Health Policy Report

The Week in Review

It was a monumental week in health policy as Republicans went to work advocating for their plan to repeal and replace the Affordable Care Act (ACA), dubbed the American Health Care Act (AHCA). The House Ways & Means and Energy & Commerce Committees held marathon markups for their respective portions of the bill last week over the objections of Democrats, who delayed the process as much as possible through parliamentary procedure. The details of the plan, the list of its supporters and detractors, and its path forward in both chambers is included in our roundup below. Expect the AHCA to control much of the legislative oxygen in the weeks to come.

On the floor last week, the House moved on from its regulatory disapproval work to pass a defense appropriations bill and three tort reform measures. The defense bill (H.R. 1301), which passed on a largely bipartisan 371-48 vote, would provide $583.7 billion in annualized funding for the fiscal 2017 year. The tort reform bills passed along more partisan lines and would specifically: (1) require federal courts to impose penalties on parties that file frivolous claims and repeal a safe-harbor provision that allows such parties to avoid penalties if they withdraw the suit (H.R. 720); (2) allow class action lawsuits to move forward only if all potential members in a class action have suffered similar injuries (H.R. 985); and (3) require additional in-state plaintiffs to show a plausible case in order to keep the matter in state courts (H.R. 725).  

Meanwhile, the Senate had a quiet week moving through House-passed disapproval resolutions including one (H.J. Res. 37) that would rescind a joint rule published by the Department of Defense, General Services Administration, and National Aeronautics and Space Administration (NASA) requiring federal contractors to keep detailed information on their past labor violations. Two other resolutions cleared the way to roll back Education Department rules designed to increase teacher accountability (H.J. Res. 57) and improve teacher training programs (H.J. Res. 58).

The Week Ahead

The release of two separate documents – a Congressional Budget Office (CBO) score for the Republican health care plan and President Trump’s budget proposal for fiscal 2018 – will drive conversation in Congress this week far more than any of the measures on the chamber floors. The first document is sure to add a wrinkle to the debate over the Republican health care proposal after the House Committees with jurisdiction approved the bill last week before the non-partisan CBO could release its analysis.

Health and Human Services Secretary Tom Price appeared on talk shows Sunday morning to defend the AHCA, saying that “the plan that we've laid out here will not leave that number of individuals uncovered. In fact I believe, again, that we'll have more individuals covered.” Analysts are expecting the CBO score to project significant coverage losses – the Brookings Institution estimated a projection of at least 15 million people losing insurance – in its consideration of the bill’s overall impacts on the federal budget and national economy. The White House has already downplayed the CBO estimate, but an unfavorable score will undoubtedly provide additional ammunition to the bill’s critics.

The FY18 budget could be released as soon as Wednesday as the White House finalizes its vision for a slimmer discretionary budget in all areas except for defense, which has been rumored to see a significant increase in funding. Among the offices facing the steepest cuts will be the State Department and the American foreign aid program, although Republicans in Congress have already expressed some skepticism of that plan. The President’s proposed budget kick-starts the appropriations process for the fiscal 2018 year, which will likely take considerable attention in both chambers of Congress later this spring and into the summer.  

The Senate will start its floor work today by finishing consideration of the nomination of health consulting executive Seema Verma to head the Centers for Medicare and Medicaid Services. A cloture vote on her nomination passed Thursday on a 54-44 vote, with vulnerable Democratic Sens. Joe Manchin (D-WV), Joe Donnelly (D-IN), and Heidi Heitkamp (D-ND) joining Republicans in approving the nomination. Watch for the upper chamber to also consider additional House-passed resolutions disapproving of Obama-era rules.

In the House, two veterans-related measures will hit the chamber floor. One measure (H.R. 1259) would allow for the Department of Veterans’ Affairs (VA) to more easily fire or demote employees as part of Congress’ ongoing attention to the Department’s accountability. The other measure (H.R. 1367) to be considered provides additional resources for the VA to attract, train, and retain qualified employees by establishing a healthcare and benefits fellowship program and creating a database of mission-critical vacant positions.

