Prospects for Health Care Reform in the U.S. Senate

The acid test of any nation’s health care reform happens with a change in national administration. Only when a president or minister who instigated reform departs and a new regime assumes power can we judge the durability of any reform law or program. Like it or not, now is that moment for the Affordable Care Act (ACA) in the era of President Donald Trump. Over the coming months, U.S. society will decide, through the Congress, which of President Barack Obama’s reforms will survive and which will not.

On May 4, the U.S. House of Representatives, by a 217-to-213 vote, approved the American Health Care Act (AHCA), legislation formulated to make far-reaching changes to the ACA and Medicaid.¹ The AHCA would largely undo the ACA’s Medicaid expansion and subsidies for private health insurance, restructure Medicaid’s financing, permit state governments to waive popular ACA insurance-market reforms, and repeal ACA tax increases, among other changes. The Congressional Budget Office (CBO), in its May 24 analysis of the final House bill,²estimated that, if enacted into law, it would result in 14 million Americans losing health insurance by 2018 and 23 million by 2026, an $834 billion reduction between 2017 and 2026 in federal outlays for Medicaid, and 10-year deficit reduction of $119 billion.

The fate of the ACA and the AHCA now rest in the U.S. Senate, where prospects are uncertain. Almost certainly, any Senate legislation will differ substantially from the House bill. Although senators may take months or longer to devise and pass a bill, it is possible that members will move quickly or fail to find any compromise at all. As of late May, Senate leaders hope to have a bill approved by the Senate before their August recess and to send a final Senate–House plan to the President’s desk by the end of September.

Like their House counterparts, Senate Republican leaders are working hard to devise a bill negotiated only among the 52 GOP members, involving none of the chamber’s 48 Democratic caucus members. Senate Majority Leader Mitch McConnell (R-KY) empaneled himself and 12 of his white male colleagues to formulate a plan — and then expanded the group after being criticized for the gender imbalance.

Leaders intend to bypass standing committees in passing their plan — Senator Orrin Hatch (R-UT), chair of the Senate Finance Committee, said on May 9, “I don’t think it’s going to go through the committees.”³ In 2009, the Senate Health, Education, Labor, and Pensions Committee and the Senate Finance Committee each held numerous public hearings and monthlong markup sessions in preparing legislation that became the ACA, considering hundreds of Republican-filed amendments.

As in the House, Republican senators will use the budget reconciliation process to approve their bill, which allows it to pass with 51 votes and blocks filibusters that require 60 votes to overcome. Reconciliation rules limit provisions to matters with consequential impact on federal revenues and spending, forbidding extraneous provisions incidental to the federal budget, and placing at risk politically sensitive provisions included in the House-approved AHCA such as the ability of states to waive ACA insurance-market reforms. Republicans can lose only two votes from their 52 members, in which case Vice President Mike Pence may cast the deciding 51st vote; a loss of three or more would block passage if, as expected, all 48 Democrats unite against a Republican plan. Also, any Senate bill cannot reduce the federal deficit by less than the House version’s $119 billion.

Obtaining at least 50 Republican votes requires navigating a perilous set of policies advanced by the House. These address Medicaid, rules and premium subsidies for the private insurance market, tax cuts, and Planned Parenthood funding and abortion, among other issues. These are the essential pieces of the legislative puzzle that leaders must fit into place for any bill to pass.

Twenty Senate Republicans represent states that expanded their Medicaid programs to cover all low-income persons as permitted by the ACA, an expansion that the AHCA would erode substantially. The CBO estimated that 14 million Americans would lose Medicaid under the AHCA. Moreover, the AHCA would revolutionize Medicaid financing by establishing either capped per capita payments to states for each enrolled individual or block grants, ending Medicaid’s status as a federal entitlement. The CBO estimates the AHCA’s 10-year Medicaid spending reductions at $834 billion. Though not going as far as the House plan, Republican senators are exploring similar fundamental changes, outlined in a proposal advanced in March by four Republican governors organized by Ohio’s John Kasich.⁴

