What's Next on the AHCA?

Shortly after House passage of the American Health Care Act (AHCA), it quickly became clear that the Senate plans to chart their own path forward on healthcare reform – rather than moving to advance the version drafted in the lower chamber. “We’ll be informed by what the House did,” HELP Committee Chairman Lamar Alexander (R-TN) said last week. “But we’ll write a Senate bill, it’ll get a [CBO] score so we’ll know what the cost is, and then we’ll vote.” Further, while it has been clear for weeks that the House bill would likely undergo changes in the Senate, we learned last week that Majority Leader Mitch McConnell has assembled a 13-person intra-party working group representing different factions of the caucus – and the group has already met twice.

• The Working Group – The Senate healthcare working group includes four members of Senate leadership (Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX), GOP Conference Chairman John Barrasso (R-WY), and GOP Policy Committee Chairman John Thune (R-SD)), a trio of key committee chairman (Finance Chairman Orrin Hatch (R-UT), Budget Chairman Mike Enzi (R-WY), and HELP Chairman Alexander), two hardline conservatives (Sens. Ted Cruz (R-TX) and Mike Lee (R-UT)), two Republicans who have expressed concerns on Medicaid (Sens. Rob Portman (R-OH) and Cory Gardner (R-CO)), and two relatively conservative members from Medicaid expansion states (Sens. Tom Cotton (R-AR) and Pat Toomey (R-PA)).
• Who’s Out? – Notably absent from the working group: Sen. Susan Collins (R-ME), the Senate’s most moderate Republican, and Sen. Bill Cassidy (R-LA), a physician. The pair has been pushing their own, more centrist ACA replacement bill, and their omission likely reflects a conscious decision from Senate leadership. With the GOP’s narrow 52-48 majority, the fact that the two of the most conservative Senators (Cruz and Lee) are participating in the group – while Collins and Cassidy have been left off – could signal a calculation that winning votes from the right flank will be a top priority, while one or two moderate defections might be inevitable.
• A Few Others to Watch – Sen. Dean Heller (R-NV), one of the most vulnerable GOP senators up for reelection in 2018, said he wouldn’t support the House’s bill due to concerns on both Medicaid and pre-existing condition protections. Sen. Lisa Murkowski (R-AK) has drawn a hard line on Planned Parenthood funding, saying she “will not vote to deny Alaskans access to the health services that Planned Parenthood provides.” Sen. Rand Paul (R-KY), who has argued that the federal government should not give taxpayer money to private insurance companies that are already making “extraordinary profits,” will continue to be vocal on the tax credits and high-risk pool funding. Sen. Chuck Grassley (R-IA) has called on his colleagues to consider working with Democrats on the bill. And Sen. Lindsey Graham (R-SC), whose state did not expand Medicaid, has said he doesn’t like that the House bill would “reward” states that expanded the program

With respect to process considerations, it will take a few weeks or more before the Senate is prepared to bring their own version of the healthcare bill to the floor. It is not immediately clear what lawmakers mean when they say they plan to “write [their] own bill.” While the Senate could completely start over, we expect that they will use the House bill as a framework and make adjustments and additions where needed to garner votes. Committee hearings are not expected, and the markup process could potentially bypass the Finance and HELP Committees and go directly to the Senate Budget Committee. Senate leaders appear to have ruled out bringing the House bill directly to the Senate floor.

If you need a refresher on the major policy changes offered by the AHCA, a recent blog post on Health Affairs provides a helpful primer on the bill. With respect to the most likely policy changes in the Senate, there are a number of items to be aware of:

