The Affordable Care Act repeal bill unveiled Thursday by Senate Republicans has aptly drawn universal scorn from healthcare experts, hospital and physician groups and advocates for patients and the needy. That's because the bill is a poorly-disguised massive tax cut for the wealthy, paid for by cutting Medicaid — which serves the middle class and the poor — to the bone.
Yet some of the measure's most egregious, harshest provisions are well-disguised. They're hidden deep in its underbrush or in the maze of legislative verbiage. We've ferreted out some of them and present them here in all their malevolent glory. In this effort we've built on ace detective work by Adrianna McIntyre, Nicholas Bagley of the University of Michigan, David Anderson of Duke University and balloon-juice.com, Andy Slavitt, the former head of Medicare and Medicaid in the Obama administration, and others.
Some of these provisions match those in the House Republicans' repeal bill passed May 4, and some are even harsher — more "mean," to use a term President Trump himself applied to the House bill. That bill, according to the Congressional Budget Office, would cost some 23 million Americans their health coverage by 2026. The Senate bill wouldn't do much better, and might do worse.
—States will have more authority to reimpose lifetime and annual benefit caps and eliminate essential health benefits. This may be the most insidious provision of the repeal bill, and certainly is the most deeply hidden.
It's buried in changes made to the ACA's so-called Section 1332 waivers, which are designed to allow states to try innovative approaches to healthcare, especially through their Medicaid programs. Under the ACA, states can only seek waivers under certain conditions. The "innovative" changes can't lead to fewer people insured, or subject them to higher out-of-pocket expenses.
The Senate bill repeals those limitations — and removes the flexibility of the Secretary of Health and Human Services to approve them. Under the measure, the secretary "must" approve a waiver request as long as it won't increase the federal deficit. As a result, states would be able to eliminate the essential health benefits that all health plans must provide under the ACA — including hospitalization, prescription coverage, maternity care and substance abuse and mental health treatment. Since only essential health benefits are subject to the ban on lifetime and annual benefit limits, high-cost patients such as cancer victims and sufferers from chronic diseases could permanently lose their benefits in the course of their treatment.
Would states roll back these protections? By some reckonings, they'd have no choice. The overall impact of the Senate bill would be to shrink the individual health insurance market and leave sicker customers in the insurance pool, says Jeanne Lambrew of the Century Foundation, in part because the measure eliminates the individual mandate that keeps younger and healthier buyers in the market. As a result, she says, insurers will put enormous pressure on state governments to loosen their regulations to lower the insurance companies' risk.
States would also be authorized to waive rules requiring that almost all customers be charged the same premium. That's an invitation to preferential pricing that would effectively remove protections for people with preexisting conditions — they could be priced out of the individual market in a return to the dysfunctional system that denied them insurance in the pre-ACA era.
Under the repeal bill, waivers would be in place at least for eight years, compared with five under the ACA. That means that the rollbacks of consumer protections would be inoculated against repeals by new state or federal administrations.
—Protection for people with preexisting conditions is destroyed. Senate Republicans claim in their talking points that the measure protects people with preexisting conditions from being denied coverage or priced out of the market. Don't believe them. As Gene Sperling, a former economist for the Clinton and Obama administrations, and Michael Shapiro observe, "the Republican plan may not allow insurers to discriminate … through the front door, but they've created a backdoor way in."
The key is that same Secton 1332 waiver provision. If states allow insurers to offer plans without those essential health benefits, they'll offer "skinny" plans that don't serve the needs of those with serious conditions. Plans that don't cover cancer drugs or hospitalization, perhaps. Those patients will have no choice but to opt for more comprehensive plans, which will end up with an overabundance of expensive enrollees and therefore much higher premiums.
"The Senate bill will open the door to states forcing people with preexisting conditions into segregated markets that will lead them to pay far, far higher costs than everyone else," Sperling and Shapiro say. "This bill will bring the country back to a system in which insurance only works for the healthy, and the sick can't afford the coverage they need."
