Committee for a Responsible Federal Budget
Paul Ryan

The House GOP's Plan for Obamacare Replacement

Feb 17, 2017 | Health Care

During a press conference on Thursday, Speaker of the House Paul Ryan (R-WI) previewed the House GOP plan that would repeal and replace substantial portions of the Affordable Care Act (ACA or "Obamacare"). While many details remain unclear, leadership presented a Policy Brief that outlines some broad goals and proposed mechanisms to repeal and replace the ACA.

Drawing largely on last year's House GOP "Better Way" health care plan, the plan under discussion would immediately repeal the individual and employer mandates and then provide what it describes as a "stable transition" from the subsidies and Medicaid expansion under the ACA to a new system. Based on the outline, the new system would:

  • Replace the ACA's income-based subsidies with monthly advanceable and refundable tax credits available to all individuals who purchase coverage in the individual market. The credits would not vary based on income but would vary by age, and excess funds from the credit not used to purchase insurance could be deposited into a Health Savings Account (HSA).
  • Repeal taxes from the ACA, including the tax on health insurers (which was delayed as part of the 2015 tax extenders deal), the "medicine cabinet" tax that disallows HSAs from being used to pay for over-the-counter medicine, the 2.3 percent excise tax on medical devices, and the tax on manufacturers and importers of brand-name drugs.
  • Expand Health Savings Accounts (HSAs) by increasing contribution limits and making various changes to encourage and expand the use of HSAs.
  • Replace current Medicaid funding with either a per-capita allotment or block grant (states' choice), while phasing down the higher matching rate for the Medicaid expansion population to match the rest of Medicaid.
  • Restore Medicaid Disproportionate Share Hospital (DSH) payment cuts made in the ACA.
  • Offer State Innovation Grants for states to develop policies to protect high-risk/high-cost individuals, reduce out-of-pocket costs, stabilize insurance markets, promote preventative care, or make other improvements.

The brief also said that upcoming legislation would be supplemented with regulatory changes from the Trump administration as well as other smaller pieces of legislation (for example, allowing insurance companies to sell across state lines).

Absent from the brief so far is any discussion of offsets (other than possible Medicaid savings), including any discussion of replacing the "Cadillac tax" with a cap on the employer-sponsored insurance tax exclusion.

As we estimated recently, full repeal of all ACA coverage and tax provisions would leave only $750 billion to fund replacement legislation. If existing coverage provisions are retained for two years, available funds would fall to $550 billion. Neither is likely to be sufficient to achieve the coverage goals expressed by many Republicans, so further offsets – or else retention of some of the revenue increases in the ACA – would probably be necessary.

Of course, far more details will be needed before we (or anyone) can evaluate the cost, coverage, or economic impact of the House GOP plan. As they refine these details, we hope they will focus on improving health care cost controls, strengthening Medicare solvency, and ensuring "repeal and replace" is fiscally responsible.

Read more about the House GOP "Better Way" health care plan here.

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