Health Policy Report

The Week in Review

It was a busy week in Washington that saw Congress avoid a government shutdown, House Republicans pass their health care overhaul, and the House Financial Services Committee advance a rewrite of the Dodd-Frank financial reform law.

With respect to health care, House Republicans were able to put weeks of wrangling behind them and hold a successful floor vote on the American Health Care Act (AHCA) on Thursday, approving the bill (H.R. 1628) by a narrow 217-213 margin and scoring a major victory in their hope to repeal and replace the Affordable Care Act (ACA). After the vote, President Trump hosted Republicans at the White House for a celebratory press conference, saying that he was “so confident” that the House version would be passed in the Senate. Our full breakdown of the bill’s dramatic turnaround, and its future prospects, is in the roundup below.

With a bipartisan spending deal reached the weekend prior to government funding expiring, there was little shutdown drama as Congress went through the motions to advance an omnibus that provides government funding for the remainder of the 2017 fiscal year. President Trump signed the omnibus Friday after both chambers approved the $1 trillion legislation (H.R. 244) earlier in the week. The funding measure provides additional funding for defense and border security, but avoids contentious policy changes such as the construction of a border wall or eliminating funding for Planned Parenthood. The final bill also included a $2 billion increase in funding for the National Institutes of Health (NIH).

The Week Ahead

Compared to frenetic pace of last week’s legislative action, this week is expected to be slow in comparison. The House will be out on a weeklong recess, while the Senate will take up two presidential nominations, namely Heather Wilson to become Secretary of the Air Force and Scott Gottleib to lead the Food and Drug Administration. While the Senate Finance Committee had announced a Tuesday hearing on the Children’s Health Insurance Program, the hearing was postponed upon the House’s passage of the AHCA.

Looking forward, the health care package clearing the House means that lawmakers in the lower chamber will likely turn to the fiscal 2018 appropriations process and tax reform. House Freedom Caucus members are reportedly working on their own tax reform plan after the White House put out its guide posts for legislation in late April. Watch for leading Republicans to begin hammering out details on a package in the coming weeks.

House Narrowly Passes Amended AHCA

Last Thursday, the House voted 217-213 to narrowly pass the American Health Care Act (AHCA) (H.R. 1628), moving the bill on to an uncertain fate in the Senate. The House vote was scheduled quickly after GOP leadership wrangled enough moderate members of the caucus to support the bill and reach the 216-vote threshold needed to pass it. Pivotal in the passage of the House bill was the addition of $8 in funding to fund high risk pools in states that opt out of “community rating” regulations – the subject of a controversial amendment crafted by Rep. Tom MacArthur (R-NJ) and the Freedom Caucus. Under the MacArthur amendment, states could choose to waive the rules banning insurance plans from charging more to individuals with pre-existing conditions under certain conditions, along with the ACA’s essential health benefits (EHB). While that amendment initially raised concerns among many moderates that key protections for patients with pre-existing conditions would be undermined, an eleventh-hour amendment from Reps. Fred Upton (R-MI) and Billy Long (R-MO) proved enough to allay those concerns and bring enough moderates on board to pass the bill.

Among the key provisions of the House-passed bill:

Eliminates the taxes and tax increases imposed by the ACA;

• Phases out enhanced funding for the Medicaid expansions and imposes either a block grant or per capita caps on Medicaid;
• Removes the individual and employer mandate penalties:
• Increases age rating ratios from 1 to 3 to 1 to 5 in the individual and small group market and allows states to go higher by waiver;
• Permits states to waive the ACA’s essential health benefit requirements;
• Imposes a penalty on individuals who do not maintain continuous coverage;
• Alternatively allows states to obtain a waiver to allow insurers to health status underwrite individuals who do not maintain continuous coverage;
• Creates funds of $138 billion to assist states in dealing with high-cost consumers and for other purposes;
• Ends the ACA’s means tested subsidies as of 2020 and substitutes for them age-adjusted fixed-dollar tax credits.

In the end, twenty Republicans opposed the bill and no Democrats supported it. Some of the moderates that supported the bill did so while saying the Senate is expected to make changes to the legislation. Also, in a separate vote on Thursday, the House approved (429-0) another bill (H.R. 2192) from Rep. Martha McSally (R-AZ) removing the AHCA’s exemption of Members of Congress from any state waivers obtained the MacArthur amendment.

Senate Prospects for the AHCA

Shortly after House passage of the American Health Care Act (AHCA), it quickly became clear that the Senate plans to chart their own path forward on healthcare reform – rather than moving to advance the version drafted in the lower chamber. “We’ll be informed by what the House did,” HELP Committee Chairman Lamar Alexander (R-TN) said yesterday. “But we’ll write a Senate bill, it’ll get a [CBO] score so we’ll know what the cost is, and then we’ll vote.” Further, while it has been expected for weeks that the House bill would likely undergo changes in the Senate, it became evident last week that Majority Leader Mitch McConnell has already assembled a 13-person intra-party working group representing different factions of the caucus – and the group has already met twice. Expected changes in the Senate include removing provisions that don’t meet the procedural requirements under reconciliation, a more gradual phase out of the ACA’s Medicaid expansion, and adjustments to the AHCA’s age-based tax credits.