House Republicans Release ACA Repeal Bill

Last Monday, House Republicans released the text of the American Health Care Act (AHCA) – a 123-page bill to repeal and replace portions of the Affordable Care Act (ACA). The bill would replace the ACA's income-based premium tax credits with fixed, age-based tax credits that generally would be smaller. It would also reduce Medicaid spending by as much as $1 trillion over ten years according to initial projections by ending the enhanced federal funding for states to expand Medicaid to low-income adults and converting Medicaid from an open-ended entitlement to a program of capped, per-capita payments to the states. The bill would continue funding for the ACA’s Medicaid expansion until 2020, and also keep the law's premium subsidies through the insurance exchanges until 2020. The bill also omits a prior proposal to remove an existing tax exclusion for high-value employer health plans.

Among its key provisions, the bill would:

• retroactively repeal the ACA's requirement for most Americans to buy health insurance, as of the end of 2015. That may leave insurers wary about offering plans for 2018.
• end enhanced federal funding at the end of 2019 for states to expand Medicaid to low-income adults.
• convert Medicaid to a program of capped per-capita federal grants to the states, starting in 2019. Hospital leaders are very nervous about how this would affect uncompensated care and payment levels.
• establish age-based, refundable premium tax credits to help people buy insurance, with the credits phasing down starting at income levels of $75,000 for individuals and $150,000 for families. These credits would be adjusted annually by the consumer inflation rate plus 1%.
• starting in 2018, repeal most of the ACA taxes that finance the law's premium subsidies, Medicaid expansion, and Medicare benefit enhancements. The Joint Committee on Taxation has estimated the plan would reduce tax collections by $600 billion, including $275 billion in cuts for high-income individuals.
• retain the ACA's so-called Cadillac tax on high-value plans but delay it until 2025.
• eliminate the ACA's minimum essential benefits at the end of 2019.
• offer states $100 billion over nine years to establish high-risk pools or other mechanisms for stabilizing the individual insurance market.
• let insurers charge individuals who buy insurance after letting their coverage lapse a 30% premium penalty for one year, to encourage people to maintain continuous coverage.
• allow insurers to charge older customers 5X higher premiums than they charge younger people, up from the ACA's permitted 3 to 1 age differential.
• repeal the ACA's cut in funding for Medicaid disproportionate share payments, which has not yet taken effect.
• repeal the ACA's subsidy to reduce low-income enrollees' cost-sharing in private health plans, effective at the end of 2019.
• prohibit federal Medicaid funding for Planned Parenthood or any organization that performs abortions, and bar use of tax credits for purchase of any health plan that covers abortions.

The Congressional Budget Office has not yet issued its assessment of the bill's cost and impact on coverage levels. According to reports, the CBO indicated that an earlier version of the House bill could cause 10 million to 20 million people to lose insurance coverage. Since the bill’s age-based tax credits generally would be smaller than the ACA’s, which are based on income, lower- and middle-income people might not be able to afford insurance, boosting uninsured rates. To pay for the new system, Republicans will rely heavily on savings from constraining growth in federal Medicaid spending through their proposed per capita payment system.

The bill, which currently exists in two sections (one for each committee of jurisdiction), passed through the Energy and Commerce and Ways and Means Committee last Thursday. This week, it's expected to be considered by the Budget Committee, and then it will likely head to the floor next week.

Conservatives Demand Changes to ACA Repeal Bill

As two key House Committees moved forward with their markups of the American Health Care Act (AHCA) last week, two leading groups of conservatives are demanding changes to the bill to win their support. The concerns among conservative House Republicans that the bill creates a “new entitlement program” through its tax credits, and that the bill does not roll back the ACA’s Medicaid expansion quickly enough. Changes to either policy would likely jeopardize support from moderates, many of whom have called for more generous tax credits and hail from states that expanded their Medicaid programs under the ACA’s enhanced matching rate.