—Older Americans would get socked with much higher premiums and costs. The Senate bill changes the ACA's premium subsidies in ways that severely hurt older customers. The bill expands the permissible range of premiums for older buyers compared to younger from a ratio of 3 to 1 in the ACA to 5 to 1. In other words, older buyers could be charged much more. It reduces subsidies for older buyers in other ways. The ACA's subsidies are based entirely on income, and are provided to households with income up to 400% of the federal poverty line. That ceiling is $48,240 for an individual.
The Senate bill cuts the maximum income to be eligible for subsidies to 350% of the poverty line — $42,210 for an individual. The measure also pegs subsidies partially to age, with older buyers entitled to smaller subsidies. Under existing law, the most that anyone within 400% of the poverty line can pay for a qualified health plan is 9.5% of their income. Under the Senate bill, buyers age 60 or older within 350% of the poverty line would pay as much as 16.2% of income — and those over 350% of poverty would get no help at all.
In other words, an insurance buyer today earning $48,240 would pay a maximum premium of $4,583; anything over that would be paid by the government. Under the Senate plan, a 60-year-old earning up to $42,210 would pay a maximum premium of $6,838. And anyone earning more than $42,210 would have to pay whatever the insurer charged, with no subsidy.
—The biggest tax cut for the rich is retroactive. As we've reported before, the repeal measure delivers an estimated $346 billion in tax cuts over 10 years, all of it going to households with income over $250,000. But the biggest component of the cut — repeal of a 3.8% surcharge on capital gains and dividends for those taxpayers — would be retroactive to the beginning of this year. That turns it into more of a free handout for wealthy people who already had sold securities or collected dividends since Jan. 1.
Even the Wall Street Journal is aghast. "Retroactive tax cuts like this don't create an incentive and can yield windfall gains for people who already made decisions," the paper observed. A millionaire who already had booked a $1-million gain on a stock sale, for example, would collect a $38,000 benefit.
This provision in particular is heavily loaded toward the richest of the rich. According to the Tax Policy Center, 90% of the cut goes to the top 1% (those with income of $699,000 or more); they'd get an average tax benefit of about $25,000. And almost two-thirds goes to the top 0.1% (with income exceeding $3.8 million); they'd get an average $165,000.
In fact, all the measure's tax cuts taken together, valued at about $700 billion over 10 years, would be almost entirely paid for by the bill's elimination of Medicaid expansion in the 30 states and the District of Columbia that accepted it—that's similar to the House version. Medicaid expansion, which covers households earning 138% of the federal poverty line or less, will cost about $702 billion in that period. There's no clearer illustration of how the Republican repeal bills transfer wealth from the poor to the rich.
—The fight against opioid addiction is crippled. Opioid addiction has emerged as perhaps the worst public health crisis in America. But as much as 40% of the cost of treatment of addicts has been paid by Medicaid. The harsh cuts in that program imposed by the Senate bill would force more of that expense onto states that simply can't afford it. Meanwhile, the projected loss of medical coverage by as many as 23 million Americans under repeal will keep many victims of the epidemic from finding treatment.
The Senate measure substitutes a frayed Band-Aid to cover that loss. Despite estimates of as much as $183 billion over 10 years to fight the epidemic and treat its victims — and a request from GOP Sens. Rob Portman of Ohio and Shelley Moore Capito of West Virginia that $45 billion be added to the Senate measure for the purpose — the bill offers only a risible one-year appropriation of $2 billion.
—Salaries for health insurance chief executives can go through the roof. This provision matches one that was buried in the House bill, and is similarly obscured in the Senate version. It removes a limit on the deductibility of CEO pay in the health insurance industry written into the ACA.
Most public companies can't deduct more than $1 million in pay for their top executives, but there's a big loophole: "Performance-based" compensation, such as stock options or restricted stock grants, is exempt from the limit. The Affordable Care Act cut the limit on the deductibility for health insurers to $500,000 in pay per executive and eliminated the performance-pay loophole for them entirely. The Senate would repeal that provision, restoring the higher deductibility and the loophole for health insurers.
As we reported earlier this year, according to calculations by the progressive Institute for Policy Studies based on the pay of top executives at the five biggest publicly traded insurers in 2015, the deduction constraint saved taxpayers about $92 million that year. The figure would undoubtedly be higher now: The CEOs alone of the top five health insurers (Aetna, Anthem, Cigna, Humana, and United Health) collected nearly $88 million in compensation last year.