Overview and Implications of the House Republican Bill
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The document provides an overview of the American Health Care Act (AHCA), highlighting key aspects such as Medicaid reforms, insurance marketplace changes, and tax reforms. It discusses the congressional process for passing the bill and its implications for federal Medicaid spending, projected enrollment changes, and the shift in tax policies. The information underscores the legislative attempts to repeal and replace the Affordable Care Act (ACA) and outlines the potential challenges ahead.
Overview and Implications of the House Republican Bill
- 1. © 2017 Epstein Becker & Green, P.C. | EBG Advisors, Inc. | All Rights Reserved. ebglaw.com | ebgadvisors.com Overview and Implications of House Republican Bill: American Health Care Act March 15, 2017
- 2. 2 © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. This presentation is provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact- specific situation under federal, state, and/or local laws that may impose additional obligations on you and your company. Cisco WebEx can be used to record webinars/briefings. By participating in this webinar/briefing, you agree that your communications may be monitored or recorded at any time during the webinar/briefing. Attorney Advertising
- 3. Presented by © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Philo D. Hall Associate, Epstein Becker Green [email protected] Tel: 202-861-1382 Robert F. Atlas President, EBG Advisors [email protected] Tel: 202-861-1834 Drew Willison Strategic Advisor, National Health Advisors [email protected] Tel: 202-728-1010
- 4. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. 1. Introduction 2. Congressional Process Overview 3. ACA v. AHCA 4. Medicaid Reforms 5. Insurance Marketplace Reforms 6. Tax Reforms 7. What’s Next 8. Closing Thoughts
- 5. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Congressional Process
- 6. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Basics of Budget Reconciliation 6 What is reconciliation? What can be included? Why use reconciliation? What are the limits of reconciliation? ACA provisions that impact the federal budget ACA provisions without a direct impact
- 7. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Congressional Process The AHCA 7 Introduction » Committee mark-ups (Energy & Commerce , Ways & Means, Budget) » House floor vote Sent to Senate for consideration » debate and amendments » Senate floor vote Assuming Senate passes a bill other than exact bill presented by House, the two bills go to a Conference Committee to resolve differences Both chambers then must vote on Conference bill Status Quo:
- 8. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Prospects for Passage? IMPORTANT NUMBERS TO REMEMBER 8 House Republican “No” votes for defeat* 21 Senate Republican “No” votes for defeat* 3 Number of times Senate or House will vote ? * Assumes no Democrats in House or Senate vote in favor of AHCA
- 9. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. House Bill’s Scope Not 100% ACA-Aligned LEAVES MUCH OF ACA INTACT WHILE REACHING TO NON-ACA TERRITORY 9 • Restructure Medicaid financing • Defund Planned Parenthood • Eliminate insurance mandate • Rescind taxes meant to fund ACA subsidies • Phase out Medicaid expansion for non- disabled adults • Innovation Center • Medicare Part D coverage gap discount program • Medicare Advantage rate methodology • More ….. American Health Care Act Affordable Care Act
- 10. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Medicaid Reforms
- 11. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Medicaid Reform EXPANSION PHASE-OUT & FUNDAMENTAL CHANGE TO MEDICAID FINANCING 11 AHCA will roll back and eventually eliminate the ACA Medicaid expansion and shift federal Medicaid contributions to a per-capita based system, in addition to multiple smaller changes to Medicaid.
- 12. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Changes to ACA Medicaid Expansion EXPANSION PHASE-OUT 12 Beginning in 2020 • States can no longer implement ACA Medicaid expansion • Enhanced federal funding for states that expanded will disappear for new enrollees • Enhanced funding will continue for those enrolled in Medicaid on 12/31/2019 until they have a break in eligibility > 1 month • States may continue to serve expansion populations but at standard federal contribution
- 13. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Introducing Per Capita Caps in Original Medicaid RADICAL CHANGE TO PAYING FEDERAL SHARE OF 52-YEAR-OLD PROGRAM 13 Current Law: “Defined Benefit” AHCA Proposal: “Defined Contribution” State incurs costs in Medicaid U.S. pays percentage of State’s cost Federal share = 50-75%* based on state’s wealth (Average = 60%) *Higher for ACA expansion population U.S. allows up to fixed $ amount per Medicaid enrollee, starting in 2020, based on 2016 spend 2016 base indexed by CPI-Medical, irrespective of actual growth in Medicaid per capita costs Calculated separately for 5 groups
- 14. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Widening Cut Foreseen in Federal Medicaid Share MEDICAID SPENDING TRENDS HIGHER THAN CPI-M 14 550 600 650 700 750 800 850 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CBO Growth Projection •CPI-Medical = 3.7% •Medicaid per capita costs = 4.4% MedicaidExpenditures($Billions) Source: EBG Advisors analysis based on CBO trend rates in cost estimate of American Health Care Act, March 13, 2017 Uncapped Trend Capped at CPI-M Annual shortfall to be made up by states
