The Senate health care bill: What’s in it and what to watch for in the CBO report

The Senate health care bill retains some key features of Obamacare, but cuts Medicaid and eliminates taxes on the wealthy. (Yahoo)

Senate Republicans may have vowed to repeal and replace Obamacare, but the plan they unveiled retains some of the key features of the law they love to hate.

The bill leaves in place the overall structure of the law while ratcheting back the money that expanded coverage to the least affluent. It also does away with taxes on those making $200,000 or more and eliminates the rule that everyone must have insurance and large employers must offer it.

What stays the same?

  • The government-managed individual insurance market exchanges continue, as do subsidies for people based on income, age and where they live.

  • Young people can stay on their parents’ plans until they turn 26.

  • Insurance companies cannot reject or charge a person more because they have a pre-existing condition.

  • For another two years, Washington pays insurance companies to cover the out-of-pocket costs incurred by lower-income policyholders.

While these basic elements are part of the Senate bill, overall it lays out a path toward less government spending.

Medicaid

Major reductions come in the Medicaid program. Under the Affordable Care Act, 30 states and the District of Columbia opened up the government insurance program for the poor to those making up to 138 percent of federal poverty. The Senate bill starts to phase out the expansion money in 2021. By 2024, there would be no additional funds for people in the expansion group.

After 2024, the Senate would use a different measure of inflation, meaning Medicaid funds would grow more slowly than today. The change would add up to tens of billions of dollars in the later years.

Importantly, states would face a cap on future Medicaid money based on a block grant or a per capita formula. All of these changes would present states with the choice to continue benefits at their current level and pay for them out of state tax dollars or reduce benefits. This would affect low income households and people in nursing homes who rely on Medicaid for long-term care.

Premium and cost-sharing subsidies

The Senate bill’s treatment of insurance premium subsidies is tougher to calculate. Compared with Obamacare, it reduces the income cutoff point from 400 percent of federal poverty to 350 percent. On the other hand, it makes subsidies available to more people at the lower end of the income ladder.

But in another wrinkle, it changes the formula for calculating how large the subsidies will be. People of limited means would have to shoulder a larger share of the premium cost.

Before too long, lower-income households would also soon face higher bills for their out-of-pocket costs. While the Senate bill commits to continuing the current cost-sharing payments, it does so for only two years. After that, those payments would end.

Taxes

The Senate bill eliminates almost all of the taxes in the Affordable Care Act.  In one difference from the House bill, a Medicare surcharge tax for affluent households — individuals making at least $200,000 a year and couples making at least $250,000 a year — would remain in place through 2023. Based on earlier Congressional Budget Office estimates, the changes would be worth about $220 billion over ten years to wealthier taxpayers.

Stability funds

The bill provides two pots of money primarily aimed at insulating insurance companies from losses and reducing the costs of coverage for high-risk individuals or households of modest means. The Centers of Medicare and Medicaid Services would have flexibility in awarding these funds. One fund worth $50 billion would go directly to insurers to "address coverage and access disruption and respond to urgent health care needs." The other, with a total value of $62 billion, would flow through the states for them to use in a variety of ways. They could write-down the premium costs for high-risk individuals, subsidize out-of-pocket payments for policyholders, provide money to hospitals, and otherwise inject money to keep markets more predictable for insurers.

Other changes

The bill would give insurance companies more leeway in setting premiums based on age. Today, companies can’t charge older customers more than three times what young adults pay. The Senate bill increases that to five to one. This change reduces premiums for the young and increases them for those in their 50s and early 60s.

The bill also bans funds from going to Planned Parenthood for a year and prohibits the use of premium subsidies for policies that cover abortion.

States would have the option to redefine the services that insurance plans must cover. Under the Affordable Care Act, every policy must cover maternity and mental health care, along with doctor visits, hospitalization and so forth. The Senate bill would allow states to set a different package of core benefits.

Awaiting the CBO

The next big step for the Senate bill is the analysis from the Congressional Budget Office. The CBO estimated 23 million people would lose insurance under the House health care bill. Now, the nonpartisan analytic arm of Congress says it will have a report on the Senate’s version early next week. It could come as soon as Monday.

Here are some of the key questions it will answer:

Coverage: The Senate measure changes many factors that make coverage affordable. There are the limits on Medicaid funding, changes in subsidies that flow through the exchanges, the option for states to eliminate maternity and mental health care from the list of required insurance benefits and the opportunity for carriers to charge older people five times more than younger ones. In addition, the elimination of the individual and employer mandates will play a role.

Federal spending: The bill cuts spending and it cuts taxes. The CBO will score the net result. This is particularly important to ensure that the bill fits within the special budget rules Republicans are using to keep this to a simple majority vote.

Premiums: This is the pocketbook part of the CBO report. They will give their best guess as to who will pay more and who will pay less. Under the House bill, the CBO found that younger people would see savings and older people would pay significantly more. Some people could be priced out of the market.

Market stability: In the past, the CBO has assessed the future stability of the insurance market under the proposed legislation and we can assume its analysts will again. Sometimes lost in the heat of the debate is that this involves the non-group market, which about 7 percent of Americans rely on for coverage.