Hysteria Over Senate Healthcare Bill

 

Senate Minority Leader Chuck Schumer complained about the “secrecy” of the healthcare bill proposed by Senate Republicans. Then he gave a prepared speech condemning the bill just moments after it was released for his review. That should tell you how fairly this legislation is being evaluated by his party.

In reality, the Senate bill meets every essential principle for healthcare reform that a bi-partisan group of healthcare researchers agreed must be included. (see Healthcare Reform Principles That Cross Party Lines)

The Wall Street Journal editorial board says, “The bill is an imperfect compromise between moderate and conservative Republicans, and it makes pains to accommodate different interests and the Americans, states and businesses that have adapted to ObamaCare over the years. . . But the reform is a major improvement over the U.S. healthcare status quo that will worsen if the bill fails.”

Avik Roy, healthcare economist writing in Forbes, was an outspoken critic of the House bill, the AHCA, but he now praises the Senate version. (see High Praise for the Senate Healthcare Bill)

The Senate Version of the AHCA

The House of Representatives passed the American Health Care Act (AHCA) and the Senate is deliberating over its version of the bill. The Senate bill, called The Better Care and Reconciliation Act of 2017 (BCRA), uses the House bill as a frame of reference but differs in several ways.

Things That Are the Same in Both Chambers:

The Senate bill is the same as the House in these ways:

  • Replaces ObamaCare subsidies with tax credits for people who purchase insurance on the individual market
  • Ends Medicaid’s status as an open-ended entitlement
  • Transitions Medicaid to block grants by per capita enrollment
  • Increases flexibility for states to innovate their Medicaid program
  • Repeals ObamaCare tax hikes including the 3.8% on investment income
  • Begins to resolve some of the healthcare system’s flaws

 

Things That Differ in the Senate Version:

The Senate bill differs from the House bill in these ways:

  • Medicaid transitions over 4 years (House 3 Years) and ties the grants to inflation with no adjustment (House tied to inflation plus 1%)
  • Eliminates the enhanced Federal Matching Rate – Pre and Post ObamaCare enrollees will be treated the same. (begins 2021)
  • Senate tax credits are more generous than the House – but means tested
  • $100 Billion for a “stability fund” to support insurance markets
  • Uses ACA program called “1332 waivers” to eliminate regulations and mandates to give states flexibility to design new insurance products
  • Maintains the “community rating” with 3:1 ratio pricing of ObamaCare

 

The Senate bill is “kinder” to the poor and harder on the rich than the House bill. The tax credits are means tested, which will translate into more credits for the poor and less or none for higher-incomes. The House tax credits also created work disincentives since people earning just enough to leave Medicaid would face higher out of pocket expenses for healthcare. The Senate tax credits avoid this problem.

But it also is “meaner” to the young and healthy because it maintains the 3:1 pricing that drives up premiums for them and benefits older, sicker Americans. This issue would be my criticism of the bill but apparently it was needed to win enough votes from moderates.

Taxes that are passed on to consumers are eliminated and industry taxes that depress economic growth and jobs are eliminated, too. This will fuel economic growth, creating more jobs for all Americans. Democrats will portray this as a “tax cut for the rich” but it really is simply eliminating the “tax hike” of ObamaCare that slowed down our economy.

The Medicaid enhanced federal matching rate of ObamaCare is eliminated which fueled wasteful spending and threatened to overwhelm the federal budget. States that refuse block grants will have to accept the “traditional matching rates” for residents that existed before ObamaCare – which average 52% federal support.

The changes in Medicaid are some of the biggest improvements over ObamaCare. These changes allow states the flexibility to design their own innovative programs that will lower costs and improve quality for their residents. Such programs have already begun under waivers granted by the Obama administration and are proving successful in states like Indiana, Rhode Island, and Florida. The AHCA will ensure such programs will grow and expand to other states without the need for federal waivers.

If the Senate passes this bill, it will go to a conference committee where members of both chambers of Congress will work out the differences in the two bills until they come to a consensus. At this point, I think the Senate bill comes closer to the changes needed to garner enough votes for passage in both chambers.

The importance of this moment cannot be overemphasized. The WSJ put it this way:

“The Senate bill is imperfect, but it includes many conservative policy victories that have long been Republican goals. It’s not too much to say this is a defining moment for whether the GOP can ever reform runaway entitlements. If Republicans fail, the next stop is single payer.”

 

 

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