The WasteWatcher: The Staff Blog of Citizens Against Government Waste

American Health Care Act -- A Bill to Repeal and Replace Obamacare

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

The House Republicans have introduced a bill that will begin the process to repeal and replace Obamacare, entitled the American Health Care Act of 2017 (AHCA). Obamacare is collapsing and Congress must act to stabilize and prevent further turmoil in the individual and small group health insurance market. For example, there are more than 1,000 counties with only one insurer in the Obamacare exchanges and insurers start to submit their 2018 premium requests to state insurance regulators around the end of May.

Today, our sister organization, the Council for Citizens Against Government Waste (CCAGW), and eleven other free-market, fiscally conservative organizations, endorsed the bill.

By now you have likely heard a lot about AHCA and what it will and will not do. The caterwauling and outright hysterical opposition to the bill is underway by liberal groups and their friends in the media. Even conservatives, particularly Republican senators, are complaining because they believe the bill does not go far enough in repealing Obamacare. But it is the senate’s procedures and rules that are forcing the House Republicans to take a more constrained approach to repealing Obamacare through the budget reconciliation process, while relying on Department of Health and Human Services Secretary Tom Price to abolish other aspects of Obamacare that cannot be done through this special budgetary procedure.

Citizens Against Government Waste (CAGW) described the budget reconciliation process in its January Waste Watcher. Simply put, reconciliation only requires a simple majority to pass a bill and enables the Senate to bypass a filibuster, which takes 60 votes to overcome.  The reconciliation process only addresses spending and tax measures, therefore Congressional Republicans are limited on what they can do. Here’s what has happened so far:

  • On January 3, 2017, Senate Budget Chairman Mike Enzi (R-Wyo.) introduced S.Con.Res. 3, a budget resolution that sent reconciliation instructions to the House and Senate committees responsible for crafting repeal legislation.
  • The House Ways and Means and Energy and Commerce Committees drafted their respective bills and marked them up on March 8 in two marathon hearings lasting about 18 and 27 hours, respectively. Amendments were offered in both committee markups and were rejected.
  • The two bills have now been combined into one bill, the AHCA. The House Committee on the Budget is scheduled to markup the bill at 10:00 AM on March 16, 2017. If all goes well, the bill will be sent to the House Rules Committee and then to the House floor for debate and a vote.

Here are some of the policy provisions CCAGW likes in the legislation:

AHCA expands and increases the utility of Health Savings Accounts; repeals the individual and employer mandate by reducing the penalty for not purchasing health insurance to $0.00; removes the taxes on medical devices, pharmaceuticals, over-the-counter medicines, and health insurance (costs that are passed onto consumers); and provides advanceable, refundable tax credits that will help people purchase health insurance in the individual market.

The bill provides a major reform to Medicaid by repealing the Obamacare budget-busting expansion policy; turns the program over to the states and allows them to run it in a way they think is best for their citizens; and, puts it on a budget for the first time ever with a per capita allotment. This is a major reform to an entitlement program that is overwhelming state budgets, provides poor health insurance to low-income people, and is rife with fraud.  (According to the Centers for Medicare and Medicaid, improper payments in Medicaid amounted to $36.3 billion in 2016, or 10.5 percent of program funds.)

The Congressional Budget Office (CBO) has weighed in on the bill and is grabbing headlines with its analysis that AHCA will cause 24 million people to “lose” their health insurance by 2026. How does CBO come up with this number? CBO predicts that because the AHCA removes the penalties that forces people to purchase insurance, some people may use their re-found freedom to choose not to become insured. Also, because the bill stops Medicaid expansion, CBO predicts that people who might have received insurance coverage through this program will not receive it.

The press, and contrarians, have pretty much ignored what CBO states on page 3 of their analysis:

Under the legislation, in the agencies’ view, key factors bringing about market stability include subsidies to purchase insurance, which would maintain sufficient demand for insurance by people with low health care expenditures, and grants to states from the Patient and State Stability Fund, which would reduce the costs to insurers of people with high health care expenditures. Even though the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in the agencies’ view, lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market."

In other words, there are policies being put in place that will help drive down premiums and deductibles, and many incentives in AHCA will encourage individuals to purchase insurance in the private healthcare market.

It is prudent not to take CBO predictions on enrollment in AHCA too much to heart. Josh Blackman, an associate professor at South Texas College of Law, reminds us in his March 12 blog that CBO has been inaccurate in predicting Obamacare’s costs and enrollment. For example, CBO predicted Obamacare enrollments would be between 20-24 million in 2016; actual enrollment was 12.7 million.

What is also being ignored is the CBO analysis that AHCA "would reduce federal deficits by $337 billion over the 2017-2026 period." That's not chump change.

House Speaker Paul Ryan (R-Wisc.) explained in a March 6 press conference that there are three phases to repealing and replacing Obamacare. Phase One is ACHA and Phase Two is administrative actions that can be undertaken by the HHS Secretary Tom Price. As discussed in CAGW’s February 16 blog, Secretary Price has already begun Phase Two by using his regulatory power to reduce costs, increase choice, encourage competition, and stabilize the health insurance market by changing harmful policies utilized by the Obama administration.

In Phase Three, policies that require legislative action, but cannot be put in a reconciliation bill, will be considered through regular order. Bills that contain these measures will require 60 votes in the Senate to overcome any potential filibuster. Many of these policy changes will likely be inserted in must-pass bills, such as reauthorization of the Prescription Drug User Fee Act (PDUFA) or Children’s Health Insurance Program (CHIP). It is also hoped as Phases One and Two start to take hold, some Democrats will be more willing to support additional measures.

Repealing and replacing Obamacare with a consumer friendly, high-quality, and market-driven system that will drive down costs is going to take time. It is important to remain engaged and not become complacent as this process goes forward.

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