Three Ways to Improve the Senate GOP Health Care Bill

Number one: Help low-earners afford their deductibles.

On Tuesday, June 28, Senate Majority Leader Mitch McConnell announced that he would not be holding a Friday vote on Republicans’ health reform bill, the Better Care Reconciliation Act of 2017. Instead, senators would take some more time to hash out their differences. While they are doing that, here are a few ideas they could consider to improve their legislation.

First, some context. On June 27, the Congressional Budget Office published its fiscal projections of the Senate bill. They predict that the Senate bill will reduce deficits by $321 billion over ten years, compared to $119 billion for the House bill: a difference of $202 billion.

Senate reconciliation rules require that the Senate version of the bill be scored by the CBO as reducing the deficit by at least as much as the House version, with some technical asterisks. Hence, the Senate has about $200 billion of fiscal room to address other priorities, if needed.

1. A Health Savings and Cost Sharing Program to help low-income enrollees with deductibles

The Senate bill was a major improvement on the House bill because it adopted a means-tested, aged-adjusted, income-capped tax credit structure that will help low earners, the near-elderly, and those in high-cost localities afford coverage. This is precisely the structure described in Transcending Obamacare.

The House bill would have made it impossible for many people—especially low-income Americans in their 50s and 60s—to afford their premiums. The Senate solved that problem. But there is some uncertainty about how these low-earners will afford their deductibles. For example, an individual making 100 percent of the Federal Poverty Level—$12,060 for a childless adult and $24,600 for a family of four—would be unlikely to find a $5,000 deductible affordable.

The Affordable Care Act addresses this problem by offering cost-sharing subsidies to those with incomes below 250% of FPL to defray deductibles, co-pays, and co-insurance. The Senate bill repeals $105 billion in ACA cost-sharing subsidies and replaces them with $112 billion for the State Stability and Innovation Program. Section 106 of the bill specifies that one of the purposes of the grants is to help states

Reduce out-of-pocket costs, such as copayments, coinsurance, and deductibles, of individuals enrolled in plans offered in the individual market (within the meaning of section 5000A(f)(1)(C) of the Internal Revenue Code of 1986).

However, this is only one of the specified purposes of the State Stability and Innovation Program. These grants are also to be used for purposes such as high-risk pools, reinsurance, and risk adjustment. Furthermore, under the Senate bill, further resources above and beyond the ACA’s will be needed to help those previously enrolled in the ACA’s Medicaid expansion afford their deductibles.

Hence, it would be worthwhile to consider adding a second pool of funds, perhaps amounting to $100 billion, specifically for the purpose of reducing deductibles for these populations. It could be called the “Health Savings and Cost Sharing Program.” As with the innovation grants, the Health Savings and Cost Sharing Program could be inserted as an amendment to Section 2105 of the Social Security Act, and administered as a block grant to states to deploy as befits their needs.

States could use these funds to set up Health Savings Accounts that low-income enrollees could use to fund their out-of-pocket expenses, or save to fund expenses in future years if they stay healthy. Alternatively, states could use them to lower deductibles more directly. But the first approach would do much more to expand consumer-driven health care.

2. Tie the new Health Savings and Cost Sharing Program to state-based Section 1332 waivers

Congress could condition the utilization of the Health Savings and Cost Sharing Program upon applying for, and receiving, a Section 1332 waiver from Obamacare’s federal insurance regulations. That would help ensure that the Senate bill’s waiver provisions are germane to the budget, and encourage states to deploy the flexibility granted by the 1332 waiver process.

3. Delay the repeal of the individual mandate until 2020–21

The Congressional Budget Office believes—wrongly—that the individual mandate is responsible for more than 15 million of the 22 million “fewer” people that will be covered under the Senate bill. The assumptions behind both the 15 million and the 22 million figures are suspect. However, it is true that postponing the repeal of the mandate until 2020 or 2021 would further stabilize the individual insurance market while the Senate bill’s new tax credit and regulatory structures are being implemented.

The individual mandate remains a constitutional injury, and its repeal is a core plank of conservative goals with regards to the Senate bill. But delaying its repeal for a few years may lead to stronger coverage numbers, and lower premiums, by increasing the stability of the insurance market in the interim.

The likely effect, along with more coverage, is less deficit reduction, since fewer people having health insurance means fewer government subsidies going to support those with coverage under the ACA.

Horse-trading in the interim

Members of the Senate have expressed other concerns. According to Politico, some GOP senators have asked for, and received, $45 billion in opioid funding in what will become the second version of the Senate bill. An overlapping group of senators are hoping to water down the law’s reforms of Medicaid in a way that would increase Medicaid spending.

These measures, if enacted, would narrow the resources available for the policies proposed above. But they do not necessarily prevent their deployment. In particular, reducing deductibles for those near or below the poverty line will make the care and coverage by the Better Care Reconciliation Act even better.

Update: Senate considering additional cost-sharing funds

According a late Friday evening report from The Hill, Republican senators are considering doing just this:

Top Senate Republicans are signaling that they are willing to dramatically increase funding for a special state innovation fund…One Republican senator said leaders could double the amount of money in the bill’s long-term state innovation fund.

The legislation, as currently drafted, dedicates $62 billion over eight years to encourage low-income people with high healthcare costs to buy insurance, according to a summary posted by the Senate Budget Committee.

A GOP aide said leaders are prepared to “pour a lot of money” into the fund to address concerns from a variety of moderates that the bill’s tax credits are not generous enough to help low-income people buy insurance.

The aide said the increase could possibly double the amount allocated.

The money could come from the $321 billion in savings projected from the legislation over the next decade.

Sen. John Cornyn (Tex.), the second-ranking Republican in the Senate, noted that such an approach could dramatically increase the number of people with insurance in states like Texas that have not expanded Medicaid:

Senate Republican Whip John Cornyn (Texas) on Thursday afternoon endorsed the idea of giving money to states to devise alternatives to ObamaCare’s heavily regulated insurance exchanges.

“That’s going to be an important part of this,” he said. “What it represents is a devolution of power and money from Washington back to the states. So the states are going to have a lot of resources and a lot of flexibility.

Cornyn said the legislation would also modify Section 1332 of the 2010 Affordable Care Act to make it easier for states to exempt insurance plans from some federal regulations.

Cornyn said that tax credits combined with funding in the innovation fund would allow low-income people in Texas, which did not expand Medicaid enrollment, to buy private insurance for the first time.

“That’s about 800,000 in my state alone,” he said.

Sen. Bob Corker (Tenn.) agreed that the expansion “is a proposed way of dealing with some of the subsidy issues,” but expressed a desire to specifically earmark the fund expansion for cost-sharing:

“The question people have is, ‘Is that really what it’s going to be used for?’” Corker added.

“There is a desire for people to understand specifically how we’re going to deal with this issue of lower income people being able to purchase affordable healthcare that actually covers the needs that people have,” he said.

“It’s like flooding the zone with a bunch of money but is it really getting to the place that people wish it would get to.”

Creating a separate Health Savings and Cost Sharing Program would, of course, be a way to address this concern.