Until this point the working assumption for most health care policy geeks (ourselves included), has been that repeal of the ACA will follow, more or less, the path blazed by the December 2015 reconciliation. However, conservatives organizations have been putting forth alternative approaches for repeal and replace or just repeal that are designed to out manauever supporters of the ACA. Fans of the ACA have adopted a strategy of "replace and repeal" - meaning a viable alternative needs to be in place before the law is repealed.
Anyone who has spent 5 minutes in politics knows that when your opponents ackowledge your goals ("repeal") it is time assess your strategy. A fully negotiated replacement bill could take years and not reflect the goals of conservatives or achieve the results promised during the 2016 elections. Heritage Action, the sister organization to the Heritage Foundation which advised the Trump campaign on economic matters, amoung other things. offered some alternatives last week that may help Republicans avoid the quagmire that supporters of the ACA readily embrace; two-step repeal and replace, December 2015 reconciliation plus repeal of insurance mandates; and a redo of the December 2015 reconciliation.
Regardless of which approach Republican leadership adopts - repeal and delay or rip the band-aid off - we anticipate that the Senate (which would be much less inclined to accept the Heritage Foundation's recommendations) will begin the process the last week of January with the House taking it up in early February and complete the process by President's Day.
Recall that reconciliation is limited by the Byrd rule which stipulates that:
“[Any provision of a reconciliation bill] that contains material extraneous to the instructions to said Committee [of jurisdiction]…shall be deemed stricken from the bill and may not be offered as an amendment from the floor.”
A provision shall be considered “extraneous” if:
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If it does not produce a change in outlays or revenues. However, a provision in which outlay decreases or revenue increases exactly offset outlay increases or revenue decreases shall not be considered extraneous.
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If the net effect does not achieve the reconciliation instructions contained in the budget instructions.
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If it is offered by a committee that does not have jurisdiction
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If it produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the provision
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If it increases net outlays or decreases revenues during a fiscal year after the fiscal years covered by reconciliation and those increases or decreases are greater than outlay reductions or revenue increases resulting from other provisions.
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If it reduces Social Security payments.
For good reason, the December 2015 reconciliation avoids repeal of any provision not safely in the non-extraneous category. The list includes elimination of the diverse list of taxes used to pay for the ACA, subsidies for the purchase of insurance and to mitigate cost-sharing and elimination of increased federal match for Medicaid expansion. The bill was rewarded with a CBO score that indicated the repeal would decrease outlays over the 10-year budgetary window by $1.4 Trillion and the net effect on the budget deficit would be a decrease of $317 Billion over the same period.
A complete list of the December 2015 repeal provisions can be found here.
Missing from the December 2015 reconciliation bill are changes to the health insurance industry mandates like the 1:3 age band, minimum Essential Health Benefits, the prohibition on exclusion for pre-existing conditions and guaranteed issue. The absence of these provisions has given rise to the belief that they would not pass muster with the Senate Parliamentarian, although the question of their inclusion was never adjudicated. Of course, retaining these provisions while repealing other sections of the law creates significant chaos in the health insurance markets as issuers are left trying to sell a product that no one could buy.
The limited list of repeal provisions has also been interpreted to mean that entire repeal of the ACA via reconciliation is not possible. Part of the justification for that argument is the budgetary impact score awarded to full repeal by the CBO in June 2015. The CBO concluded that full repeal would increase the budget deficit by $353 billion over 10 years. The primary culprit behind that theoretical increase in the federal deficit would be repeal of reductions to Medicare reimbursement. The ACA included a host of provisions – like the multifactor productivity adjustment applied to all annual updates, changes to reimbursement for Medicare Advantage plans and other reimbursement reductions. Over half of the cost of the ACA was born by the Medicare program.
The effect of the Medicare provisions on the budget deficit has been hotly debated by Republicans who believe that the Obama administration has “double counted” this reduction in outlays. On the one hand, the Obama administration, Congressional Democrats and presidential candidate Hillary Clinton have credited the ACA with prolonging the solvency of the Medicare Trust Fund. One the other hand, reductions in Medicare payments have been used to offset the cost of the ACA. Republicans believe – and have some support from the CBO - that using Medicare payment reduction for both Trust Fund solvency and as a "pay-for" for the ACA is double counting. In 2009, the CBO released one of many reports on the ACA and noted:
“To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.”
Finally, most observers have presumed that any replacement to the ACA will require 60 votes in the Senate and therefore involve a lot of compromise between Democrats and Republicans and a lot of time – years perhaps – to accomplish.
The idea that full repeal was not possible and partial repeal would lead to chaos in the insurance markets, has led most observers to conclude that the Republican strategy would be to “repeal and delay.” That presumption has served as the foundation for the political strategy of proponents of the ACA who have been calling for a replacement to the ACA before repeal is approved.
Some or all of these presumptions could be wrong.
In a strategy memo released last week, the conservative Heritage Action outlined a different approach that challenges conventional wisdom and offers an alternative strategy. Heritage Action is the sister organization to the influential Heritage Foundation which has been advising president-elect Trump on economic policy, among other things.
Heritage Action, in their memo, spelled out a two-step approach using two reconciliation bills as an alternative to “repeal and delay."
In this scenario, Congress would pass a FY 2017 budget – something they rather fortuitously failed to do in the 114th Congress – followed by an FY 2017 reconciliation package. The second step of the process would be for Congress to pass a budget for FY 2018, also followed by a FY 2018 reconciliation package that enacts a set of replacement provisions. Under this scenario, effective dates of critical portions of the law, like elimination of tax subsidies would be delayed until a replacement would be effective probably sometime in 2018.
To get around a ruling on extraneousness due to full repeal’s impact on outlays and revenues, Heritage Action has suggested that the Senate Budget Committee Chairman, Mike Enzi, ask the CBO for an estimate on the Medicare “double-count” Assuming the CBO assigns some value to the double count in excess of the $350 billion score for full repeal, the Chairman could assert that the full repeal meets the test of the Byrd Rule.
The allure of this approach is speed. The longer supporters of the law have to organize and mobilize in support of major provisions of the law, the more likely it is that Congress and the White House will be pressured into a compromise unacceptable to conservative Republicans. Last week, The Center for American Progress which has close ties to the Obama White House and is the home address of health policy for liberals, set up ACAworks.org to solicit stories from individuals who would be negatively affected by repeal of the ACA. Families USA, Community Catalyst and Doctors for America are holding a “Week of Action” this week. Other organizations like the Center on Budget and Policy Priorities and the National Partnership on Women and Families are involved in supporting preservation of key components of the law.
Another strategy outlined by Heritage Action is to repeat the 2015 repeal by reconciliation and add repeal of the insurance mandates. The argument in favor of adding these provisions to a reconciliation bill comes from the Supreme Court itself which found in King v. Burwell that the three legs of the ACA stool – insurance market regulations, a coverage mandate and tax credits are inextricably linked:
“Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits.”
Adding the insurance mandates like guaranteed issue, community rating and age rating to a repeal bill would provide much needed flexibility for insurers to offer plans on the exchanges and elsewhere at prices that are more affordable and eliminate the much feared “death spiral.” More stable insurance markets greatly reduces the urgency for replacement and the leverage Democrats will have to force a replacement more to their liking.
As always,
Call with questions.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
