by Eva Stahl
3/21/2017

As many are aware, efforts are underway in Congress to repeal the Affordable Care Act (also known as the “ACA”). Under pressure from rallies, town halls, letters and phone calls from consumers, Republicans recently shifted their stance on ACA repeal by committing to include a replacement plan in their proposal. Just last week, the American Health Care Act (AHCA) was introduced in the House and is swiftly moving through the legislative process to the House floor for a vote.

The bill is moving at unprecedented speed ---there are neither hearings being held nor opportunities to substantively amend the proposal. There is dissent within the Republican Party about what is in the bill (traditional Republicans versus Freedom Caucus), and there is strong opposition from Democrats and some Independents seeking to maintain coverage for 20 million people. Specifically, those opposing the bill are concerned about the deep cuts to health care subsidies (financial support to purchase coverage) and Medicaid, the insurance program that provides coverage to low-income elderly, children, pregnant women and people with disabilities. The bill also financially limits and phases out the “Medicaid expansion” that covers childless adults just over the poverty line—that equates to a little over $16,000 for an individual.

What does the American Health Care Act (AHCA) do?

The AHCA does three things: 1) repeals the taxes that fund the ACA; 2) reduces financial support for people to buy private coverage and 3) cuts funding and restructures the Medicaid program, including the Medicaid expansion included in the ACA.

First, the bill eliminates the funding for the ACA. The ACA includes a tax on couples earning over $250,000 a year in order to help fund the health coverage expansion. Repealing these taxes will transfer $275 billion to those earners over the next decade. In order to fund a replacement for the ACA, AHCA cuts funding to support the purchase of private coverage through the Marketplaces (or what we call the Connector) and cuts funding to states for the Medicaid program (what we call MassHealth). AHCA also repeals taxes on pharmaceutical and device industries that fund the ACA.

Second, AHCA provides refundable tax credits based on a person’s age, not income. This proposal significantly increases the cost for health coverage. Individuals and families will pay $2,400-$4,000 more for coverage over the next decade.  People ages 50-64 will experience an almost $7,000 increase by 2020. For the sickest among us, the replacement provides state funding for high risk pools. This means that if you are sick and high cost, you are transferred to an insurance risk pool that subsidizes your coverage. The key to a high risk pool is that it is adequately funded so it does not shift untenable medical expenses onto consumers. Additionally, AHCA includes an expansion of and heavy reliance on health savings accounts (HSAs). HSAs are a type of tax-preferred savings account in which individuals deposit tax-deductible income and then make withdrawals to pay for health care expenses. Currently HSAs are a tool mostly used by moderate to high-income earners. An expansion of HSAs will continue to benefit higher income individuals rather than those who need help most. This is because HSAs primarily serve as a way to reduce taxable income rather than to expand health coverage. Consider an individual with a $3,000 tax deduction in a 35% tax bracket who has their tax liability reduced by $1050 (.35 x $3000) while an individual in a 15% tax bracket will have the same deduction but only has their liability reduced by $450 (.15 x $3000).

Third, AHCA proposes to financially restructure the health care coverage program for the poor, known as Medicaid. The bill uses what is termed a “per capita cap” approach that caps funding for enrollees at a predetermined level. This approach reduces the amount of money available to states to manage their Medicaid program (currently a shared state-federal fiscal responsibility). Over 10 years, states lose about $370 billion dollars to support low-income people. Notably, caps on Medicaid reduce resources available to respond to disease outbreaks such as the Zika virus.

Finally, the bill strips the contentious individual mandate but creates a “continuous coverage” provision that levies a 30 percent surcharge on monthly premiums for allowing a lapse in coverage. The continuous coverage provision is included in order to maintain certain ACA protections including for those with pre-existing conditions. The surcharge will disproportionately harm older people as insurers can charge up to five times more than for younger people. Further, the pivot to penalizing people for not having continuous coverage (a gap in health coverage for more than 60 days) will increase job lock and hurt low-income people with chronic conditions. The problem with the proposed “continuous coverage” provision is that it makes the cost of opting back into the insurance market unaffordable, leaving potentially low-income and sick individuals behind.

How will this impact Massachusetts?

Massachusetts has a lot at risk. Because of the ACA, nearly 500,000 consumers in Massachusetts now have health coverage. In addition, if this proposal passes, the state will lose millions of dollars in federal funding, threatening not just health coverage but also key health care jobs. Estimates show that Massachusetts hospitals could lose over $168 billion dollars by 2026. The state proudly holds the highest insured rate in the country at 97 percent and the state’s insurance expansion has contributed to economic growth, making it a location for innovation and business development.

While individuals receiving financial support to purchase private coverage will decline dramatically, the greatest impact will be on the MassHealth program that currently serves 1.9 million people across the state. Placing caps on MassHealth funding would restrain the state’s ability to maintain current benefit and eligibility levels as consumers age and require more insurance than Medicare provides. For low-income children, this would translate into rolling back income level eligibility and cutting key preventive services like lead screening for young children and substance use disorder screenings for adolescents.

Finally, Massachusetts recently received a $52.5 billion waiver from the Centers on Medicare and Medicaid (CMS) at the end of President Obama’s administration to invest in accountable care organizations--an approach to better coordinate health care and over the long run, save money and improve health outcomes. It remains unclear if the ACHA proposal would reverse this decision and work already underway in the state. For more details see here: http://www.bostonglobe.com/metro/2017/03/07/how-would-gop-health-plan-play-out-mass/YWvvozK8qX2mehxOv5qjtJ/story.html?event=event25

What is the timeline?

If passed on the House floor, the bill will head to the Senate for a vote. The Senate is aiming to complete the repeal of the ACA by the end of April.  It will remain important for Massachusetts voters to stay informed and let elected representatives know about concerns they have. Local residents can contact their reps in Congress and the Governor at the following numbers to express concerns:

Governor Baker by Phone: 617-725-4005 or 888-870-7770 (in state)

Representative Clark @ Framingham District Office: (508) 319-9757

Senator Warren- Senate offices: Washington DC: 202-224-4543. Boston: 617-565-3170
Senator Markey- Senate Office: Washington DC: 202-224-2742.  Boston: 617-565-8519

Article submited by a member of the Holliston Democratic Committee