• Byrd Rule – A handful of policies included in the House bill are not expected to comply with the Byrd Rule, which requires reconciliation legislation to contain solely budgetary provisions rather than policy changes. Therefore, some of the policies passed in the House bill could be stripped before the legislation hits the Senate floor, while others could be subject to a ruling from the Senate Parliamentarian. The decision to remove a policy can be what is called “a rifle shot,” which only strikes the specific provision, or the Parliamentarian can determine that the policy is instrumental to the entire title – or “fatal” – in which case the entire section of the bill would be struck down. Among the specific provisions that might be subject to the Byrd Rule: (1) the provision allowing plans to charge older adults up to five times the amount of younger Americans; (2) the penalty on people not maintaining continuous coverage; (3) the elimination of actuarial value thresholds established by the ACA’s metal tiers; (4) an amendment allowing states to let plans underwrite based on health status or adjust the ACA’s essential health benefits package, and (5) a requirement that the tax credits may not be used to purchase plans that cover abortions.
• Medicaid – The phase-out of the ACA’s additional funding for states that expanded Medicaid for people with income of up to 138 percent of the federal poverty level (FPL) will be a key sticking point. Several GOP lawmakers have already expressed concerns about the phase-out of the health law’s Medicaid expansion in the current version of the repeal legislation, two of which sit on the Senate working group. Sen. Portman is reportedly working on an amendment that would create a more gradual phaseout of the Medicaid expansion. While the Medicaid per-capital cap proposal is likely to stay, additional tweaks could be offered around populations exempted from the caps or the growth rate for federal spending.
• Tax Credits – Sen. Thune is reportedly crafting an amendment on means testing the AHCA’s tax credits to provide additional assistance to low-income consumers. According an early draft of the proposal, Thune is suggesting to begin phasing out the tax credit at 400 percent of FPL (an individual making $48,240/yr.), and fully phase them out at 621 percent of FPL ($74,907/yr.). The current House bill begins phasing out the tax credit at $75,000 for an individual and fully phases out at individuals making $115,000 a year. Additionally, under Thune’s proposal, people making less than 250 percent of poverty would receive a tax credit that is both income and age-based, as opposed to the House’s age-based only tax credit.
• Rural Hospitals – Republican senators are working on amendments to boost funding for rural hospitals that may end up treating a larger share of uninsured patients. While the ACA cut disproportionate share hospital (DSH) payments because the law gave insurance to many patients for whom hospitals care, the Congressional Budget Office (CBO) estimated that AHCA would lead to 24 million fewer people with insurance after a decade.
• Other Policies – While the policies outlined above represent the most likely changes to the House bill, there are a number of other potential changes that could occur in the Senate. Additional tweaks around high-risk pools are possible, including adjustments to the Palmer-Schweikert amendment which creates federal invisible risk sharing programs. Senators might also consider certain conservative-backed proposals to address perceived shortcomings in the bill: increasing the penalty for not maintaining continuous coverage; offering automatic enrollment (with opt out) for those who are eligible for tax credits but fail to select a plan; or revisiting a proposal to cap the exclusion on employer-sponsored health insurance (an alternative to the Cadillac tax).

The AHCA still faces numerous procedural and political hurdles if it is going to become law. With only two votes to spare, Senate Republicans will need to reach near-unanimous consensus to pass their own version of the bill. And similar to the policymaking process in the House, any changes made to appease one constituency may just as easily alienate another. Moreover, the House will have to approve of any changes made by the Senate, or the respective chambers could opt to resolve their difference in a conference committee.

Given the enormous political capital that Republicans have invested in ACA repeal – both since 2010 and more recently under President Trump – there are significant gravitational forces pulling Republicans towards passage of the AHCA. Outside conservative groups such as Heritage Action, Club for Growth, and American Action Network will provide air cover for Republicans who back the bill, potentially diminishing the opposition from wide-ranging groups of healthcare stakeholders. And President Trump, still somewhat popular in most red states, will press the Senate to move forward with the bill.

If lawmakers are able to thread the needle of winning support from the three most conservative senators (Lee, Cruz, and Paul) without alienating more than one or two moderates, any issues in reconciling the bill with the House could become irrelevant. The trio carries significant weight with conservatives in the House, and their blessing would likely be enough to move the bill through the lower chamber. But changes to the bill appear imminent, and it remains to be seen what the breaking point is for both conservative and moderate senators. If the AHCA were up for a vote in the Senate today, chances are it would fail overwhelmingly. Still, there’s one thing Senate Republicans can all agree on: this is their chance to repeal the ACA.