Jun 24, 2016
GOP Releases Alternative to the Affordable Care Act
The GOP alternative/replacement for the Affordable Care Act (ACA) was
released in a June 22 white paper. The plan would make changes to Medicare and
Medicaid and would allow association health plans (AHPs), buying across state
lines and high-risk pools, among other changes. Many of the ideas have been
brought up in the past in various contexts.
- Repeal the ACA’s expansion of Medicaid.
- Each state would receive a fixed amount of money
for each beneficiary or default into a per capita allotment approach. The
per capital allotment approach, according to the outline, would achieve
“three inter-related aims: reforming Medicaid’s financing, restoring
Medicaid’s focus on the most vulnerable and restoring federalism by
empowering states with new freedoms and flexibilities to run their Medicaid
In 2019, a total federal Medicaid allotment would be available for each state
to draw down based on its federal matching rate. The amount of the allotment
would be the product of the states’ per capital allotment for the four major
beneficiary categories — aged, blind and disabled, children and adults — and the
number of enrollees in each of those four categories. The capital allotment for
each beneficiary category would be determined by each state’s average medical
assistance and non-benefit expenditures per full-year equivalent enrollee during
the base year (2016), adjusted for inflation.
The allotment would grow at a rate slower than current law. The plan argues
that this would provide certainty for state budgets.
For states that did not expand Medicaid under the ACA as of January 1, 2016,
this per capital allotment approach would permit them to expand. States that had
already expanded would be given new authority to better control the costs of the
In 2019, states that have already expanded Medicaid under the ACA would
receive the same amount of dollars received today under the plan. However,
states would be able to shift dollars from “less needy populations to target
more funding to help those who need it the most.” The current enhanced federal
medical assistance percentage (FMAP) for the expanding adult population would be
phased-down each year starting in 2019 until it reached the state’s normal FMAP
Allow states to establish work requirements for able-bodied adults on
Medicaid, which the Obama Administration has opposed.
States could charge “reasonable enforceable premiums or offer a limited
benefit package” and use “waiting lists and enrollment caps” for certain groups
of Medicaid beneficiaries.
Medicaid Waiver Process:
The proposal grandfathers “successful waivers for managed care” if they have
already been renewed twice. The proposal would also grandfather waivers that
meet “fast track parameters so that states could fold them into the state plan
and no longer be required seek renewals.”
The proposal does away with the requirement in current law that states obtain
a waiver for enrolling some populations in managed care. The proposal would
adopt a waiver “clock” to track progress and deliver a decision to states in an
abbreviated time period.
Children’s’ Health Insurance Plan (CHIP)
The GOP plan would roll back the ACA’s FMAP rate for CHIP but continue the
- Medicare Advantage:
- Repeal Benchmark Caps: Current law provides
that Medicare Advantage (MA) plans are paid relative to a benchmark that
is based in fee for service.
- Limit the Ability to Cut MA plan
reimbursement through the regulatory process: This issue relates to
“coding” and it is a factor that impacts how Medicare pays for MA. The
plan would freeze the ability to negatively adjust the MA payments based
on accurate coding.
- Open Enrollment Period: Medicare
beneficiaries would switch into a new MA plan during the first three
months of the next year for specific reasons. The ACA locked
beneficiaries into a plan regardless of changes. This Republican plan
repeals that provision.
- Independent Payment Advisory Board: The Republican plan
repeals this board, which has never been staffed and was created by the ACA.
It was to make recommendations to cut Medicare spending if spending exceeded
- Repeal the Center for Medicare and Medicaid
Innovation: This center was created by the ACA and was tasked with
testing and evaluating payment and service models. The GOP plan asserts the
center has expanded beyond its authority.
- Repeal the ban on physician-owned hospitals
that went into effect in 2010.
- Repeal the hospital wage index provisions of
the ACA that benefited some states at the expense of others
(also known as the “Bay State Boondoggle”).
- Provide value-based insurance design for MA
- Restrict Medigap plans coverage related to
cost-sharing: Prohibit Medigap plans from covering cost-sharing below a
combined amount and limit the plan from covering no more than half of the
cost-sharing between the deductible and the out-of-pocket cap.
- Combine Medicare Parts A and B and
have a unified deductible.
- Personal Care Demonstration Program:
Permit beneficiaries and healthcare professionals to voluntarily enter into
an arrangement for items and services outside of the Medicare system.
- Uncompensated Care Pool: Require the
secretary to create one national pool of uncompensated care funds and
distribute funds to disproportionate share hospitals (DSHs) based on the use
of certain federally collected data. This is to address the lower than
anticipated enrollment in Medicaid and the exchanges under which the ACA
reduced Medicaid DSH funds with the anticipation that as more people had
coverage, these funds would no longer be needed.