Members of the Freedom Caucus have branded the House bill as ‘Obamacare-lite,’ and claim that the tax credits to purchase health insurance constitute a “new entitlement.” Rep. Mark Meadows (R-NC), the chairman of the group of about forty hardline conservatives, have suggested that the advanceable refundable tax credits of $2,000-$4,000 per individual would be ripe for fraud and abuse. Ironically, the group previously backed a bill introduced by Rep. Mark Sanford (R-SC) and Sen. Rand Paul (R-KY), which included a tax credit of up to $5,000 per person to use as part of a Health Savings Account.  Meanwhile, the Republican Study Committee – a conservative group including 172 of the 237 House Republicans – is pushing for two Medicaid-related amendments: (1) to end Medicaid expansion for new enrollees to 2018 instead of 2020, as it is in the current bill, and (2) to institute work requirements for childless adults on Medicaid. Republican leaders in the House are currently resisting major changes to the bill, and predict the measure will pass the House in its current form.

Speaker Ryan Plans for Second Healthcare Vote Alongside ACA Repeal

The House will consider a second health care bill the week it votes on the Obamacare repeal and replacement, Speaker Paul Ryan indicated in an interview last week. Republicans have long said the plan is to do repeal and replace in three phases: first comes this week’s budget reconciliation, which is the legislative method being used to repeal Obamacare without any Democratic votes; next comes whatever HHS Secretary Tom Price can do administratively; and then comes the legislation that can't be done through budget reconciliation, which would necessarily need some Democratic support to pass in the Senate.

Speaker Ryan is now saying that the third phase will come to the House floor alongside their reconciliation bill, and will include a provision allowing people to buy insurance through association health plans and across state lines. The measure could also include medical malpractice reforms, such as a bill passed by the House Judiciary Committee, that would cap non-economic damages at $250,000. The White House has also pushed for drug pricing policies to be included as part of Congress’ “phase three” on healthcare reform, but congressional Republicans have shown less of an appetite for such reforms.

Insurers Call for Major Changes in ACA Repeal Bill

The nation’s largest insurance lobbying group is urging House Republicans to rethink several central features of their new Affordable Care Act (ACA) repeal bill, including age-based tax credits and proposed changes to Medicaid funding. Marilyn Tavenner, the CEO of America's Health Insurance Plans (AHIP) said in a letter to House leaders that the bill should be revised to offer premium tax credits that factor in both the age and income of a health plan member. She wrote that there should be larger subsidies for individuals with incomes between 100 percent and 400 percent of the federal poverty level. Tavenner also wrote that the GOP bill "includes a number of positive steps" to stabilize the individual insurance market.

Tavenner also said her association is “concerned” that changes in Medicaid's financing structure could “result in unnecessary disruptions in the coverage and care beneficiaries depend on.” She added that insufficient funding could jeopardize the progress made on providing coverage for and access to behavioral health services and opioid addiction treatment. Additionally, Tavenner cautioned that immediately eliminating the individual mandate penalties, as the House bill would do, would add to the instability of the individual insurance market in the short term. She suggested starting federal funding to the states to launch high-risk pools and other market-stabilization mechanisms in 2017 rather than waiting until 2018. Those funds would be available for states to offer financial help to high-risk individuals, stabilize private insurance premiums, and provide cost-sharing subsidies and access to preventive services.

While the ACA was supported by most of the leading healthcare stakeholder groups, the AHCA faces unique challenges in becoming law, as it has received broad stakeholder opposition. Groups that have come out against the bill include the AMA, AAFP, AHA, AARP, and numerous patient advocacy organizations.

Trump Calls for Drug Price Negotiation, Importation Following Meeting with Key Dems

President Donald Trump reaffirmed his commitment to lowering prescription drug prices in a meeting with a pair of leading House Democrats who have prioritized the issue. Trump met with Reps. Elijah Cummings (D-MD) and Peter Welch (D-VT), in addition to Health and Human Services (HHS) Secretary Tom Price, for about an hour last week, and those in attendance said Trump expressed his continued commitment to government negotiation of drug prices in Medicare Part D. Cummings said Trump would go further with drug negotiations than Cummings’ own bill, which is currently in the works, does – he wants to negotiate for any drug the government purchases, not just those covered by the Medicare Part D program. Cummings also said Trump "volunteered" his support for a drug importation bill he introduced last week with Sen. Bernie Sanders (I-VT).