U.S. Senate Discussion Draft Continues Path to Increasing the Uninsured

June 23, 2017

Cuts Medicaid Even Deeper than House-passed Bill

On June 22, 2017, Senate Republicans released a discussion draft of legislation they are considering that would undo key provisions of the federal Affordable Care Act (ACA) and make sweeping changes to the federal Medicaid program. The Senate proposed Better Care Reconciliation Act (BCRA) differs in several respects from the House-passed American Health Care Act (AHCA), including slowing the timeline for some changes to ACA, but also includes deeper cuts to Medicaid. (See ITUP analyses of the AHCA and the BCRA.)

The Congressional Budget Office (CBO) has yet to score the emerging Senate bill, but like the House bill, the Senate draft severely weakens the federal financial commitment to Medicaid and undermines key ACA insurance market rules and premium subsidies. It therefore seems very likely that the BCRA will also result in millions of Americans losing health coverage over time. CBO estimates that 23 million Americans would be uninsured under the version of AHCA passed by the House. The CBO score of the BCRA is expected early next week.

Deep Medicaid Cuts Should Trigger Greater Scrutiny

To date, the limited debate and truncated Congressional review of the full details of Republican ACA “repeal and replace” proposals has generally concealed from public view the historic and dramatic magnitude of the proposed changes to Medicaid. Both the AHCA and the BCRA cut federal Medicaid funding by nearly $1 trillion, shifting the costs to the states, and threatening to impact all Medicaid recipients, including children, seniors, persons with disabilities and the working poor.

Both AHCA and BCRA (Republican proposals) fundamentally alter the state-federal partnership in Medicaid from its inception fifty years ago. Instead of providing federal matching funds for state Medicaid expenditures consistent with federal program rules, the Republican proposals would set a capped, per beneficiary federal payment to states, based on each state’s “base year expenditures,” adjusted annually thereafter by an inflation adjuster.

To absorb the steep cuts in Medicaid, states will be forced to raise significant new revenues or reduce eligibility, benefits and/or provider payments. At the same time, the Republican proposals reduce federal funding for the ACA Medicaid expansion to low-income childless adults. The BCRA gradually reduces the higher federal matching rate under ACA for this population (95 percent in 2017 under ACA dropping to 90 percent permanently in 2020) so that by 2023, states will receive the traditional federal match, which in California is 50 percent.

As an illustration of the potential impact for California, the California Department of Health Care Services (DHCS) estimates that the shift in Medicaid costs from the federal government to the states under the House bill results in nearly $6 billion in additional costs to California starting in 2020 growing to $24.3 billion by 2027. Given the lower inflation adjuster in the BCRA, the cuts to Medi-Cal will be larger by 2027 under the Senate proposal. The level of additional state costs would likely necessitate significant cuts in Medi-Cal, even if the state could identify additional revenues to offset some portion of the federal reductions. The Republican proposed Medicaid cuts will require California to analyze and re-evaluate every element of Medi-Cal expenditures, not just the enrollment expansions made possible by the ACA. (See ITUP analysis of the ACA and Medi-Cal here.)

Key Differences: House and Senate Bills

  • Medicaid Per-Capita Cap. Senate includes the same per capita cap approach starting in 2020 as the House bill but excludes children with disabilities. Starting in 2025, the Senate adjusts the cap annually by the consumer-price index (CPI), and not the Medical CPI, which will slow the rate of increase in the program and result in deeper Medicaid cuts.
  • Medicaid Adult Expansion. The House bill ends the enhanced federal match for childless adults starting in 2020 (currently 95 percent) as individuals cycle out of the program. Senate gradually reduces the percentage match over time until 2023, when it reaches the level of traditional Medicaid match, 50 percent in California.
  • Premiums Subsidies for Low-Income Exchange Enrollees. Senate limits eligibility for premium tax credits to those under 350 percent of the Federal Poverty Level (FPL) instead of up to 400% FPL in the ACA. House adjusts premium subsidies by age only, making the tax credits more generous for younger enrollees than ACA, and premiums more expensive for those in high-cost areas. Senate allows for geographical and income adjustments to subsidy levels. In addition, like the House bill, the sliding scale capping the percent of income individuals must pay for premiums is less generous for those age 50 and older. Senate benchmarks subsidy levels to a lower benefit plan than ACA with an actuarial value of 58 percent.
  • State Waivers of ACA. House allows for state waivers of essential health benefits, as well as ACA community rating for those who do not maintain continuous coverage. Waiving community rating requirements allows insurers to charge sick people and those with pre-existing conditions higher premiums. Senate allows for state waivers for many significant ACA provisions but not for guaranteed issue or higher rates for applicants with health issues.
  • Individual mandate. House deletes penalties for not having coverage but imposes penalties of up to 30 percent when someone applies for coverage, if they have not maintained continuous coverage. Senate deletes individual and employer mandate penalty without any offsetting provisions.
  • Taxes. House repeals all ACA taxes but not all immediately. Senate repeals taxes, some retroactively, and some in 2018 and 2023. Senate further delays “Cadillac tax” on high-cost employer benefit plans until 2026.

See ITUP’s detailed summary of the Senate discussion draft here.