After months of interparty turmoil, the House of Representatives passed their much-anticipated, highly-controversial, American Health Care Act (AHCA) by a narrow margin of 217-213. While passage prompted a Rose Garden celebration with House Republican leaders and President Trump at the White House, scholars of School House Rock know that the AHCA is still just a bill. To become a law, it still must pass the Senate and any differences between the two versions must be reconciled, passed again, and only then will it head to the President’s desk for signature to become law. In other words, the process to repeal and replace Obamacare has only just begun.
We hope this explainer will catch you up to speed on where things stand now, where things are headed, and what we are paying most attention to (hint: federal spending and debt). For a refresher, you can also look back to our original Repeal and Replace Explainer from March that delved into the politics and policies that led up to this moment.
In March, the gap between the conservative and moderate wing was too far to bridge. What changed?
The fact that the Republican party is made up of a diverse set of viewpoints was put under the national spotlight during the health care negotiations this spring. Getting the moderate and conservative wings of the Republican party to agree to the same approach to revamping the entire health care system was always going to be difficult. With only 22 votes to lose, it was nearly insurmountable. The process was a high-stakes balancing act that meant changes to win support from conservative members could not simultaneously lose the support of moderate members. After a vote was called off in March due to a clear lack of enough support from both factions, it appeared that the breaking of seven years worth of promises had occurred.
However, turning back after seven years would be too humiliating and negotiations between the moderates and conservatives continued after the March collapse. While much of the core pieces of the AHCA remained intact, two major breakthroughs were able to get enough support from conservative members without losing too many moderates.
The first came in the form of the MacArthur Amendment, which gives states the ability to apply for waivers from regulatory requirements, including pricing limits, essential benefits, and the approach to cover those with pre-existing conditions. This regulatory flexibility was a key ask for conservative members as many believe onerous regulations are the driving force behind the cost increases. In order to mitigate concerns from some moderates that this flexibility could harm those with pre-existing conditions, the Upton amendment provided an additional $8 billion to help cover the costs of those with pre-existing conditions in states that seek a waiver.
The combination of these two amendments provided enough votes from both conservatives and moderates for the House to pass the bill with only a four-vote margin.
Wait, so what else is in the AHCA?
The AHCA repeals most of the core pieces of Obamacare’s financial support and taxes and replaces them with other forms of financial support and incentives. For an exhaustive policy summary, you can read more here and here.
Here are some key highlights:
Provides age-rated tax credits to help people purchase insurance that do not receive it through their employer or an existing federal program.
Obamacare limited the amount an insurer can charge an older person to three times what they charge a young person – thus putting a higher cost burden on the young. The ACHA increases that limit so that an insurer can charge five times as much while providing states additional flexibility to adjust the ratio.
Changes Medicaid from an open-ended entitlement system to a per-capita block grant system.
Replaces the individual mandate with an incentive for people to enroll in the form of a 30 percent surcharge for premiums if you enroll after a gap in coverage.
Eliminates the larger employer mandate.
Provides states the flexibility to opt out of certain ACA regulatory mandates, namely essential benefits that many critics have said drive up prices. States will also have the ability to seek a waiver from the pre-existing coverage mandate but would have to have a system in place such as a high-risk pool to provide cost support to garner the waiver.
Provides $138 billion to states over the next nine years that can be used to subsidize premiums, assist high-risk individuals, or increase access to mental health and substance abuse care. $8 billion of this is set-aside for states that gain a waiver from the pre-existing coverage mandate.
Prohibits federal Medicaid funding for Planned Parenthood clinics for 1 year.
Encourages the use of Health Savings Accounts by doubling the contribution limit and halving the withdrawal penalty.
Repeals the Obamacare tax increases.
Okay, it passed the House, is the Senate going to take it up and pass it as-is?
No. Sorry, now that you’ve read up on all the policy details of the House AHCA, it’s likely to significantly change in the Senate. In fact, the Senate has already indicated they will write a new bill from scratch.
There are three important elements to keep in mind for the Senate process:
Senate rules will make the policy writing process much more difficult: The process by which the repeal and replace plan will be done is through a complicated procedural mechanism called reconciliation. Reconciliation is a powerful tool that can be used once per fiscal year that allows a bill to pass the Senate by a simple majority rather than the usual 60 votes needed to break a filibuster. In lieu of going down a Senate rules rabbit hole, the key item to know is that reconciliation bills are supposed to be budgetary, rather than policy bills. That means a provision can be stripped from the bill if it does not have a direct impact on spending or revenues. It is unclear whether provisions that change regulations, which are more policy-oriented, will survive the Senate rules. We will not have a clear understanding of what passes procedural muster until a bill hits the floor – which could take some time.
The Senate can only afford to lose two Republicans: The limitations that Senate rules places on the bill writers is difficult enough, but the Senate also faces the same political problem that tripped up the House so many times. In other words, they have even less room for error. There is not expected to be any support from Democrats, so the Senate can only afford to lose two members while bridging the gap between conservative members such as Sens. Paul (R-KY), Cruz (R-TX), and Lee (R-UT), moderate members such as Sens. Collins (R-ME) and Murkowski (R-AK), and members from Medicaid-expansion states such as Sens. Portman (R-OH) and Gardner (R-CO). Major compromise between each of these main factions will be critical for the Senate to even produce a bill that can pass.
The rest of the Republican agenda cannot move forward until this is done: While Senate Republican leadership says there is no timetable for Senate completion of a repeal and replace plan, it is not that simple. Because the procedure that Congress is using to repeal and replace Obamacare is tied to last year’s budget resolution, Congress cannot pass a budget resolution for next fiscal year until this process is complete. This has two impacts. First, it complicates the ability for Congress to pass appropriations bills because they have not agreed to how much they are going to spend in total. Second, tax reform, the other major Republican initiative, cannot begin until they pass next year’s budget resolution because of the plan to use the reconciliation procedures. Plus, the tax changes made in the health care bill will have a significant impact on the ability for Republicans to engage in tax reform.
Ever since Obamacare passed on purely party lines, the approach to our nation’s health care policy has been completely partisan. House Democrats even taunted Republicans on the House floor after the AHCA passed by singing “na, na, na, na, hey, hey, hey, hey, goodbye” because they believe they will take back the House majority next election. This is no different than Republicans advocating for letting our healthcare system collapse so they can pin the blame on theDemocrats. These are stark reminders of the lows our politics have reached when political power is more important than policy results.
While the Senate has not indicated much on policy approaches, they have said that the House bill is too harmful to older Americans. This is viewed as problematic because our nation’s seniors are a major voting bloc. But as we will detail in a future piece, policymakers should be focused on the impact that rising healthcare costs will have on our budget, debt, and opportunities for future generations. Under current law, in 2027, the federal government will spend more on just Medicare and Medicaid than the entire federal government spent when President George W. Bush took office. It is no wonder that the Congressional Budget Office has called the growth in federal healthcare spending the greatest threat to budget stability.
As this process moves forward, we hope that achieving a sustainable budget will be on the top of lawmakers’ minds – not sustaining a political majority.