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WASHINGTON — The 142-page Senate health care bill released on Thursday is easy to summarize: It cuts health care spending for low-income and middle-income Americans and uses the savings to finance large tax cuts for the wealthy and the medical industry.
How it accomplishes this is simple as well: It makes large cuts to Medicaid and to subsidies for private insurance, meaning large chunks of money that the government would have spent on helping Americans afford coverage, pay for long-term care and reduce their out-of-pocket costs would instead be paid either by states or by the customers themselves.
In this regard, the bill, which is called the Better Care Reconciliation Act, is broadly similar to the American Health Care Act that passed the House in May. There are some significant differences within that framework, however, especially when it comes to private insurance subsidies.
Let's go through the main planks of the Senate plan:
Medicaid covers about 70 million Americans, including low-income residents, seniors in nursing homes (over 60 percent of whom are on Medicaid) and people with disabilities.
The Senate bill would restructure the program, cap its spending and reduce its funding significantly over time.
First, the Senate GOP bill would eliminate a major expansion of Medicaid under Obamacare.
The Affordable Care Act gave states federal funding to expand Medicaid coverage to people whose incomes were between 100 percent and 138 percent of the federal poverty line (the current cap is about $34,000 for a family of four). The Supreme Court later made the funding optional, but 30 states and the District of Columbia accepted it. The Senate bill would gradually end this expansion between 2020 and 2024.
But it would go a lot further than repealing Obamacare’s changes. It would also cap the amount of funding states can get on a per-recipient basis rather than continue the current system, in which states decide how much to spend and then have the federal government match their contribution.
Starting in 2025, the plan would then grow those per-recipient caps at a rate that’s unlikely to keep pace with increasing medical costs. A similar change in the House bill was projected to reduce Medicaid spending by $839 billion over a decade and cover 14 million fewer people. The Senate bill kicks in later, but its cuts would be even deeper than the House plan.
To make up the difference, states would either have to raise taxes, cut programs elsewhere or reduce benefits and coverage for recipients. That prospect has governors, including some Republicans like Ohio Gov. John Kasich, nervous that the reduced funding will hamper their ability to respond to health crises like the current opioid epidemic. The bill provides an extra $2 billion next year for substance-abuse treatment, a small number compared to its looming cuts.
But the Medicaid cuts also have small-government conservatives nervous. Congress has a history of passing cuts to services or tax increases and then delaying them down the line. The more time before they kick in, the greater the chance that government control might change hands or public opposition could prompt a reversal.
Private insurance subsidies
When it comes to Obamacare’s subsidies to buy private insurance, the Senate bill keeps the same basic structure, but provides less money for fewer people to purchase insurance that is less generous. These changes would also raise premiums for older people.
Under the current system, people who don’t get health insurance through work or a government program can qualify for help buying a private plan on Obamacare’s exchanges. The maximum amount you’re expected to contribute is capped based on your income.
There are limits, though. If your income is higher than 400 percent of the federal poverty line — about $98,000 for a family of four — you don’t get those subsidies. This is one of the biggest gripes about Obamacare: While most people qualify for aid, those who miss the cutoff have to pay full price, which can be difficult to afford.
The Senate bill would expand this complaint to a wider group. It would cut the subsidies off at 350 percent of the federal poverty line instead, about $86,000 for the same family. On the other hand, it would also cover some lower-income people who currently fall in the “Medicaid gap” in states that didn’t take the federal expansion.
Those who qualify for subsidies could also pay higher premiums. Under current law, no Obamacare recipients are expected to contribute more than 9.5 percent of their income in premiums. But the Senate bill changes this and make the caps more generous for younger customers and less generous for older customers. A 60-year-old making $42,000 would now have to contribute as much as 16 percent of their income to premiums.
In addition, the subsidies would be pegged to less comprehensive insurance. Under the current law, they’re calculated based on a “silver plan” that covers an average of around 70 percent of medical costs. The new bill would peg them to plans that cover only 58 percent of costs. That means higher deductibles, which have also been a major complaint among Obamacare users.
Out-of-pocket expenses would actually go up even higher for many Americans. Obamacare provided “cost-sharing reduction” payments to insurers, which they used to lower expenses for customers making up to 250 percent of the federal poverty line (about $61,500 for a family of four). For those at 150 percent of the line, these payments reduced the average deductible from $3,609 to just $255, according to the Kaiser Family Foundation. But the Senate bill ends those subsidies starting in 2019.
This is still a big difference from the House bill, which would have offered only fixed tax credits. Those credits would have likely fallen far short for many people, especially older, lower-income customers in places with high health care costs, which are often rural areas. Now the subsidies will scale up to meet the costs in their area, even if they fall short of current levels.
