Senate GOP health plan aims to slash Medicaid spending

Republican proposal closely mirrors Obamacare repeal put forth by the House.

Senate Republicans’ long-awaited healthcare proposal includes sharp cuts to Medicaid for the poor and disabled, more modest trims to other Obamacare subsidies and tax cuts for the wealthy that were included in a version passed by the House.

Labeled a "discussion draft," the plan would provide an additional $50 billion over four years to stabilize insurance exchanges, relying on a mechanism Republicans have criticized in the past as a way to keep insurers in the marketplace.

It largely resembles the House bill passed last month, including the tax cuts for wealthy people, drugmakers and insurance companies. The Senate bill’s initial Medicaid cuts are more gradual than the House, although both end the open-ended funding of the healthcare system for the poor.

The plan, released Thursday after months of closed-door meetings, includes $15 billion a year in market-stabilizing funds over the next two years and $10 billion a year in 2020 and 2021. These payments would come in addition to cost-sharing subsidy payments, which would be extended through 2019.

Senator Rand Paul of Kentucky said he and three other GOP senators—Ted Cruz of Texas, Ron Johnson of Wisconsin and Mike Lee of Utah—oppose the version released Thursday and intend to negotiate as a team to improve it. Their opposition could threaten passage of the bill. For the measure to clear the Senate, Republicans can only afford to lose two GOP votes amid unanimous Democratic opposition.

Senate Majority Leader Mitch McConnell of Kentucky has previously said he wants the full Senate to vote on the measure next week. He didn’t say on Thursday when he’ll bring the measure to the Senate floor.

The bill will “ultimately transition away from Obamacare’s collapsing system entirely so more Americans won’t be hurt,” McConnell said Thursday on the Senate floor.

President Donald Trump said Thursday the Republican plan will have “heart.” "It’s going to be great," he said at an unrelated event at the White House.

Hospital stocks led a rise in healthcare shares Thursday after the bill text was released. Community Health Systems Inc. was up 8.2 percent, HCA Healthcare was up 3.6 percent and Tenet Healthcare was up 8 percent.

The plan mostly affects two groups of people: the roughly 72 million whose care is covered through Medicaid, and another 20 million or so who buy insurance in the individual market.

The Senate version phases out Obamacare’s expansion of Medicaid over three years through 2023, rather than in 2020 under the House bill. But in 2025, the Senate bill moves to more severe funding caps for the federal contribution to Medicaid, using the consumer price index, rather than a measure of medical inflation that tends to rise more quickly.

In the individual market, the Senate bill has a subsidy system similar to Obamacare, though less generous. The subsidies would be based on the cost of a low-level bronze plan, rather than a silver plan. Silver plans have an average deductible of about $3,500, while the average for bronze plans is about $6,000, according to HealthPocket, which compares health plans.

That means individuals either must pay more to get the same health insurance they had before, or end up with less generous health plans with higher deductibles. The bill would provide subsidies for people making up to 350 percent of the poverty level, rather than the 400 percent cutoff in Obamacare.

“Changing the actuarial value benchmark to a bronze plan will likely result in narrower plans with higher deductibles, shifting costs to beneficiaries,” said Rebecca Owen, a health research actuary at the Society of Actuaries.

Several Republicans are still skeptical of the measure, which may undergo significant changes before a Senate floor vote.

Republican Senator Susan Collins of Maine "has a number of concerns," spokeswoman Annie Clark said in a statement. They include the upcoming Congressional Budget Office analysis of how many people would have insurance coverage, the effect on insurance premiums and changes in Medicaid, Clark said.

The draft bill would provide $62 billion allocated over eight years to a state innovation fund, which can be used for coverage for high-risk patients, reinsurance and other costs. The draft bill would phase out Obamacare’s expansion of Medicaid over three years, starting in 2021.

Among the Obamacare tax increases that would be repealed are a 3.8 percent investment income tax and a 0.9 percent Medicare surtax. The measure would delay the so-called Cadillac tax on high-cost plans from 2020 to 2026.

“Over the next week, we will be working to improve on this draft with broad input from health-care providers, patients, and every member of the U.S. Senate,” Republican Senator John Barrasso of Wyoming said Thursday in a statement, calling the proposal a “vast improvement” over Obamacare.

The subsidies are somewhat more generous for younger people and those with lower incomes. A young person making 250 percent of the poverty level, though, would pay 4.3 percent of income for a health plan, down from 8.2 percent in Obamacare.

Older people with higher incomes could be required to pay as much as 16.2 percent of their income for health insurance, compared with a 9.7 percent cap in Obamacare.

To be eligible for tax credits, plans couldn’t cover abortion costs unless the procedure is to save the life of the mother or in cases of rape or incest.

Like the House bill, the Senate version effectively ends the employer and individual mandates to buy health insurance. Republicans released a summary of the draft measure.

Republican Senator James Inhofe of Oklahoma said Thursday that the bill has his support. “It does, but it’s just a starting point,” he said.

Senate Minority Leader Chuck Schumer of New York said the bill is "heartless" and "may be meaner" than the House version.

"This bill will result in higher costs, less care, and millions of Americans will lose their health insurance, particularly through Medicaid," Schumer said on the Senate floor. "It seems designed to slash support for healthcare programs in order to give tax breaks to the very wealthy."

The plan would make fewer people who are legally present in the U.S. eligible for insurance subsidies by eliminating them for many temporary residents and visa holders.

The draft bill does not, as of yet, include a provision to penalize people who don’t maintain coverage continuously, senior GOP Senate staff said. Drafters are meeting with the CBO and Senate parliamentarian to determine whether they can include such a provision, staff said. The House bill allows insurers to charge people more for coverage if they are uninsured for 63 days in a year before signing up.

The legislation is expected to result in millions of people losing insurance when evaluated by the CBO, an estimate the nonpartisan office said it aims to release early next week. The CBO said the House-passed bill would result in 23 million fewer people with insurance by 2026.

Republicans plan to use a mechanism allowing the bill to pass the Senate with only 50 votes, plus the support of Vice President Mike Pence.

If a majority of senators vote to bring the bill to the floor next week, it would then face 20 hours of debate followed by votes on a potentially unlimited number of amendments. Republicans would have to hold together against Democratic amendments and then vote for final passage.

A Senate-passed bill would then go to the House, which would have the choice of approving the Senate version and sending it to Trump’s desk or negotiating a compromise version, which would then have to pass both chambers.

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