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January 13, 2017
Health Policy Blog Sneak Peek: Repeal and Replace - Potential Path and Implications

Repeal and Replace: Potential Path and Implicationsby Director of Government Relations Tony Gutowski

One of the campaign promises President-elect Trump made to his supporters was to ask Congress to repeal and replace the Patient Protection and Affordable Care Act (ACA) on his first day in office. This promise, supported by a majority of Congressional Republicans since its enactment in 2010, is now front and center in Washington, yet few know the details of the proposal and the process required for President-elect Trump to fulfill his promise. This blog attempts to outline the most common proposals and the process (known as “reconciliation”) that will likely be used to execute a repeal and replace of the ACA.

While House Republicans were the first out of the gate to release an ACA replacement, many in healthcare believe the legislative language that will ultimately be used to replace the ACA will come from H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act. This bill, which was passed in January of 2016 and vetoed by President Obama, does several things to upend the ACA, including:

  • Repeals individual tax penalties for not keeping qualifying health coverage;
  • Repeals tax penalties for employers that do not offer qualifying health coverage;
  • Repeals premium tax credits;
  • Repeals cost-sharing subsidies;
  • Repeals the transitional reinsurance program;
  • Repeals Medicaid expansion;
  • Restores the Medicaid Disproportionate Share Hospital (DSH) payments that were reduced under the ACA;
  • Repeals other taxes specified in the ACA (i.e. medical device tax, prescription drug tax, limitations on contributions to flexible spending accounts, etc.).

But, in order to accomplish any of these repeals, Congress will need to use a process called “reconciliation” to achieve the votes. This process, created by the Congressional Budget Act of 1974, allows for expedited consideration of certain tax, spending, and debt limit legislation. With tight margins in the U.S. Senate, this is the preferred method for Senate Republicans, as it only requires a 51-vote majority to pass the chamber, as opposed to the required three-fifths vote typically needed to pass bills out of the Senate. The important thing to remember about a reconciliation bill is that it can only be used to address “mandatory” or entitlement spending – not “discretionary” spending. Mandatory or entitlement spending includes programs such as Medicare, Medicaid, federal civilian and military retirement, SNAP, and farm programs – but not Social Security.

Expediting the undoing of the ACA by way of the reconciliation process is surely the path of least resistance for congressional Republicans, but the process itself does have some restrictions. Not only is the Senate limited on the number and variety of reconciliation bills it can consider in any given year, but the bill itself is scrutinized to ensure it meets the requirements outlined above. The Byrd Rule, named after the late Senator from West Virginia Robert Byrd, allows for senators to object to certain portions of a budget reconciliation bill on grounds of “extraneous matter,” meaning the proposal is unrelated to the deficit reduction goals of the reconciliation process. If considered extraneous, the portions of the reconciliation bill that do not address deficit reduction are removed and only the remaining language is considered by the Chamber. Agreeing on the true fiscal impact of a reconciliation bill is obviously challenging, which is why the Senate Parliamentarian is tasked with analyzing the language to determine if in fact the Byrd Rule can be used in certain instances. In order to apply the Byrd Rule and strike extraneous matters from the proposal, it must be clear that the provision:

  • Does not produce a change in outlays or revenues;
  • Produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions;
  • Is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure;
  • Produces a change in outlays of revenues which is merely incidental to the non-budgetary components of the provision;
  • Would increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure; and
  • Recommends changes in Social Security.

During the passage of H.R. 3762, the Senate Parliamentarian ruled that the repeal of the individual and employer mandates was extraneous under the Byrd rule, which is why the Chamber ultimately decided to keep the mandates but eliminate the penalties for noncompliance in the final version of the bill. Moving forward, it is possible that Congress will reintroduce H.R. 3762 in early 2017 and delay its implementation until sometime after the 2018 midterm elections. If H.R. 3762 is passed using the reconciliation process, the healthcare landscape is likely to change dramatically. According to recent analysis, some of the effects on consumers are as follows:

  • The number of uninsured will increase from 28.9 million to 58.7 million, or 11 percent to 21 percent, in 2019.
  • 12.9 million people will no longer be covered by Medicaid or CHIP.
  • Of those becoming uninsured:
    - 82 percent will be working families,
    - 38 percent will be between the ages 18 to 34,
    - 56 percent will be non-Hispanic whites,
    - 80 percent do not have college degrees,
  • 7.3 million people would become uninsured because of the near collapse of the nongroup insurance market.

In addition to consumers, providers across the country will be adversely affected by these sweeping changes. Recent analysis commissioned by the Federation of American Hospitals (FAH) and the American Hospital Association (AHA) examined the impact on hospitals absent any replacement for the ACA. The exhaustive study looked at a number of factors that will affect hospitals’ bottom lines between 2018 and 2026. Taking into account the anticipated uninsured rate, reduction in utilization of hospital services, and restoration of hospital DSH payments from both Medicaid and Medicare, the net impact of repeal would be a loss of $165.8 billion in net income for hospitals. Whether Congress moves forward with repeal and replace or repeal and delay, it’s clear that any change to the current system has the ability to upend the healthcare delivery system and those relying on it for their care.

Stay tuned for more blog posts from Tony Gutowski and The Center's team of health policy experts in Spring 2017!

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