Senate GOP Health Bill Would End ACA Penalties, Cut Taxes on High Incomes

The Wall Street Journal
By Stephanie Armour, Kristina Peterson and Louise Radnofsky
Updated June 22, 2017 5:53 pm ET

WASHINGTON—Senate Republican leaders released a proposal Thursday that would undo major parts of the Affordable Care Act and transform a large part of the American health-care system by changing and cutting the funding for the Medicaid program.

The bill would reverse the ACA’s expansion of Medicaid, a move that could affect millions of people, and would for the first time limit states’ overall Medicaid funding from Washington. It also would eliminate the requirement in the 2010 law that most Americans sign up for health insurance, and provide instead less-robust tax credits than the ACA to help people afford insurance. It would repeal hundreds of billions of dollars in taxes on businesses and high-income households and retroactively cut taxes on capital gains.

The Senate plan in many ways echoes a health bill passed by the House last month, but it contains several differences. It isn’t clear if those changes, such as the shape of the tax credits and a more gradual phasing-out of the Medicaid expansion, would be enough to attract more centrist Republicans without alienating the most conservative lawmakers in both chambers.

The challenge quickly became evident when four GOP senators—Ted Cruz of Texas, Ron Johnson of Wisconsin, Mike Lee of Utah and Rand Paul of Kentucky—said they couldn’t vote for the bill as it stood, though they were open to negotiation.

A more centrist GOP senator, Dean Heller of Nevada, who faces re-election next year, said he had “serious concerns” about the bill, particularly its effect on Medicaid recipients.
Senate Health-Care Overhaul

With 52 Republican senators, Majority Leader Mitch McConnell can lose no more than two GOP votes for the bill to pass under a special process tied to the budget.

Thursday’s release of the 142-page bill, after its elements had been closely held by GOP leaders, launched a fast-moving process that top Republicans hope will culminate in a new health law’s passage possibly before Congress’s August recess. Senate GOP leaders say they plan to vote next week; if the bill passes, then the House could take it up, or the two chambers could try to reach a compromise on the two bills.

The Senate bill, mirroring its House counterpart, keeps some of the ACA’s provisions in place, like the tax credits to subsidize health coverage. But it would shift the income eligibility and some of the structure for those credits, which in some cases could reduce their size for older Americans, in particular.

In other areas the bill takes fuller aim at the ACA, former President Barack Obama’s signature law. The enhanced federal funding the 2010 law provided for states to expand Medicaid would be phased out starting in 2021 and eliminated by 2024. States could still keep the expansion, but they wouldn’t get the additional federal funds.

Beyond that expansion, federal funding for Medicaid would be capped for the first time. States would be given a choice on whether they would prefer block grants or a per-capita payment for beneficiaries.

In 2025, the bill would lower the growth rate for Medicaid spending, a move that alarmed some centrist Republicans. “That translates into literally billions of dollars, and it would result in states either cutting back on eligibility or rural hospitals going under because of uncompensated care,” said Sen. Susan Collins of Maine. “Those are serious problems.”

Among Republicans’ loudest complaints about the ACA, sometimes called Obamacare, was that it imposed several new taxes, and the GOP push would undo most of them.

Like the House bill, the Senate bill would repeal a 3.8% tax on investment income retroactively to January 2017 and delay the repeal of a 0.9% payroll tax until 2023. Both of those taxes only apply to individuals making more than $200,000 and married couples making more than $250,000. A tax on generous employer health plans, which has yet to go into effect, would remain but be further delayed, until 2026.

Democrats criticized the bill for curbing Medicaid funding while repealing taxes on the wealthy, and referred to President Donald Trump’s recent characterization of the House version of the bill as “mean.”

“The House and Senate bills should be known as ‘mean’ and ‘meaner,’ ” said Sen. Ron Wyden (D., Ore.). “Republicans will keep telling Americans they’re fixing their health care right up until the minute it’s taken away.”

GOP leaders were quick to note that the text was subject to change.

“Right now we’ve got members who are going to be interested in seeing it, digesting it, and then looking to see if there are things we can do to refine it, make it more acceptable to more members in our conference to get to 50” votes, said Sen. John Thune (R., S.D.).

In particular, Republicans may seek to “dial” the levels up or down on the tax credits and phase-out of the enhanced funding for Medicaid expansion, Mr. Thune said.

Other Republicans, like Mr. Paul, said the law didn’t go far enough in repealing the ACA, and the Kentucky senator said he didn’t favor the government subsidizing the cost of health insurance.

“The bill needs to look more like repeal of Obamacare, and less like we’re keeping Obamacare,” Mr. Paul said.

If the Senate splits 50-50, Vice President Mike Pence would break the tie.

Mr. McConnell has set a rapid-fire timeline for passage. An analysis by the nonpartisan Congressional Budget Office, laying out the bill’s effect on cost and coverage, could come as early as Monday. Senate Republicans plan to vote on the bill days later, and then it would be taken up by the House.

The CBO report on the House bill showed it would leave 23 million more people uninsured while reducing the cumulative federal deficit by $119 billion in the next decade compared with current law.

House Speaker Paul Ryan (R., Wis.) declined to discuss the Senate bill’s prospects in the House Thursday. At the White House, Mr. Trump said he hoped the Senate would pass a health bill “with heart” and that he was pleased with the legislation unveiled earlier in the day.

Mr. Trump was heavily engaged in pushing the health bill through the House, sometimes dialing lawmakers late into the night. He has taken a more hands-off approach with the Senate, but a senior White House official said that could change.

Mr. Obama, in a post on Facebook Thursday, urged Republicans and Democrats to work together on a health bill but said the Senate’s proposal would harm many Americans.

“Simply put, if there’s a chance you might get sick, get old, or start a family—this bill will do you harm,” he said in the post.

Under the bill, states would get billions more in funding largely to help stabilize markets for insurance bought on exchanges that were set up under the ACA. The measure also includes a formal, temporary appropriation for billions of dollars for health insurers to offset subsidies that reduce costs for low-income consumers, though it faces procedural challenges.

Insurance-market woes in some states have prompted health plans to withdraw entirely, citing a combination of problems succeeding under the Affordable Care Act and additional turbulence under Republicans.

—Byron Tau and Natalie Andrews contributed to this article.