THCB readers are well aware this coming week Senate Republicans plan to begin debate on passing their amended version of the House-passed American Health Care Act (AHCA), titled the Better Care Reconciliation Act. As of today, June 23rd, immediate reactions by Republican senators to the June 22ndreleased discussion draft have been limited largely because members immediately left town after the draft’s release. The Congressional Budget Office’s (CBO’s) score, that will again be influential, is expected this Monday or Tuesday. Senate debate on the legislation will likely begin next Wednesday with a vote expected late Friday or early Saturday morning, or just prior to their week-long July 4th recess. Here is an assessment of the legislation’s prospects.
What’s at Stake or Our Health Status
One of the best or most thorough assessments of US population health is the 2013 National Academies report titled, Shorter Lives, Poorer Health. As the title plainly indicates the report found that compared to residents in 16 peer countries Americans experience higher mortality and comparative inferior health status. Americans live shorter lives and suffer pervasive health disadvantages throughout their life course. For example, the report found the US experiences higher rates of infant mortality, injuries, particularly automotive, and homicides, higher rates of teenage pregnancy and STDs, higher rates of HIV/AIDs, higher drug and alcohol-related mortality and morbidity, higher rates of diabetes and obesity, more heart and chronic lung disease and more disabilities including arthritis, and all without any compression of disease.
Senate Republican Motivations
Congressional Republicans have of course been promising, or attempting, to repeal the Affordable Care Act (ACA) since it became law in 2010. They believe they need to keep this promise. If not, they fear, particularly House Republicans, getting primaried, as former House Majority Leader, Eric Cantor, was in 2014 (though his defeat was due largely to his immigration reform position). Their other primary motivation is tax reform. The House bill cuts $834 billion in Medicaid spending over the ten year budget window largely pay for less generous individual tax credits. The Senate bill largely does the same. With a massive reduction in Medicaid spending Republicans are also able to repeal ACA taxes on corporations and on higher income earners. For example, under the House AHCA, those earning over $1 million annually would see $144 billion in tax relief and those earning $200,000 to $900,000 would see $274 billion in tax abatements over the next 10 years. Cutting ACA taxes also lowers the government’s tax revenue baseline. This sets up Republicans to pass a tax reform bill that would allow for approximately $1 trillion in less revenue while still being defined as revenue neutral.
Congressional Budget Office (CBO) Scoring
The CBO concluded the House-passed AHCA would reduced the number of covered lives by 14 million in 2018 and by 23 million in 2026. The bill would cut Medicaid spending, as noted, by $834 million. By 2020, state marketplaces would become unstable for about one-sixth of the population. This is because AHCA waivers would allow states to drop the essential health benefit requirement and would allow insurance underwriting for those that had not demonstrated continuous coverage. For example, the CBO estimated for a single individual age 64 with an income of $26,500, or 175 percent of the Federal Poverty Level (FPL), their premium would increase from $1,700 to upwards of $16,100. A similar score of the Senate’s proposed legislation is likely.
Stakeholder or Lobbying Efforts
In sum, stakeholder opposition to the AHCA has been limited if not anemic. This is explained in part by fear of retaliation, for example, the administration would cut off cost saving reduction repayments. Repealing the ACA means health care companies, including pharmaceuticals and medical device manufacturers, would receive a tax cut estimated at $200 billion. The industry is also hoping for further favorable tax treatment when the Republicans move on to rewriting the tax code. Others believe Republican efforts will collapse under its own weight. Medicaid managed care organizations including Molina and Blue Shield of California, have been obviously vocal. The hospital industry has as well in part over concerns fewer covered lives means more bad debt and how Republicans have structured Disproportionate Share Hospital (DSH) funding. The AARP, the American Academy of Pediatrics, the American College of Physicians, the Association of American Medical Colleges (AAMC), the American Medical Association (AMA), disease groups like the American Cancer Society and patient advocacy groups like Families USA and related others have also expressed opposition.
Among those on the sidelines, the American Health Insurance Plans (AHIP) has not weighed in. Association criticism is though muted or offset by their continued funding of Republican leadership re-election campaigns. Republican governors in Medicaid expanded states, for example, Ohio’s John Kasich and Maryland’s Larry Hogan have stated respectively “deep concerns,” or argued legislators “should go back to the drawing board.” Despite the fact Arkansas has added 300,000 Medicaid under ACA expansion, Governor Asa Hutchinson stated “there are significant positive changes in the Senate bill.”
