The $879 Billion Footnote — And The Financing Path To ACA Repeal

The November 3 election of Matt Bevin as governor of Kentucky will provide an important indication of the seriousness of Republican intentions to undermine and repeal the health insurance expansions of the Affordable Care Act (ACA). Early in Bevin’s campaign, he expressed unambiguous intent to repeal Governor Steve Beshear’s executive order that expanded Medicaid; during the general election campaign, Bevin backpedaled and proposed adopting an Indiana-like Medicaid waiver to require significant enrollee cost sharing and an enrollment freeze. Bevin also prefers to close the successful Kynect health insurance exchange and transfer operating duties to the US Department of Health amp; Human Services.

Whatever the outcome, the moves by the Tea Party-endorsed new governor will provide the best preview of what the nation may expect if Republicans take control of the White House and retain majorities in the Senate and the House of Representatives in January 2017. Many eyes will watch Governor Bevin’s health care moves from across the political spectrum.

The Consequences Of Repeal

Every Republican presidential candidate has committed publicly to repeal the ACA with varying degrees of specificity. Republican Congressional leaders continue attempting to eliminate the law most recently via a new House-approved reconciliation bill that would repeal the individual mandate and other ACA provisions, their 61st attempt. Conservative think tanks continue offering proposals to achieve explicit or de facto repeal. Kaiser public opinion tracking polls show continuing solidarity among core Republicans against the law and in favor of repeal or repeal and replace.

Hindering repeal stands a June report from the Congressional Budget Office (CBO) concluding that full ACA repeal would increase the federal deficit over the 2016-2025 budget window by between $137 and $353 billion. In addition, it would increase the number of uninsured Americans by 24 million by 2020, and the cost of repeal gets higher each subsequent year. If in January 2017, Republicans control the White House, Senate, and House, is there a pathway for them to achieve near total repeal using the budget reconciliation process that thwarts filibusters and requires only 51 Senate votes for passage? Yes, and senior Republicans leaders already know it and have made it public.

The evidence can be found in the so-called Patient CARE Act (Patient Choice, Affordability, Responsibility, and Empowerment) advanced by Senators Richard Burr (R-NC) and Orrin Hatch (R-UT) as well as Representative Fred Upton (R-MI). This proposal matters especially because Hatch is Chairman of the Senate Finance Committee and Upton chairs the House Energy and Commerce Committee, both committees with key jurisdiction over the ACA. In typical Senate Finance Committee fashion, the proposal has not been translated into legislative language and only a narrative version is available that is too vague to be translated into a CBO score.

Of particular interest in the CARE Act is footnote #3 on page two of the narrative. The narrative sentence (reproduced along with the embedded footnote) states that:

The first step toward achieving sustainable, affordable, patient-focused health care is to repeal the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA).3

One must then go to the smaller type footnote #3 to read the rest of the story:

All provisions of PPACA and HCERA are repealed except for the changes to Medicare.” (Emphasis added). [Note: PPACA and HCERA are the two statutory components of the law now known as the ACA or Obamacare.]

What’s that about Medicare?

A critical element of the ACA’s financing involves Medicare payment reductions in title 3 of the law to hospitals, insurance companies, home health agencies, and other health care providers (physician payments in Part B were unaffected) to reduce Medicare’s rate of spending growth. The resulting savings help to finance the private insurance and Medicaid coverage expansions in ACA titles 1 and 2. In its first 10 years (2011-2020), CBO estimated these title 3 savings at $450 billion; in its recent June estimate, it projects the savings at $879 billion between 2016 and 2025.

Since the 2009-10 legislative process leading to the ACA’s passage, Republicans have had a curious relationship with these Medicare spending reductions. During Congressional debate, Republicans frequently condemned the cuts, accusing Democrats of harming Medicare to pay for Obamacare. Then, in 2011, and in every subsequent House budget proposal, House Budget Committee Chairman Paul Ryan (R-WI) (now Speaker Ryan) included in his budget plans total repeal of the ACA except for the cuts to Medicare.

Simultaneously, in the 2010, 2012, and 2014 federal elections, Republicans castigated these same Medicare reductions as part of their broader condemnation of Obamacare. The most uncomfortable moment came in August 2012 when Ryan was named vice presidential running mate to presidential candidate Mitt Romney; Ryan’s early defense of sustaining the ACA’s Medicare cuts was followed by a quick reversal and public opposition to the same cuts.

What Would Republican Control Look Like?

In 2017, if Republicans win control of White House, Senate, and House, their leaders could use the budget reconciliation process to repeal many essential budget related sections of the ACAmeaning most of the law’s essential components”except for the changes to Medicare.” Saving that single element turns the CBO’s current deficit raising cost projection for repeal from $137 to $353 billion negative to $449 to $665 billion positive.

Health care stakeholders (especially hospitals, though not the health insurance industry) generally supported the Medicare reductions to help achieve and pay for the ACA’s insurance coverage expansions. These interests can be expected to strongly oppose a move to preserve the cuts while eliminating the coverage expansions, though they would also receive little sympathy from Republican leaders because of their support for Obamacare in the first place.

What about the estimated 24 million who would lose their Medicaid or private health insurance coverage? The likely answer, based on Republican and conservative think tank proposals that we described in our earlier post, would be to resurrect state high-risk insurance pools, with generous federal financing. Guaranteed issue and elimination of pre-existing conditions would be continued only for individuals who maintain continuous coverage. The financial assistance delivered through the ACA’s premium tax credits, cost-sharing reductions, and Medicaid expansion would be replaced by a tax credit or deduction, less generous and not financially means-tested.

It is worth emphasizing one additional positive from the Republican perspective for this approach. In addition to the Medicare payment reductions, the other substantial source of ACA financing comes from new Medicare payroll taxes on high-income households plus new taxes on the pharmaceutical, insurance, and medical device industries. Repealing all these increases would achieve an enormous tax cut for the new Administration and Congress.

Scarcely a voice can be found in the nation’s Republican/conservative firmament that publicly supports continuation and non-repeal of the ACA – the Universal Exchange Plan by Avik Roy of the Manhattan Institute stands as the rare exception (his plan would retain the law’s tax credits and market reforms while phasing out Medicare and Medicaid and moving those enrollees into the Exchanges).

Some commentators have noted the lack of discourse in Republican presidential debates regarding the ACA, interpreting this to mean that interest in repeal is waning. Yet the current reconciliation bill being advanced through Congress on an exclusively partisan basis raises doubts about this view. It may serve the interests of those committed to ACA repeal not to talk much about it to avoid angering and mobilizing the many millions who would be harmed by repeal.
The results of next year’s elections won’t be a simple change in leadership; they will have profound implications for what is won or what is lost for people who have benefited under the ACA.