- 15. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Other Notable Medicaid Changes • Beginning in 2018 for non-expansion states • For all states beginning in 2020 15 Repeals ACA DSH payment reductions Prohibits states from using federal Medicaid funding to pay for services provided by Planned Parenthood
- 16. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Effects of Medicaid Reforms CONGRESSIONAL BUDGET OFFICE’S SCORE OF AHCA 16 CBO estimates AHCA will reduce federal Medicaid spending by $880 billion between 2017-2026 CBO projects that by 2026 14 million fewer people would be enrolled in Medicaid than under current law Spending reductions are projected to begin in 2017, $3 billion, and escalate over time to $155 billion in 2026
- 17. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Insurance Marketplace Reforms
- 18. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Insurance Marketplace Changes 18 Pre-existing condition protections, guaranteed issue, cost sharing caps, essential health benefits, prohibitions against lifetime and annual limits Individual mandate, employer mandate, minimum actuarial value requirements, cost sharing subsidies Refundable tax credits, state stability fund, age ratio (to 5:1), continuous health insurance incentives (1 year surcharge for gaps in coverage), expands HSAs and FSAs Keeps Removes Adds or Alters
- 19. 19 © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. ACA Penalty v. AHCA Surcharge SHIFTING INCENTIVES AHCAAHCA ACAACA Begins in 2019 open enrollment 12-month look back period for coverage gaps > 63 days If a gap occurs, a late enrollment surcharge will be charged by the insurer to enrollee for the plan year Surcharge = 30% of plan premium Penalty higher of 2.5% of taxable income or $695 per uncovered adult and $347.50 per uncovered child Prorated based on number of months without coverage
- 20. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. ACA Subsidies Changes to Exchange Subsidies ACA v. AHCA 20 • Subsidies based on cost of health insurance plan available on exchange in enrollee’s area • Scaled according to enrollee income • Unavailable for those with incomes over 400% of federal poverty level • AHCA would permit subsidies to be used for catastrophic plans and certain plans not sold on exchanges • AHCA would eliminate ACA subsidies beginning in 2020 • Advanced refundable age-based tax credits • Start at $2,000 for individuals under 30, scaling up $500 per 10 years, maxing at $4,000 for individuals over 60 • Phases out at higher income levels $75,000 individual / $150,000 joint at $100 per $1,000 of income over the threshold AHCA Tax Credits
- 21. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. ACHA Impact on Individual Market Consumers ILLUSTRATIVE EXAMPLES FROM CBO – NON-GROUP COVERAGE IN 2026 21 -22 -5
- 22. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Tax Reforms
- 23. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Effects Multiple ACA Tax Provisions 23 Delays “Cadillac” tax start date CBO and Joint Committee on Taxation estimate revenue reduced by $592 billion over 10 years Repeals limits on FSA contributions Lowers tax rate on HSA distributions used for non-qualified expenses Repeals medical device tax Lets employers deduct expenses associated with retiree Part D subsidies Repeals annual fee on health insurers
- 24. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. AHCA Effects Multiple ACA Tax Provisions Continued 24 Lowers income threshold for deduction of medical expenses Repeals Medicare Hospital Insurance surtax on high income earners Changes HSA contribution rules Repeals tanning tax Repeals Medicare tax on net investment income Repeals health insurance “CEO” tax Repeals brand Rx tax CBO and Joint Committee on Taxation estimate revenue reduced by $592 billion over 10 years
- 25. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Medicare, Not a Target of AHCA, Is Affected TAX CUTS IMPLICATE MEDICARE TRUST FUND 25 ACA Medicare Taxes Repealed By AHCA Net investment tax 3.8% of investment income above income of $200k single, $250k joint Payroll surtax 0.9% of compensation for earners above $200k single, $250k joint 10-Year Impact to Medicare Trust Fund $157.6 billion $117.3 billion $274.9 billion Approx. 3% cumulative cut to Medicare Sources: CBO cost estimate of American Health Care Act, March 13, 2017; CMS National Health Expenditures estimates, February 2017
- 26. © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. What's Next? Congress and Trump administration will try multiple techniques to repeal, replace and reshape Affordable Care Act 26 Reconciliation General Legislation Administrative Action • Must impact federal budget • Requires simple majority vote in Senate • Need not impact federal budget • Requires 60 votes in Senate • House is considering bills related: stop-loss coverage, wellness programs, association health plans • Executive orders • Regulations and Guidance • Waivers AHCA: JUST THE BEGINNING
- 27. Questions? © 2017 Epstein Becker & Green, P.C. | ebglaw.com | EBG Advisors, Inc. | ebgadvisors.com | All Rights Reserved. Philo D. Hall Associate, Epstein Becker Green [email protected] Tel: 202-861-1382 Robert F. Atlas President, EBG Advisors [email protected] Tel: 202-861-1834 Drew Willison Strategic Advisor, National Health Advisors [email protected] Tel: 202-728-1010