The Senate Parliamentarian, Reconciliation and the Byrd Rule
Since Senate Republican efforts fall under budget reconciliation rules, that allow them to pass their health bill with a simple majority vote, provisions within the bill must conform to the so called Byrd rule. Simply explained, this means provisions that are considered extraneous, i.e., generally do not increase spending or decrease revenues, the Senate Parliamentarian, Ms. Elizabeth MacDonough, must strike from the legislation. There are provisions that may not meet Byrd rule requirements. These include the cost sharing reduction payments, state stabilization funds (moneys to stabilize state marketplaces) and the House ban on the use of federal tax credits for abortion. If these provisions are struck, Republicans will move these to Medicaid CHIP legislation in September and/or likely find other ways to address.
Timing and Process
Majority Leader McConnell is pushing for a vote before the July 4th recess for at least three reasons. The Senate needs to move on to other matters including raising the debt ceiling, the desire for a legislative win before the August recess and, leaving aside the potential for extraneous variables and crowd out, there’s no guarantee McConnell would be successful should he work the bill through the latter half of the year. Also of note, Republicans cannot move on to tax reform legislation, that they’ll forward under a 2018 reconciliation resolution such that again they can pass with a simple Senate majority vote, until they dispense with the ACA repeal-related 2017 budget resolution.
As has been widely reported McConnell drafted the Senate bill in secret. All Republican meetings were closed to the press. There were no committee hearings and will be no committee markups. This has enabled his members to credibly say when asked about the bill, that they have no comment because they’ve seen no language. Legislating in the dark subverts media coverage or criticism. Media Matters reported the three major networks ran a total of three related segments between June 1 and June 14.
Since the Senate bill is again being considered under reconciliation, Senate floor debate is limited to 20 hours. The time is equally divided between the majority and minority. There is no limit to the number of amendments members can offer during consideration of the bill. Once the 20 hours have expired, amendments not withdrawn are voted on with no debate via what’s termed a “vote-a-rama.”
Senate Republican Votes
None of the 48 Democratic Senators are expected to vote for the Republican bill. No House Democrat voted for the AHCA.
With a 52 member caucus, McConnell can only lose two votes. If he loses two, Vice President Pence will vote to break the tie. Republican votes in play are on the extremes. On the far right is Ted Cruz (TX), Mike Lee (UT) and Rand Paul (KT). Cruz, representing the state with the highest percent of uninsured, is up for re-election next year with current polling showing Texas voters only “leaning” Republican. This is offset by the fact Cruz already has a substantial campaign war chest and is not expecting a primary challenge. The moderates likely in play are seven: Shelly Moore Capito (WV); Bill Cassidy (LA); Susan Collins (ME); Jeff Flake (AZ); Dean Heller (NV); Lisa Murkowski (AK); and, Rob Portman (OH).
Despite a June 22 press release stating “we are not yet ready to vote for this bill” by Cruz, Lee, Paul and Ron Johnson (WI), it appears Cruz, Johnson and Lee will ultimately vote for the bill. Paul will likely vote against. He has consistently stated he does not want to end up with “Obamacare lite.” He wants full repeal. Nebraska’s Senator Ben Sasse may also be a no vote. This means McConnell can only lose one or two more votes.
Among the moderates Flake and Heller are particularly on the bubble. Both Arizona and Nevada expanded Medicaid coverage under the ACA. Both are up for re-election next year and current polling shows voters in both states are also only “leaning” Republican. Heller is more hard pressed. Hillary Clinton easily won Nevada in 2016 by eight points, the popular Nevada Governor, Brian Sandoval, has been a strong supporter of ACA Medicaid expansion that has enabled the state to increase coverage by 33 percent. He has warned Nevada would lose $100s of millions of federal Medicaid funding if Congressional Republicans were to succeed. Heller is presently polling at 39 percent versus 46 percent for any Democratic opponent. Not surprisingly late today, June 23rd, Heller announced he cannot support the Senate bill. Also not surprising immediately after Heller made his announcement a Republican super PAC announced it would spend seven figures on advertising to “influence” the freshman senator.