To satisfy conservatives in the House Freedom Caucus, House leaders amended the AHCA to permit states to waive popular ACA insurance-market reforms such as banning preexisting-condition exclusions and lifetime or annual benefit caps. States could also eliminate or downgrade the ACA’s 10 “essential health benefits” in ways that could degrade employer-sponsored insurance coverage as well. The AHCA would permit insurance companies to price older enrollees’ premiums at five times the rate for younger enrollees (the ACA allows up to 3:1 variation), mobilizing opposition from senior organizations such as AARP. Though experts on budget reconciliation question the viability of these changes under Senate rules, some senators advocate going further than the AHCA.

The AHCA also repeals ACA tax increases that finance the Medicaid and private-insurance expansions, including taxes affecting the insurance, pharmaceutical, and medical device industries and taxes on wealthy households making more than $200,000 annually (0.9% on earned income and 3.8% on unearned income). Trump and House Speaker Paul Ryan (R-WI) have emphasized links between repealing ACA taxes and their emerging tax-reform agenda. If Senate Republicans soften the House bill’s cuts in Medicaid coverage, private insurance coverage, or both, they may also need to lessen or delay the AHCA tax cuts to achieve the minimum budget-deficit savings required under Senate reconciliation rules. This trade-off highlights the essential tension in both the ACA and the AHCA between taxes and health insurance coverage.

The AHCA also bans all federal payments to Planned Parenthood for non–abortion-related services (payments for abortions are already prohibited) — a provision that, if included in a Senate bill, would cause Senators Susan Collins (R-ME) and Lisa Murkowski (R-AK) to vote no. The AHCA also prohibits subsidies for any health insurance policy that includes abortion coverage (federal payments for those services are prohibited under the ACA); this provision would prohibit any subsidies to otherwise eligible families in states such as New York and California, where abortion coverage is a mandated benefit. In 2010, disagreements among Democrats over abortion-related language nearly blocked the ACA’s passage.

Three conservative senators — Ted Cruz (R-TX), Mike Lee (R-UT), and Rand Paul (R-KY) — have declared their opposition to any Senate bill less conservative than the AHCA. Also, Senators Bill Cassidy (R-LA) and Maine’s Collins have four additional cosponsors for their Patient Freedom Act, which would allow states to retain the ACA or construct alternatives, and have been hosting health care reform conversations with moderate senators from both parties, including Senators Joe Manchin (D-WV) and Heidi Heitkamp (D-ND) and a bloc of Republicans including Shelley Moore Capito (R-WV), Murkowski, Rob Portman (R-OH), John McCain (R-AZ), and others who are especially concerned about the AHCA’s Medicaid cuts.

As this Senate drama unfolds, health insurers and consumers express worries about the Trump administration’s commitment to keeping the ACA’s insurance marketplaces functioning. Administration figures have offered varying statements regarding continuation of ACA “cost-sharing reduction” (CSR) payments to insurers that keep deductibles and coinsurance affordable for lower-middle-income families; on May 22, administration and House leaders agreed to postpone a hearing on a lawsuit brought by House Republicans to end CSR payments. Trump has stated repeatedly that ACA marketplaces are “failing,” despite counterindications from sources such as the CBO and Standard & Poor’s.⁵ With deliberate neglect of state individual insurance markets (ACA and private) covering approximately 20 million Americans, the prospects for massive instability are real and worrisome.

Some observers expect a drawn-out Senate process that could last into 2018 or beyond. Yet after the May 4 House passage of the AHCA, Republican senators began working quickly on alternatives, seeking less aggressive but still far-reaching changes to the ACA and Medicaid. After failed attempts to pass the AHCA in the House in March and April, many assumed the legislation was dead, only to see it reemerge suddenly in early May. Citizens and medical professionals should pay close attention to this urgent matter affecting American society.

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This article was published on May 31, 2017, at NEJM.org. by John E. McDonough, Dr.P.H., M.P.A.