With respect to process considerations, we expect it will take a few weeks or more before the Senate is prepared to bring their own version of the healthcare bill to the floor. While the Senate could completely start over, we expect that they will use the House bill as a framework and make adjustments and additions where needed to garner votes. Committee hearings are not expected, and the markup process could potentially bypass the Finance and HELP Committees and go directly to the Senate Budget Committee. Senate leaders appear to have ruled out bringing the House bill directly to the Senate floor.

The AHCA still faces numerous procedural and political hurdles if it is going to become law. With only two votes to spare, Senate Republicans will need to reach near-unanimous consensus to pass their own version of the bill. And similar to the policymaking process in the House, any changes made to appease one constituency may just as easily alienate another. Moreover, the House will have to approve of any changes made by the Senate, or the respective chambers could opt to resolve their difference in a conference committee.

Given the enormous political capital that Republicans have invested in ACA repeal – both since 2010 and more recently under President Trump – there are significant gravitational forces pulling Republicans towards passage of the AHCA. Outside conservative groups such as Heritage Action, Club for Growth, and American Action Network will provide air cover for Republicans who back the bill, potentially diminishing the opposition from wide-ranging groups of healthcare stakeholders. And President Trump, still somewhat popular in most red states, will press the Senate to move forward with the bill.

If lawmakers manage to thread the needle of winning support from the three most conservative senators (Lee, Cruz, and Paul) without alienating more than one or two moderates, any issues in reconciling the bill with the House could become irrelevant. The trio carries significant weight with conservatives in the House, and their blessing would likely be enough to move the bill through the lower chamber. But changes to the bill appear imminent, and it remains to be seen what the breaking point is for both conservative and moderate senators. If the AHCA were up for a vote in the Senate today, chances are it would fail overwhelmingly. Still, there’s one thing Senate Republicans can all agree on: this is their chance to repeal the ACA.

Executive Order Directs Agencies to Reexamine ACA Contraceptive Coverage

In a broad executive order, President Trump directed the Department of Health and Human Services (HHS), the Department of the Treasury, and the Department of Labor (DOL) Thursday to consider issuing amended regulations in order to address conscience-based objections to the Affordable Care Act (ACA) mandate regarding first-dollar preventive coverage for women’s services, including contraception. The statement came after Trump signed a "religious freedom" executive order earlier Thursday. Following the order, HHS Secretary Tom Price said he welcomed the chance to reexamine the regulations and planned to take regulatory action shortly. Religious nonprofits and organizations have long pushed to be exempt from the requirement, arguing that they shouldn't have to pay for something that violates their beliefs.

Iowa Under Threat of Having No Insurers on Exchanges in 2018

The vast majority of counties in Iowa could have zero insurers on the Affordable Care Act (ACA) exchanges next year after another company announced it may not participate in 2018. Medica, a Minnetonka, MN-based insurer, said on Wednesday that it may pull from Iowa's individual insurance marketplace, potentially leaving no alternative insurance option for most residents in all but five counties next year. Medica, which offers exchange plans for 12,645 members in Iowa, has a relatively small presence in the market but the recent exits of other big insurers – Aetna and Wellmark Blue Cross and Blue Shield – makes Medica just one of two insurers selling plans on the exchanges for 2018.  The GOP has been using the situation as a key defense against the ACA as they move forward with their own health plan.

Medica has said would like to see federal and state actions to stabilize the market such as establishing a form of high-risk pools to cover high cost plan members and a reinsurance program to offset unknown high-risk members. Medica also said it's committed to working with state and federal stakeholders to stabilize the marketplace until the June 19th deadline. Medica and Gundersen Health Plan are the only two health plans expected to sell individual health plans on the exchanges in Iowa next year. But Gundersen, which offers plans in just four Iowa counties, is also weighing whether or not to offer plans for next year. If both insurers exit, about 51,600 people enrolled in Iowa's insurance marketplace would have no insurance option next year.

Congress Increases NIH Funding by $2 Billion

Lawmakers increased the budget for the National Institutes of Health (NIH) in its bipartisan deal to fund the government, effectively ignoring a Trump administration proposal. President Trump had proposed cutting the NIH budget by $1.2 billion for the rest of the current fiscal year (FY). In total, the Health and Human Services (HHS) Department would receive $2.8 billion more in FY 2017 than in the previous budget year under the draft spending bill released last week, about two-thirds of which is directed to NIH.  The $34.1 billion for the NIH for the remainder of FY 2017 is the biggest boost the NIH has received in more than a decade, higher than at any point during the Obama administration.