a health care bill that allows heavy-handed government directives, rather than the free market, to determine coverage. The American Health Care Act misses an important opportunity to introduce market-savvy reforms, and instead clings to many of the worst aspects of Obamacare including the regulations on the insurance industry, which will, necessarily, harm all Americans.
3 Understanding Medicaid Expansion Medicaid is a federal government program designed to help lower-income citizens get health care. It now serves more than 70 million Americans. But costs are high $532 billion in 2015 and care is poor. Obamacare drastically expanded Medicaid coverage, pushing able-bodied Americans onto this failing government healthcare program. Rather than repealing Obamacare s Medicaid expansion immediately, the Republicans American Health Care Act includes a three-year delay in freezing Medicaid enrollment, effectively retaining one of Obamacare s worst aspects for the next three years. Medicaid is the federal-state partnership healthcare program for low-income citizens that delivers dismal results. Research published in The New England Journal of Medicine documents that patients covered by Medicaid actually fare worse than patients with no insurance at all. Prior to the enactment of Obamacare, Medicaid was available to citizens whose income fell below the Federal Poverty Level $24,300 for a family of four in Obamacare expanded Medicaid to add able-bodied adults below 138% of the Federal Poverty Level $33,600 for a family of four in states have opted to implement the Obamacare Medicaid expansion. The House leadership American Health Care Act leaves Obamacare s Medicaid expansion in place until The House leadership bill would also continue to pay for all continuously covered adults who enrolled in the Medicaid expansion before the 2020 freeze. Over the next two-and-a-half years, states including those that have not opted to accept the Medicaid expansion would have an incentive to enroll as many people as possible in Medicaid before the freeze goes into place. Worse, a freeze that doesn t take place until 2020 is a freeze that likely will never happen at all because 2020 is a presidential election year, and pressure to repeal the freeze will rise significantly as 2020 approaches. A stronger solution would be an immediate freeze on Medicaid enrollment. It would also be more effective to send Medicaid dollars to states without the strings attached. This type of arrangement would recognize that states are better able to innovate and use dollars effectively without the federal government s interference.
4 Understanding the Tax Credits in the American Health Care Act The American Health Care Act creates a new entitlement program in the form of advanceable, refundable tax credits. Just as with Obamacare, the American Health Care Act relies on government use of its coercive power to transfer wealth from one group of people to another. Further, these advanceable, refundable tax credits by masking real prices and distorting competition will distort the market further. Refundable tax credits are those that can reduce a taxpayer s tax liability below zero dollars. In other words, rather than paying any federal taxes, taxpayers whose incomes are so low that they are not required to pay federal income taxes would nevertheless receive a tax credit. That s not a credit, that s a subsidy. Advanceable tax credits are credits the taxpayer receives during the course of the tax year, without having to wait until filing his/her tax return the following year. The House GOP bill, the American Health Care Act, creates a new entitlement program through the use of advanceable, refundable tax credits which taxpayers will be forced to fund in perpetuity. History has shown that entitlement programs, once enacted, are nearly impossible to eliminate. This new GOP-created entitlement program would quickly become another entrenched program for taxpayers to fund. This new entitlement program is another example of a wealth transfer program a way for government to use its coercive power to take money from one group of people and give it to another group of people, minus a bit taken out for the government s overhead cost which we, at Tea Party Patriots, have consistently opposed. Conservative stalwart Congressman Mark Meadows of North Carolina opposes the American Health Care Act, in large part, because of the new entitlement program. In an interview with CNN, Congressman Meadows remarked: "What is conservative about a new entitlement program and a new tax increase? And should that be the first thing that the President signs of significance that we sent to the new President? A new Republican president signs a new entitlement and a new tax increase as his first major piece of legislation? I don't know how you support that -- do you? One of the most objectionable aspects of the tax credits is that because the tax credits are tied to income, rather than wealth, even some very wealthy people who do not have employer-sponsored health insurance plans would be eligible for these credits. The American Health Care Act would actually represent a growth in the amount of taxpayer-funded subsidies - the wrong direction for a GOP-led repeal bill. The last thing the U.S. healthcare system needs is another massive entitlement program.
5 Understanding the Role of the Senate Parliamentarian in the Reconciliation Process Congressional Republicans have chosen to use the Reconciliation Process as the means to pass their American Health Care Act. The Reconciliation Process allows a bill to pass the Senate on a simple 51-vote majority, because it cannot be filibustered in the Senate. But there s a catch in exchange for this privilege, a bill brought to the floor under Reconciliation Rules can only relate to the federal budget specifically, revenues, spending, or the debt ceiling. Congressional Republicans assume that no Democrats will assist in the effort to repeal Obamacare. The corollary to that assumption is that Senate Democrats would use the filibuster to block any repeal legislation Senate Republicans attempt to consider. One way to avoid a filibuster is to use a process known as reconciliation to bring legislation to the floor. The Congressional Budget Act of 1974 created the reconciliation process. The process allows a simple majority of the Senate to proceed to consideration of a budget bill, with debate limited to 20 hours and no opportunity for the minority to filibuster. Because the GOP congressional leadership is planning to bring the bill to the floor of the Senate under the reconciliation process, they are unwilling to insert items into the legislation that, they say they believe, the Senate Parliamentarian could deem ineligible for the protection and insist on stripping from the legislation. The Senate Parliamentarian is an unelected Senate staffer. Under the Rules of the Senate, the Parliamentarian can offer interpretations of the Rules to the Presiding Officer. There is no requirement, other than tradition, that the Presiding Officer follow the advice offered by the Parliamentarian. If the Presiding Officer chooses to ignore the advice of the Parliamentarian, an opponent of the legislation could raise a Point of Order, challenging the ruling of the Presiding Officer. To overturn a Ruling of the Presiding Officer on a bill brought to the floor under reconciliation rules, opponents would have to muster 60 votes. There are 52 Republican Senators. As long as 41 of them voted to sustain the Ruling of the Presiding Officer, the challenge would fail. To our knowledge, no Presiding Officer has ignored the advice of the Parliamentarian in more than 40 years. But just because it hasn t been done doesn t mean it shouldn t be done.
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