This story was updated at 2:20 p.m. ET.
Senate Republicans' bill to repeal and replace the Affordable Care Act would cap federal Medicaid spending even more tightly than the repeal bill narrowly passed by House Republicans last month.
A "discussion draft" released by Senate Majority Leader Mitch McConnell Thursday morning could cap federal payments to the states for most beneficiaries at the medical component of the Consumer Price Index starting in 2020. Growth of those payments would be limited to the much lower CPI rate starting in 2025, a much tighter cap than proposed in the House bill.
The Senate bill, called the Better Care Reconciliation Act of 2017, would exclude disabled children, breast and cervical cancer patients and children covered under the Children's Health Insurance Program from the Medicaid cap formula. Experts say, however, that it would be difficult or impossible to protect any beneficiaries from the effects of the per capita cap structure, because states would receive fixed federal payments and have to make tough choices about cutting eligibility, benefits and payments to providers.
In general, the 142-page Senate bill—which was written behind closed doors by McConnell and his staff and which other GOP senators reportedly didn't see until Thursday—would reduce the ACA's financial assistance to lower- and middle-income people to obtain affordable healthcare coverage.
McConnell hopes to bring the bill to a vote on the Senate floor next week, shortly after the Congressional Budget Office issues its estimate of the bill's cost and coverage impact. The bill's prospects for passage are dicey, with both moderate and conservative Senate Republicans expressing doubts about its provisions and asking for more time to study it.
If the Senate passes the bill, it would have to go back for approval to the House, where its prospects are uncertain. Republican leaders hope to pass a healthcare bill no later than the end of July so they can move on to legislation to restructure and cut taxes.
Under the draft Senate bill, tax credits to help people buy insurance in the individual market would be limited to those with incomes up to 350% of the federal poverty level, below the ACA's current limit of 400% of poverty. Unlike under the ACA, no one whose employer offers insurance would be eligible for tax credits, regardless of whether the cost of that employer coverage is affordable.
The bill pegs its federal tax credits to age and income level, up to an income of 350% of the federal poverty level. The credit would be based on capping a person's premium costs at a certain percentage of household income, for instance 6.3% for a person age 40 to 49 at 150% to 200% of the federal poverty level.
That contrasts with the House bill, which would offer age-based credits of $2,000 to $4,000 that start to phase out at an individual income level of $75,000 and a family income level of $150,000.
Qualified health plans, however, would only have to cover an average of 58% of medical costs, which is lower than the minimum required actuarial value under the ACA. That likely would lead to increased out-of-pocket costs for consumers.
The bill would repeal the ACA's tax penalty for not buying insurance as of Dec. 31, 2015. It offers no replacement provision to prod younger and healthier people to buy insurance. That likely will alarm insurers, who say a strong financial incentive is needed to get younger people to buy coverage in order to offset the costs of older and sicker enrollees.
Under the draft bill, the ACA's enhanced federal payments for Medicaid expansion would be phased out by 2023. That likely would prompt most of the 31 states that have extended Medicaid to low-income adults to terminate that coverage, which providers say has significantly reduced uncompensated care.
The bill would give the 19 states that did not expand Medicaid a more favorable formula than expansion states for setting the annual per capita federal payments. That's a response to conservative lawmakers who complained their states would receive less Medicaid funding because they turned down the expansion offer.
The formula for calculating each state's per capita growth cap would be based on the state's Medicaid spending during eight consecutive quarters from 2015 through 2017. States could select the time period to come up with the most favorable baseline, in contrast to the House bill, which would establish 2016 as the base year.
As an alternative to the per capita cap formula, states could apply to operate their Medicaid programs under a block-grant model. States choosing that approach would receive annual payment increases limited to the rate of general inflation, but they would receive any federal savings in the following year.
The bill also would eliminate the ACA's requirement that Medicaid managed-care plans cover 10 essential benefits, starting at the end of 2019. Providers worry that would prompt plans to stop covering costly mental health and substance abuse services.
The bill would fund a temporary federal reinsurance program to stabilize the individual insurance market, offering insurers $15 billion in both 2018 and 2019 and $10 billion in both 2020 and 2021. After that, states would have to implement their own market stabilization programs, with $62 billion in funding through 2026. By 2026, states would have to pay a 35% match rate. There is no provision for market stabilization funding after 2026.
Federal payments to insurers for the ACA's cost-sharing reductions for lower-income exchange plan enrollees would be funded through 2019, after which those subsidies to help people with deductibles and copayments would end. Experts question whether lower-income people would be able to afford coverage and care without the cost-sharing subsidies.
The bill would repeal almost all the ACA taxes that pay for the law's coverage expansions and benefit enhancements. The investment tax on wealthy people would be erased as of Dec. 31, 2016, while the additional Medicare payroll tax on higher-income people would be killed at the end of 2022.
The excise tax on medical device manufacturers and the health insurance premium tax would be eliminated at the end of 2017. The so-called Cadillac tax on high-value employer health plans would be repealed at the end of 2019.
With the repeal of those taxes, it remains to be seen whether the CBO will score the bill as producing enough federal budget savings to qualify it for passage under Senate budget reconciliation rules and prevent Democrats from filibustering the bill.
The bill would bar the use of premium tax credits for the purchase of health plans that cover abortion, and it would end federal funding for Planned Parenthood, which is not specifically named in the bill language.
It would let states use the ACA's Section 1332 waiver provision to establish their own health insurance framework outside of ACA insurance market rules—without the ACA's requirement that states seeking such waivers show they would provide the same level of coverage. A pot of $2 billion would be set aside to encourage states to apply for such waivers.
Republican senators from states suffering from particularly high rates of opioid addiction, including Ohio and West Virginia, have pushed for $45 billion in extra funding over 10 years for substance abuse treatment. But the draft Senate bill offers only $2 billion through 2019.
In a surprise, the Senate bill would allow small businesses and associations to band together to form small business health plans that would operate outside of state insurance rules. Supporters say this would let small businesses buy more affordable coverage, while insurers, regulators and consumer advocates warn this will undercut the insurance market and lead to harm of consumers. It's not clear whether this provision will be allowed under Senate budget reconciliation rules, since it doesn't appear to be directly budget-related.
McConnell has to win support from at least 50 of the 52 Senate Republicans to pass the reconciliation bill, since no Democrats are expected to vote for it. Vice President Mike Pence would be expected to provide the 51st vote.
Moderate GOP senators such as Susan Collins of Maine and Dean Heller of Nevada will be closely watching to see how the Senate bill affects the projected number of uninsured Americans. The CBO estimated last month that the House bill would lead to an increase of 23 million in the number of uninsured by 2026, while the CMS Office of the Actuary estimated 13 million fewer people would have coverage by that date.
Healthcare industry group and patient advocates have blasted the House bill for increasing the number of uninsured, and they likely will criticize the Senate bill if the CBO scores it as having a similar effect.
"We opposed the AHCA in the House, and we won't say yes to anything that offers less coverage to fewer people," said Dr. Bruce Siegel, CEO of America's Essential Hospitals, which represents safety-net facilities. "The Senate bill probably won't meet that test."
Political observers are hedging their bets about whether McConnell can bring Senate conservatives and moderates together behind the many controversial features of his bill.
"My sense is this is very fragile," said Rodney Whitlock, a Republican healthcare lobbyist and former Senate GOP staffer. "McConnell has written a compromise bill, and he's not going to wait around forever for members to come around on a decision. Next week we'll find out where we all are."
