POLITICO

Exclusive: Leaked GOP Obamacare replacement shrinks subsidies, Medicaid expansion

The replacement would be paid for by limiting tax breaks on generous health plans people get at work.

By Paul Demko
02/24/17 11:07 AM EST
Updated 02/24/17 03:10 PM EST

A draft House Republican repeal bill would dismantle the Obamacare subsidies and scrap its Medicaid expansion, according to a copy of the proposal obtained by POLITICO.

The legislation would take down the foundation of Obamacare, including the unpopular individual mandate, subsidies based on people’s income, and all of the law’s taxes. It would significantly roll back Medicaid spending and give states money to create high risk pools for some people with pre-existing conditions. Some elements would be effective right away; others not until 2020.

The replacement would be paid for by limiting tax breaks on generous health plans people get at work — an idea that is similar to the Obamacare “Cadillac tax” that Republicans have fought to repeal.

Speaker Paul Ryan said last week that Republicans would introduce repeal legislation after recess. But the GOP has been deeply divided about how much of the law to scrap, and how much to “repair,” and the heated town halls back home during the weeklong recess aren’t making it any easier for them.

The key House committees declined to comment on specifics of a draft that will change as the bill moves through the committees. The speaker's office deferred to the House committees.

In place of the Obamacare subsidies, the House bill starting in 2020 would give tax credits — based on age instead of income. For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, according to the proposal. A related document notes that HHS Secretary Tom Price wants the subsidies to be slightly less generous for most age groups.

The Republican plan would also eliminate Obamacare’s Medicaid expansion in 2020. States could still cover those people if they chose but they’d get a lot less federal money to do so. And instead of the current open-ended federal entitlement, states would get capped payments to states based on the number of Medicaid enrollees.

Another key piece of the Republican proposal: $100 billion in “state innovation grants” to help subsidize extremely expensive enrollees. That aims to address at least a portion of the “pre-existing condition” population, though without the same broad protections as in the Affordable Care Act.

It also would eliminate Planned Parenthood funding, which could be an obstacle if the bill gets to the Senate. And it leaves decisions about mandatory or essential benefits to the states.

According to the document, there’s only one single revenue generator to pay for the new tax credits and grants. Republicans are proposing to cap the tax exemption for employer sponsored insurance at the 90th percentile of current premiums. That means benefits above that level would be taxed.

And while health care economists on both sides of the aisle favor tax-limits along those lines, politically it’s a hard sell. Both businesses and unions fought the Obamacare counterpart, dubbed the Cadillac tax.

The document is more detailed than the general powerpoint House leaders circulated before the recess. Lawmakers are still in disagreement about several key issues, including Medicaid and the size and form of subsidies. Discussions within the House, and between House leaders and the White House about the final proposal are ongoing. President Donald Trump, who gives a major speech to Congress on Tuesday night, has said he expects a plan will emerge in early to mid March.

The exact details of any legislation will also be shaped by findings from the CBO about how much it will cost and what it will do to the federal deficit.

But the draft shows that Republicans are sticking closely to previous plans floated by Ryan and Price in crafting their Obamacare repeal package.

“Obamacare has failed," said HHS spokesperson Caitlin Oakley. "We welcome any and all efforts to repeal and replace it with real solutions that put patients first and back in charge of their health care rather than government bureaucrats in Washington, D.C.”

Other changes proposed by Republicans align with previous ideas for strengthening the individual insurance market, which has been unstable under Obamacare with rising premiums and dwindling competition. For example, the legislation would allow insurers to charge older customers up to five times as much as their younger counterparts. Currently, they can only charge them three times as much in premiums. The insurers have been pushing for that change.

The proposal also includes penalties for individuals who fail to maintain coverage continuously. If their coverage lapses and they decide to re-enroll, they would have to pay a 30 percent boost in premiums for a year. Like the unpopular individual mandate, that penalty is designed to discourage individuals from waiting until they get sick to get coverage.

Republicans have vowed to dismantle Obamacare ever since it passed with only Democratic votes in 2010. But reaching agreement on what should come next has proven difficult since they gained full control of Congress and the White House.

Recent polling has shown that Obamacare is increasingly popular. Supporters of the health care law have been turning out by the hundreds at town hall meetings across the country to demand that Republicans answer questions about what’s going to happen to the 20 million individual who have gained coverage under Obamacare.

According to the latest Kaiser Family Foundation tracking poll, released Friday morning, the public now views the Affordable Care Act more favorably than it has since the summer of its enactment. Some 48 percent view the law favorably — up from 43 percent in December. About 42 percent have an unfavorable view of the ACA — down from 46 percent in December. The pollsters say Independents are mostly responsible for the shift. A separate poll by the Pew Research Center found 54 percent approve of the health care law — the highest scores for Obamacare in the poll's history. Meanwhile, 43 percent said they disapprove.