Issues Facing Republicans in Replacing Affordable Care Act

FEB. 7, 2017

WASHINGTON — Ever since Democrats began pushing the Affordable Care Act through Congress more than seven years ago, Republicans have been trying to come up with an alternative. Candid conversations leaked from a conclave of Republican lawmakers in Philadelphia last month, and public comments since, show they are nowhere near agreement.

The leaked audio recordings revealed that Republicans recognize the technical complexity and political difficulty of the task they have set for themselves: repealing the law known as Obamacare and replacing it with a new plan that, in the words of President Trump, provides “better health care for more people at a lesser cost.”

What follows is a summary of the thorny questions with which Republicans in Congress are struggling. These are not just academic quandaries. People’s lives could depend on the answers. And time is short. Insurance companies have about three months to decide what kinds of health plans, if any, they will sell to the public in 2018.

Many of the choices facing Republicans are variations of a fundamental question: how much of the Affordable Care Act to keep, and how much to discard?

Future of Medicaid

More than half of the 20 million people who gained coverage through the Affordable Care Act did so through Medicaid, the federal-state program for low-income people. Medicaid, begun as an adjunct to the main cash welfare program a half-century ago, has gradually become a pillar of the American health care system, covering more than 70 million people and financing more than 40 percent of all births.

The 2010 health care law, as written by Democrats, required all states to expand Medicaid eligibility. But the Supreme Court said that requirement violated the Constitution by placing “a gun to the head” of states. So the expansion became voluntary.

To date, 31 states have expanded Medicaid, and 19, including Florida and Texas, have not. The federal government pays at least 90 percent of the costs for newly eligible beneficiaries. Governors who supported the expansion of Medicaid eligibility, including Republicans like John R. Kasich of Ohio, Rick Snyder of Michigan and Brian Sandoval of Nevada, want to keep it. That would be impossible if congressional Republicans repeal this part of the law, as they tried to do in a budget bill that was vetoed by President Barack Obama last year.

Many who gained coverage under Medicaid are poor adults who were not previously eligible. Republicans in Congress have not decided whether to let states continue such coverage. Nor have lawmakers decided whether additional states will be allowed to expand eligibility, with the same generous contribution of federal funds.

Medicaid is now an open-ended entitlement. Anyone who meets federal and state eligibility criteria is entitled to benefits.

Many Republicans in Congress, including Speaker Paul D. Ryan, would like to roll back the expansion of Medicaid and give each state a fixed amount of money for each beneficiary or a lump sum for all of a state’s Medicaid program — a block grant. Under such proposals, states would have more freedom to set benefits and program rules, but the federal government would probably cut Medicaid spending compared with the amounts projected under current law.

“Governors should be exceedingly wary of block grants” for the Medicaid program, said former Gov. Steven L. Beshear of Kentucky, a Democrat. If Congress gives states more discretion but less money, he said, “governors will have to use their enhanced flexibility to make impossible choices — which individuals to cut from the program, or which benefits to eliminate.”

Pre-existing Conditions

One of the more popular provisions of the Affordable Care Act prohibits insurers from denying coverage or charging higher premiums because a person has a pre-existing condition like cancer, heart disease, diabetes or AIDS. President Trump has said he would like to keep this provision. Many Republicans in Congress agree, but the version they propose is, in some ways, different from the existing law.

Congressional Republicans would provide some protection against discrimination based on pre-existing conditions. To obtain full protection, consumers would need to maintain “continuous coverage.” Under some Republican proposals, consumers with chronic illnesses could be charged higher premiums if they had a significant break in coverage lasting, say, more than nine or 10 weeks.

Republicans say this more limited form of protection would provide an incentive for consumers to obtain and maintain coverage. But Democrats say it is unfair because people have gaps in coverage for many legitimate reasons, and they may be unable to pay the premiums needed to maintain it.

Dr. J. Leonard Lichtenfeld, deputy chief medical officer at the American Cancer Society, said: “Research suggests that between 40 percent and 85 percent of cancer patients stop working while receiving cancer treatment, with absences from work ranging from 45 days to six months depending on the treatment. Sometimes they lose their jobs and their employer-sponsored coverage.”

In such cases, he said, patients could be charged “a premium they cannot afford.”

Representative Greg Walden, Republican of Oregon and chairman of the Energy and Commerce Committee, is drafting a bill to encourage continuous coverage, but said he wanted to make sure that people with pre-existing conditions would always have access to care.

“I’ve seen cancer up close,” Mr. Walden said. “My mother died of ovarian cancer, my sister-in-law of brain cancer.”

Taxes and Fees

One of the biggest questions dividing Republicans is what to do about the taxes and tax increases adopted as part of the Affordable Care Act to help pay for the coverage of millions of low- and moderate-income people.

The new revenue comes from taxes and fees imposed on consumers who go without health insurance; high-income taxpayers; manufacturers of brand-name prescription drugs; makers of certain medical devices; and insurance companies. In addition to an annual fee on insurers, the law imposes a tax on high-cost employer-sponsored health coverage, the “Cadillac tax” opposed by labor unions and employers.

Some Republicans, like Senator Bill Cassidy of Louisiana, say the government should keep some of the revenue collected under the Affordable Care Act to help pay for a replacement plan.

By contrast, House Republican leaders and some Republican senators want to eliminate most or all of the taxes. “After spending seven years talking about the harm being caused by these taxes, it’s difficult to switch gears now and decide that they’re fine, so long as they’re being used to pay for our health care bill,” said Senator Orrin G. Hatch of Utah, chairman of the Finance Committee.

“All of the Obamacare taxes need to go as part of the repeal process,” Mr. Hatch said.

Republicans are also divided over a proposal to limit the value of health benefits that employers can provide to employees tax-free. Under current law, employees do not have to pay federal income tax on contributions that employers make to their health insurance. House Republicans say this tax break amounts to an open-ended subsidy for employer-sponsored insurance, encouraging employers and employees to choose more expensive coverage than they otherwise would.

Mr. Ryan reaffirmed his support for limiting the tax break last week, but said that whether Congress would approve the change “was an open question.”

Transition and Timing

Several other questions vex Republicans as they try to write a replacement. How will they ensure a smooth transition to the market-oriented health care system they want to create? How much time should elapse between the passage of a repeal bill and its effective date?

If the federal government spends tens of billions of dollars to subsidize the purchase of health insurance, will it set standards for that insurance? Will it still require insurers to cover maternity care, mental health services and treatment for drug abuse?

Should Congress cut off funds for Planned Parenthood clinics, which receive Medicaid money for birth control, cancer screenings, treatment of sexually transmitted diseases and many other services? Mr. Ryan has said that federal funds for Planned Parenthood would be cut off in a repeal, but some Republicans say that would be a political mistake.