- Update Medicare Compare: Report
performance on a new Medicare Compare website comparing Medicare Advantage
and traditional Medicare for each Metropolitan Statistical Care on a core
set of quality measures.
- Increase the age of eligibility for Medicare:
Gradually increase the age of eligibility to correspond with that of
full eligibility for Social Security benefits.
- End fee for service and put in place premium
support: This concept has been discussed at different times, including
in 2011 when Congress created a special committee to deal with the fiscal
cliff. Some Democrats say that if appropriately designed, this could be a
workable plan. Under Medicare premium support proposals, private health
insurance plans that meet certain standards would compete head-to-head for
the enrollment of Medicare beneficiaries. Some proposals would guarantee
coverage for at least a common benefit package; others would leave benefit
decisions to the plans. In some proposals, fee-for-service Medicare would
compete under the same rules as the private insurance plans.
- Tax Credits: Provide new refundable and
advancable tax credits to low and modest income Americans.
- Cadillac tax repeal: Instead of the
Cadillac tax on more expensive health plans offered by employers, the GOP
plan would discourage companies from providing richer healthcare plans by
limiting tax exclusion on employer provided health benefits.
- Health Savings Accounts (HSAs):
- allow spouses to make catch-up contributions
to the same HSA account;
- allow qualified medical expense incurred
before HSA qualified coverage begins to be reimbursed through an HSA
account as long as the account is established in 60 days;
- set the maximum contribution to an HSA at
the maximum combined allowed annual deductible and out of pocket expense
- expand accessibility for certain groups like
those who get services through the Indian Health Service and TRICARE.
- Heath Reimbursement Accounts (HRAs):
Encourages the uses of HRAs to permit individuals to choose the insurance
plan that best fits their needs.
- Purchase coverage across state lines:
Permits states to enter into interstate compacts for pooling and allows
consumers a choice of plans to purchase across state lines.
- Association health plans and individual
health pools: Allows small businesses to band together to offer AHPs.
These new proposals would be prohibited from cherry-picking and prohibited
from charging higher rates for sicker people on the plan except to the
extent already allowed under the relevant state rating law. The plan allows
individuals to band together for individual health pools. These pools would
operate similarly to AHPs.
- Wellness programs: While the ACA permits
variability in premiums to required employees who participate in prevention
and wellness programs, the plan states that the way the Obama administration
has implemented this provision has left uncertainty. The GOP plan would
- Medical liability reform: Encourages
states to address frivolous lawsuits and defensive medicine.
- Antitrust: Have the U.S. Government
Accountability Office (GAO) study the advantages and disadvantages of
removing McCarran-Ferguson antitrust exemptions.
- Pre-existing condition protections: Keep
the ACA pre-existing condition protections.
- Dependents: Allow dependents to stay on
their parents’ plan up to age 26.
- No rescissions: Insurance companies would
not be allowed to turn away patients when they renew their plan simply
because the patient may be sick.
- Continuous coverage: Individuals who
experience a qualifying life event would not be charged more than standard
rates even if they are dealing with a medical issue. This would apply to
everyone who remains enrolled in a health insurance plan, whether the
individual switches from employer-based health care to the individual market
or within the individual market.
- Insurance premiums: The default age
rating ration would be set at 5-to-1 but states would have the ability to
narrow or expand that ratio. Current law is a 3-to-1 ratio.
- State innovation grants: Provide states
with grants to develop effective reforms that make health care more
affordable and accessible. Participating states must achieve a certain
target for the reduction of individual premiums, small group premiums and
the number of uninsured in the state.
- High-risk pools: Provide at least $25
billion in dedicated federal funding for risk pools. Premiums would be
capped and wait lists prohibited.
- One-time open enrollment period:
This would be for individuals to enroll in a plan, if they have not already
The GOP plan codifies what is known as the Weldon Amendment and expands that
amendment. It will codify provisions to give providers the freedom to exercise
their conscience. Federal funds are barred from going to states that
discriminate against individuals or entities that exercise their conscience.
The GOP plan also codifies the Hyde Amendment to ensure that federal funds
are not used for abortion or abortion services.
The rollout of this plan sets the stage for debate in the next Congress over
changes to the Affordable Care Act. However, it is notable that the plan
implicitly acknowledges that sick people should be able to obtain health
insurance and that most Americans need some kind of assistance in paying
insurance premiums. Many of the ideas have been discussed in other contexts.