Concerning the three female senators, West Virginia expanded its Medicaid program under the ACA largely because the state has the seventh highest percent of Medicaid residents, or three in ten. Also, unlike most states West Virginia’s Medicaid beneficiaries tend to remain Medicaid beneficiaries over time. For Senator Murkowski, Alaska is one of the most expensive cost-of-living states due in part to high health insurance premiums. The state has 14,000 enrolled in its marketplace with currently one insurance plan participating. Of those enrolled 90 percent receive subsidies. The Center for Budget and Policy Priorities (CBPP) estimated under the AHCA, Alaskans would pay an average of $12,599 more per year of out-of-pocket for health care costs. For Senator Collins, Republican policy is to decrease premiums for young adults while substantially increasing costs for older Americans presents a problem because Maine has the oldest residents in the US with a median age 44. For Murkowski and Collins, the only two pro choice Republicans, Planned Parenthood funding matters. Ohio’s Senator Portman, who saw an over 20 percent increase in drug overdose deaths between 2014 and 2015, has similar or related concerns.
What to Watch
Medicaid: Compared to the House, the Senate’s bill delays the ACA’s Medicaid expansion by three years. However, the Senate’s annual Medicaid update factor beginning in 2025 is less generous than the House. This latter issue is inherently problematic under either update formula because a fixed update percent, particularly the Senate’s that will track less accurately with actual medical spending growth, does not account for varying patterns of spending due to epidemics or other public health realities, for example weather extremes caused by the climate penalty. In an effort to mitigate the effect of lost lives, or to specifically to win Senator Murkowski’s vote, the Senate bill includes a provision whereby the government will redistribute two percent of Medicaid funds by reducing reimbursements from states that spend more generously on Medicaid beneficiaries to states than spend less generously except for high spending states with low population densities, like Alaska. To win Senator Portman’s vote the Senate bill also excludes the Medicaid ACE (Advancing Care for Exceptional Kids) demonstration program. By intention, because of the phase out is delayed (as well as a less realistic update factor) the number of lives lost under Medicaid may likely be scored somewhat lower than the House bill which CBO determined would drop 14 million lives by 2026. Since the Senate bill succeeds of fails largely on its Medicaid provision, the CBO’s score is particularly relevant to the moderates since all but Maine expanded their Medicaid programs under the ACA. Whether CBO’s score meets whatever lost lives tolerance level the moderates have set for themselves is the begged question.
Tax Credits: From a CBO scoring prospective, tax credits could prove to be as contentious as cuts to Medicaid. Per the CBPP, compared to ACA subsidies, in 2020 the House AHCA’s plan would reduce tax credits for Alaskans by over $10,000, for West Virginians by over $4,200 and in Louisiana and Maine by over $2,600. For those over 60, premium costs would almost triple. Under the Senate bill, beginning in 2020 tax credits would be bench marked at 58 percent of actuarial value (AV) of the median premium marketplace plan. This is substantially less generous than current ACA subsidies at 70 percent of AV. This effect may mitigated by the Senate’s lowering the availability of credits from 400 percent to 350 percent of the FPL and the fact that the Senate bill also allows states to use, ironically, the ACA’s 1332 waiver process to drop the essential health benefit requirement and the requirement that plans meeting certain actuarial values. Under a far more liberal 1332 wavier, states could also close down their ACA marketplaces. Not surprisngly, Senate Republicans incent states to submit 1332 waivers via $2 billion in grants. Like the House bill, the Senate includes a 5:1 age rating band and drops the individual and employer mandates. It appears these provisions, in sum, would, as CBO concluded in scoring the AHCA, cause the non-group market to become unstable for a significant percent of the population, or leave individuals and families unable to purchase insurance at premiums comparable to those under current law.
Cost Sharing Reduction (CSR) Payments: The Senate bill is more generous than the House in that it extends CSR payments through calendar 2019. (It’s at least ironic Republicans have generally termed these payments “bail outs” and challenged them in court since 2003 Republican-led Medicare Part D legislation made these programs permanent.) The combination of a changing 2020 individual market rules with no guard rails for insurer participation may cause moderate senators to pause particularly if the CBO validates their concern. The Senate bill does propose two “stabilization” funds but these moneys are modest, between $5 and $15 billion per year, and expire in 2021.