In addition to the subsidies, the bill provides significant funding to help stabilize insurance markets in the short-term (which have been jittery, partly due to the health care debate) and a $62 billion fund over eight years to help states potentially cover more expensive patients. But the funding is temporary, making the future uncertain.
The Senate bill does not let insurers deny people coverage based on a pre-existing condition or charge them more based on their health, which keeps two core pieces of Obamacare in place.
However, this doesn’t mean those with pre-existing conditions won’t potentially be affected. The bill does give states flexibility to waive Obamacare’s “essential health benefits,” a list of 10 broad categories of coverage every insurance plan needs.
Republicans argue states should be able to eliminate those requirements in order to lower overall premiums and provide more flexibility to insurers and customers. In the pre-Obamacare era, insurance companies often didn’t cover items like maternity care or mental health treatment, two categories that are included in “essential health benefits.”
Some health experts fear that insurers will try to shepherd healthier patients into cheaper plans that cover fewer items, leaving patients with pre-existing conditions struggling to find an affordable option that covers their treatment. So even though insurers will not be able to discriminate based on pre-existing conditions, the effect could be to make their care less affordable.
"This, in many instances, means that plans will become less comprehensive and cover less, which in turn means that if you’re an individual or family needing a certain type of care, you’ll be digging into your own pockets," said Arthur Tacchino, chief innovation officer at SyncStream Solutions, which specializes in health care compliance.
Importantly, items that aren’t considered essential health benefits could be subjected to lifetime or annual limits by insurers, a practice that Obamacare eliminated.
The individual mandate
There would be no individual mandate requiring that people buy insurance, which penalized people who went without coverage.
The goal was to encourage younger and healthier people to enter the market so insurers weren’t left on the hook for only more expensive patients who were more likely to seek coverage. It didn’t work as well as intended, however, and insurers complained that the penalties were too weak and left them with a sicker crop of patients who required them to raise premiums to cover.
This bill eliminates the penalties entirely, though, and instead counts on healthier people deciding coverage is affordable enough for them to purchase. That could be a problem if they conclude that the new insurance, which could have higher deductibles, is not worth the trouble.
“I just don’t see why people would sign up,” Joe Antos, a fellow at the American Enterprise Institute, told NBC News.
If they don’t come off the sidelines, or if they drop their existing coverage, premiums could rise for everyone as markets become dominated by sicker customers. Rebecca Owen, health research actuary at the Society of Actuaries, said in a statement on Thursday that she was concerned the bill could create "anti-selection" and would be watching this issue closely.
Unless you were paying a penalty for not carrying insurance, it’s unlikely you’ll notice any change in your taxes as a result of the Senate bill.
For rich people, though, the Senate bill is a nice income boost. It eliminates a surtax on income and investment gains for individuals making over $200,000 a year and married couples making over $250,000 a year. The bill also cuts taxes on health companies like medical device manufacturers and prescription drug companies.
Abortion and reproductive health
The Senate bill cuts off federal money to Planned Parenthood. Federal money is already barred from going toward abortion, but the group receives reimbursement for providing other services.
The bill also bars plans that are eligible for tax credits from covering abortion, with exceptions for rape, incest or the health of the mother.
Abortion was one of the last obstacles to passing health care in 2009 and 2010 as well. To help assuage pro-life Democrats, the Senate bill included language that allowed insurers on the new exchanges to sell plans that cover abortion, but required that any money for abortion services came out of customers’ premiums.
The Senate version goes further. Women on the individual market will likely no longer be able to find plans that cover abortion services. But there’s a catch: Odds are high that the language violates procedural rules in the Senate and will not make it into a final version of the bill as a result.
Does it have 'heart?'
President Donald Trump said recently that the Senate bill should be “something with heart.”
“Heart” is a subjective idea, but Trump laid out very specific standards as a candidate and as president. By those standards, the bill falls short.
Trump explicitly pledged he would make no cuts to Medicaid. Instead, the bill will cut Medicaid by hundreds of billions of dollars. He promised “insurance for everybody” backed by federal spending: Instead the bill will likely cover millions fewer people than current law. He repeatedly promised lower deductibles: Instead a core feature of the bill pushes customers towards higher deductible plans. He argued his dedication to providing more generous health care distinguished him from conservative Republicans who sought smaller government.
“This bottom line is that this bill will result in a very significant reduction in insurance coverage, as well as large increases in premium and out-of-pocket costs for those who manage to retain coverage,” Matthew Fiedler, a fellow at the Brookings Institute, told NBC News.
Should the bill become law, these will be unambiguous broken promises.