On March 6, House Republicans unveiled their broad plan for replacing the Affordable Care Act (i.e., Obamacare). Known as The American Health Care Act (AHCA), the legislation would repeal and replace Obamacare with the stated intent of transitioning to a more patient-centered health care system.

The Act would eliminate the individual mandate penalties. Instead, the legislation would drive Americans to maintain health care coverage by allowing insurers to impose a surcharge of 30 percent for those who have a gap between health plans. In addition, the Act would end or radically change other aspects of the ACA, including delaying the taxes on Cadillac health care plans provided by employers and terminating the medical device excise tax of 2.3%. However, the Act also would keep some of the ACA’s more popular provisions. For example, the legislation would preserve three of the most popular features of the health care law by letting young adults stay on their parents’ health plans until age 26, keeping the ban on lifetime coverage caps, and prohibiting insurers from denying coverage or charging more to people with preexisting medical conditions.

Further, the bill would eliminate the ACA’s cost-sharing incentives, which insurance companies receive to enroll low-income Americans. It also would increase the amount of pre-tax money that people could set aside in health savings accounts (HSAs). In a bid to further reduce costs, the bill would create a “Patient and State Stability Fund,” which would provide grants to state governments that pursue cost-controlling measures, such as creating high-risk pools or establishing state-based cost-sharing reductions. The fund would initially allocate $15 billion annually in 2018 and 2019, after which it would provide $10 billion annually over the next 7 years.

Medicaid Funding

The GOP bill also would significantly change the way the nation’s Medicaid system is funded. By 2020 the bill would repeal the authority of states to expand their Medicaid programs to nearly all adults. After 2020, no newly eligible adults could sign up. It also would cap the amount of federal funding a state will receive per person for its Medicaid program. Thirty-one states, plus the District of Columbia, have adopted Medicaid expansion. Starting in 2020, however, the GOP plan would restrict the government’s Medicaid payment — 90 percent of the cost of covering people in the expansion group — to only people who were in the program as of then. States would keep getting that amount of federal help for each of those people as long as they remained eligible, with the idea that most people on Medicaid drop off after a few years.

For the other 19 states that did not expand Medicaid, the legislation would provide $10 billion spread over five years. States could use that money to subsidize hospitals and other providers of care that treat many poor patients.

Although we do not yet know how these changes will affect sleep medicine, Republicans claim that block grants would give states more flexibility. Therefore, sleep medicine – because of an aging and obese nation – might receive more funds. Democrats, however, will argue that block grants would significantly cut into Medicaid services, which means that sleep medicine services would receive less funding. Again, at this point the proposed changes to Medicaid and how they would affect sleep medicine are only theories.

Health Insurance

If adopted, the Act would alter the system by which many beneficiaries receive financial aid from the government to buy insurance on the individual plan market. Under the ACA, federal subsidies, or tax credits, help more than 80 percent of marketplace enrollees purchase health insurance. The amount of the tax credit is based on income and the cost of coverage, with people who have a lower income generally receiving a higher tax credit.

Instead of income-based credits, the Republican plan would offer age-based tax credits ranging from $2,000 per year for those under 30 to $4,000 per year for those over 60. The full credit would be available for individuals earning up to $75,000 a year and up to $150,000 for married couples. The income-based phase-out of the credit would allow the GOP plan to be funded without taxes on employer-provided insurance. In addition, the proposal also would retain the tax exclusion for premiums paid for employer-provided health plans.

Next Steps

The legislation hasn’t been scored by the Congressional Budget Office for its cost and coverage impact, but that is expected sometime next week. After a lengthy debate, the House Ways and Means Committee has moved the bill forward, while the House Energy and Commerce Committee is still working on its own markup.

In other health care news, Brian Neale, who helped create Indiana’s conservative version of Medicaid expansion, has been picked by the Trump administration to lead the Center for Medicaid and CHIP Services.

Mr. Neale, who is currently executive director of the United States Congress Joint Economic Committee, previously served as the health care policy director under Mike Pence when he was the governor of Indiana. In that role, Neale worked with Ms. Seema Verma – who is awaiting confirmation on her nomination to head the Centers for Medicare & Medicaid Services (CMS) – to design the state’s Medicaid demonstration project, known as Healthy Indiana Plan (HIP) 2.0. The HIP 2.0 also may give an indication of the direction in which Medicaid reform could go.

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