Opioid Funding: The seven moderate senators identified represent states that have the highest drug related deaths in 2015. West Virginia had the nation’s highest age adjusted drug related death rate. The Senate bill appropriates $2 billion in 2018 for grants to states to support substance abuse disorder treatment and recovery. Considering the fact opioid abuse fatalities in 2015 numbers over 33,000, a 16 percent increase over 2014, both the amount and duration of funding appears to be far from inadequate. The $2 billion may be purposeful since McConnell could likely raise the amount substantially to win particularly Capito’s vote.
Planned Parenthood: Like the House bill, the Senate will also cut Planned Parenthood funding, approximately $550 million or 30 percent of the organization’s budget, for one year. This, despite the fact Planned Parenthood, which operates 700 clinics nation-wide, and other abortion providers are already banned from billing taxpayer-funded programs for the procedure. The 2015 ACA repeal bill that President Obama vetoed in early 2016, included defunding Planned Parenthood. Collins and Murkowski supported an amendment to strike the provision. This may also be an issue for Senator Heller since Nevada has the 5th highest percentage of births to unwed mothers.
Amendments: The fate of the Senate bill may come down to amendments during the floor debate (and,/or McConnell offering a substitute bills prior to and/or during floor debate). Look for Republican offered amendments, along with Democratic offered amendments, related to these issues and others that in sum will illustrated or attempt to reinforce each faction’s position or in the Democrats case further divide the two.
McConnell: Unlike House members, Senators are far more independent or less willing to bend to caucus leadership and/or White House pressure. Nevertheless, McConnell can and does exert considerable influence over his members. To what extent the Majority Leader pressures or provides his moderates with life boat provisions will substantially determine the outcome. It has been reported over and again McConnell is “agnostic” concerning the outcome, in part, because, again, he’d prefer to move on to tax reform. Many suspect or believe he actually would have preferred the House to have quit after they initially failed on March 24th. He also knows well Senate Republicans will lose by winning since they’ll own every inevitable adverse consequence that can reasonably tied to his legislation.
House and White House Response
Should the Senate Republicans prevail, despite posturing this past week by the House Freedom Caucus and the Republican Study Committee, it is difficult if not impossible to believe the House will attempt to rewrite the Senate bill, nor will House and Senate leaders appoint conferees to a conference committee to resolve their differences, or draft a third bill both House and Senate Republicans can accept. (One problem with the ACA was there was no conferencing the Senate and House versions.) This is to say the House will pass the Senate’s version or in DC parlance the Senate will jam the House. President Trump will sign the legislation before the Congress takes its scheduled five-week summer recess.
What Does Failure or Success Mean
Failure means a few Senate Republicans were willing to believe the CBO and not dramatically cut Medicaid, a program that provides health care services to nearly one-quarter of Americans, or approximately 70 million poor perinatal, pregnant women, disabled children and adults and the frail elderly. That they were sensitive to public opinion polling that shows less than 20 percent, and not a single state, supports the House AHCA. That they at least defacto believe the ACA’s individual market is not in a “death spiral” or that per Standard and Poor’s analysis, last year most plans found a stable and profitable price points and/or per Oliver Wyman, two-thirds of higher premiums are due to political uncertainty. Perhaps more importantly they were neither interested in disguising the legislation’s intent by delaying its implementation by a few years nor ultimately in discounting the future.
Success constitutes a lifetime win for the ideological right. Success means the vast majority if not the entirety of Republican Senators repealed, or more accurately partially repealed, the ACA in order redistribute wealth from the poor and middle class to the nation’s wealthiest. Though too infrequently defined in this way, the ACA is, or was, essentially wealth transfer bill. Although it took him seven years to say it, in his recent Facebook post former President Obama wrote the Senate Republican bill is ‘not a health care bill” but instead “a massive transfer of wealth … to the richest people in America.” Success means Republican Senators view access to and coverage for health care as simply a product or commodity and that providing all Americans with health care services is not a priority. Success in the face of certain public disapproval means as Gilens and Page concluded in a 2014 study that the “American public actually have little influence over the policies our government adopts,” or phrased another way, “when a majority of citizens disagrees with economic elites or with organized interests,” Gilens and Page concluded, “they generally lose.”
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