First Steps in Obamacare Repeal and Replace
- Congress will keep its promise to the American people to repeal and replace Obamacare.
- The first steps are getting rid of the law’s most harmful provisions by using budget reconciliation and building a transition to more sensible health care solutions.
- Last year, Congress passed a reconciliation bill that demonstrates how we can repeal the core parts of Obamacare with a transition to replace.
Efforts to replace Obamacare will begin very soon once the next Congress convenes and the new president takes the oath of office. One of the first steps is repealing Obamacare. This will provide relief to Americans whose premiums have risen wildly and who no longer have options.
Democrats say repealing Obamacare will take coverage away from 20 million Americans. One of Obamacare’s primary goals was expanding coverage, but after more than six years 30 million people remain uninsured. Of those who are insured, many can’t afford care due to sky-high deductibles, and most of the newly insured are insured through a broken Medicaid program.
Of the 20 million Americans who the administration claims gained insurance under Obamacare, 12 million are insured through Medicaid. According to a new study from Obamacare architect Jonathan Gruber, roughly two-thirds of new Medicaid enrollees in 2014 were brought into the program not through Obamacare but through a “woodwork effect.” These people were already eligible for the program under traditional Medicaid requirements. According to an article in Forbes yesterday, this means that repealing Obamacare’s Medicaid expansion would cause far fewer people to lose coverage than Democrats claim.
Reconciliation bills are filibuster-proof in the Senate. They require a simple majority to pass and limit debate to 20 hours. Reconciliation is subject to the Byrd Rule, which only permits provisions to be included that impact spending or revenue. Subject to the parliamentarian’s discretion, it also allows provisions that affect “terms and conditions” of those budgetary provisions. The House and Senate must then pass the reconciliation bill, and the president needs to sign it.
A starting place for repeal and replace is the reconciliation package passed by the House and Senate last December, but vetoed by the president. Below is an outline of what that bill did. Many of the provisions were set to take effect after a two-year transition period.
Eliminating Obamacare’s Mandates and Reining in Spending
The Prevention and Public Health Fund
Obamacare created a new Prevention and Public Health Fund that granted the secretary of Health and Human Services up to $2 billion per year in mandatory spending with virtually no restrictions. The secretary has used these funds for questionable purposes, most notably Obamacare promotion and implementation. The bill would have repealed all remaining funds.
Funding for community health centers
The bill would have increased funding for community health centers by $235 million in fiscal year 2016 and $235 million in fiscal year 2017.
Funding for territories
Obamacare provides $1 billion for premium and cost sharing assistance to U.S. territories that establish their own exchanges. Of this, $925 million went to Puerto Rico. The bill would have repealed eligibility for these funds, after a two-year delay.
The bill would have prohibited the HHS secretary from collecting fees and making payments for the reinsurance program created in section 1341 of the health care law.
Recapture excess advance payments of premium tax credits
Obamacare’s premium tax credits are paid monthly, in advance, based on estimated income. Taxpayers receiving overpayments are required to repay excess premium credit payments to the Treasury. The amount of the repayment is capped for people with household income below 400 percent of the federal poverty level. The bill would have protected taxpayers by requiring the collection of all overpayments made by the government.
Premium tax credit and cost-sharing subsidies
Obamacare created a new refundable tax credit for the purchase of health insurance on an exchange. HHS also makes payments to insurers to reduce the amount of cost-sharing qualified persons are required to pay. The bill would have repealed the credits and cost-sharing subsidies after a two-year delay.
Small business credit
Obamacare authorized a temporary tax credit for employers with fewer than 25 employees and annual wages less than $50,000 for the purchase of health insurance. Because of the complex nature of the credit, few have used it. The bill would have ended the credit, after a two-year delay.
The bill would have voided the individual mandate by eliminating penalties for failure to comply with it.
The bill would have voided the employer mandate by eliminating penalties for failure to comply with it.
Federal payments to states
The bill would have prohibited federal payments to reimburse states for payments from Medicaid, the Children’s Health Insurance Program, the Social Services Block Grant program, and the Maternal and Child Health Block Grant program to groups meeting certain criteria.
Setting the Stage for Medicaid Reform
Expanded Medicaid funding for territories
Unlike funding for states, Medicaid funding for territories is subject to federal spending caps. Obamacare provided an additional $6.3 billion in Medicaid funding for territories, available from 2011 to 2019. The bill would have rescinded the availability of the remainder of those funds, after a two-year delay.
Obamacare required states to provide Medicaid coverage to people earning less than 133 percent of the federal poverty level. The Supreme Court made that expansion voluntary for the states. The bill would have repealed that requirement after a two-year delay. States could still have expanded their Medicaid programs, as they could before Obamacare, but would likely have gotten the traditional federal matching rate of 50 to 70 percent.
Obamacare allows states to permit all hospitals that participate in Medicaid to make presumptive eligibility determinations based on a preliminary determination of likely Medicaid eligibility. The bill would have repealed this expanded authority (after a two-year delay) while still allowing states to make presumptive eligibility determinations for children, pregnant women, and breast cancer and cervical cancer patients.
Obamacare changed the mandatory Medicaid income eligibility level for children ages 6 through 18 from 100 percent to 133 percent of the federal poverty level. These are sometimes referred to as “stairstep children.” The bill would have reverted to prior law, after a two-year delay. Children would not have lost their insurance as a result of the bill, but the federal matching rate would have reverted to the Children’s Health Insurance Program level.
Medicaid and Children’s Health Insurance Program “maintenance of effort”
Obamacare extends a “maintenance of effort” provision included in the 2009 stimulus that effectively prevents states from making significant changes to their state Medicaid and CHIP programs until 2019. The bill would have repealed the MOE requirement, effective after a two-year delay.
Territory Federal Medical Assistance Percentages
Obamacare increased the federal Medicaid matching rate available to all territories from 50 percent to 55 percent. The bill would have repealed the expanded match, effective after a two-year delay.
Newly eligible Federal Medical Assistance Percentages
Under Obamacare, the federal match for Medicaid spending on people who are newly eligible for Medicaid is 100 percent for 2014, 2015, and 2016 and falls incrementally each year until it reaches 90 percent in 2020. The bill would have repealed the expanded match for the newly eligible people after a two-year delay.
Expansion of state Federal Medical Assistance Percentages
Prior to Obamacare, a number of states had already expanded eligibility for Medicaid to cover all adults with earnings below the federal poverty level. Obamacare provided these states with an enhanced match. The bill would have repealed that enhanced match rate, after a two-year delay.
Community First Choice Federal Medical Assistance Percentages
Prior to Obamacare, states could provide community-based attendant services and supports to Medicaid beneficiaries. Obamacare provided a 6 percentage point increase in the federal match rate for those services. The bill would have returned to prior law without the 6 percent bonus, after a two-year delay.
The Deficit Reduction Act of 2005 gave states flexibility to design alternate benefit packages for their Medicaid programs. Obamacare limits this flexibility by requiring state Medicaid programs to cover the same “essential health benefits” that are required of plans on the exchange. The bill would have repealed this requirement, after a two-year delay, and restored flexibility to states.
Obamacare requires states to coordinate their Medicaid eligibility and enrollment systems with the exchange’s systems, even if the state has opted not to operate an exchange. The bill would have repealed that requirement, after a two-year delay. States would have been free to coordinate if they so choose.
Medicaid Disproportionate Share Hospital Payments
Prior to Obamacare, the federal government provided an allotment to states to compensate hospitals that treat a disproportionate share of low-income patients. Obamacare cut those payments, and the bill would have restored them.
Providing Relief from Obamacare’s Taxes
The bill would have repealed Obamacare’s 40 percent tax on employer-sponsored health plans that exceed a certain dollar threshold, commonly known as the “Cadillac tax.”
Over-the-counter medicine tax
Obamacare prohibits people from purchasing over-the-counter health care items with funds in their health savings accounts, flexible spending accounts, or health reimbursement accounts. The bill would have repealed this prohibition.
Tax increase on improper HSA disbursements
Prior to Obamacare, there was a 10 percent tax on distributions from a health savings account that were used for non-qualified purchases. Obamacare increased the tax penalty to 20 percent. The bill would have restored the penalty to 10 percent.
Tax limits on FSAs
Prior to Obamacare, employers could allow employees to receive a portion of their salary in a health flexible spending account, without the FSA compensation being taxed (just as employer sponsored health insurance is not taxed). Obamacare limited contributions to FSAs to $2,500 per year. The bill would have repealed this restriction.
Prescription drug tax
Obamacare imposes an annual fee on manufacturers and importers of prescription drugs. The bill would have repealed this tax.
Medical device tax
The bill would have repealed Obamacare’s 2.3 percent tax on gross sales of medical devices.
Health insurance tax
Obamacare imposes an annual fee on health insurers, which is eventually passed on to consumers. The bill would have repealed this tax.
Deduction for employer-provided prescription drug coverage for retirees
Obamacare limited the deductibility of employer provided prescription drug coverage for retirees, when the employer also received a Part D subsidy. The bill would have reversed that policy.
Chronically ill tax increase
Prior to Obamacare, people who had health care costs exceeding 7.5 percent of their adjusted gross income could deduct those costs from their taxes. Obamacare increased that threshold to 10 percent. The bill would have reversed that tax increase.
Additional Medicare tax
Obamacare imposes an additional 0.9 percent surtax on taxpayer income above $200,000 for individuals and $250,000 for couples. The bill would have repealed that surtax.
The bill would have repealed Obamacare’s 10 percent excise tax on indoor tanning services.
Net investment tax
Obamacare imposes a 3.8 percent tax on investment income over $200,000 for an individual and $250,000 for couples. The bill would have repealed this tax.
Obamacare limits the deductibility of compensation for people working for health insurance companies that exceeds $500,000. The bill would have repealed this provision.
Economic substance doctrine
Obamacare codified the “economic substance doctrine,” which was a judicial doctrine courts had used to deny tax benefits when the transaction lacked economic substance. The bill would have repealed this provision.
Ending Obamacare’s Raid on Medicare
Obamacare raided more than $700 billion from Medicare to fund a new entitlement. The bill would have instructed the secretary of the Treasury to transfer the full amount of on-budget savings from the bill between fiscal years 2016 and 2025 to the Federal Hospital Insurance Trust Fund.
Next Article Previous Article