With the demise of the H.R. 1628, the American Health Care Act (AHCA), Republicans leaders in Congress and President Donald Trump have acknowledged that the Affordable Care Act (ACA) is here to stay for the foreseeable future. With this greater certainty, the politics of repeal and replace will begin to shift to changes and improvements.

Let’s review the future of the ACA. We begin by discussing the future of the Medicaid expansion, how the administration may move forward in administering the law, and how Congress may work to repair, modify, and improve the law. Finally, we review what pay-fors in AHCA may return in future legislation.

FUTURE OF THE MEDICAID EXPANSION

Under AHCA, the Medicaid expansion would have been repealed in favor of per-capita caps or block grants to states. However, the Medicaid expansion now appears to be secure for the time being. Repeal of the Medicaid expansion already faced difficult politics among moderate House Republicans, and it was likely to face a greater hurdle in the Senate had the bill advanced out of the House. Furthermore, Republican plans to institute per-capita caps, stemming from the House Republican Medicaid Task Force in the 114th Congress, appear done for now.

With that being said, there are two important questions to consider for the future of the Medicaid expansion:

Will more states expand? With the Medicaid expansion being here to stay, more states may expand Medicaid, particularly as it comes at limited cost to states. Two recent examples illustrate this possibility: In Kansas, the legislature is currently advancing legislation to expand Medicaid, but it may be vetoed by Governor Sam Brownback (R-KS). In Virginia, Governor Terry McAuliffe (D-VA) announced on Monday, March 27, 2017, that he would amend his state budget proposal to support expanding Medicaid, but it may continue to be blocked by the Republican-controlled legislature. Other states, including Georgia, North Carolina, Idaho, Nebraska, and South Dakota, are reportedly considering expansion as well.

Will non-expansion states seek conservative expansions? Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma is known for her work on Medicaid reform in Indiana through the Healthy Indiana Plan and later Medicaid expansion through the Healthy Indiana Plan 2.0. Under her leadership, CMS is expected to give states greater flexibility in designing their Medicaid plans, which she discussed in a letter to Governors sent by herself and Health and Human Services (HHS) Secretary Tom Price. If non-expansion states now seek to expand Medicaid, it is possible they could pursue their own “Healthy Indiana Plan 2.0s,” to include conservative Medicaid provisions such as premium contribution requirements, work requirements, and health savings accounts.

ADMINISTRATION DECISIONS

President Trump and his administration have a choice to make on the ACA: he can take actions to ensure the failure of the ACA or he can work to improve the ACA.

The President may choose to let the ACA fail. On March 27th, the President tweeted, “The Democrats will make a deal with me on healthcare as soon as ObamaCare folds – not long. Do not worry, we are in very good shape!” While the politics of letting ordinary Americans suffer as a negotiating tactic is politically questionable, the President and the administration have tools and actions they could take that would make certain the ACA fails, in part stemming from the President’s Executive Order in January. HHS and the Treasury Department could announce further changes to the enforcement of the individual mandate. Insurers have repeatedly argued that the individual mandate is needed to ensure market stability when all pre-existing conditions must be covered. If individuals only purchase when they become sick and not when they are healthy, it would put insurance markets into an unaffordable death spiral as premiums increase and healthy individuals drop out. Furthermore, the administration could make regulatory changes that would weaken the ACA’s consumer protections and potentially increase costs and financial risks for providers and patients. Broadly speaking, the biggest hit to the ACA by the President could come by failing to give assurances to insurers that the administration intends to be committed to the program, causing insurers to flee the market.

However, if the President and his administration choose to fix the ACA, they can begin to do so through regulatory changes. The law provides HHS the option of granting states Section 1332 Waivers to implement reforms that improve coverage or affordability so long as it does not increase federal spending or increase the number of uninsured persons. Secretary Price outlined his support for greater flexibility for state insurance marketplaces through a letter to Governors earlier this month. In addition, HHS already released an ACA market stabilization proposed rule to address a variety of insurer concerns, and the agency could finalize those provisions or others to support the continued functioning of the law.

Rates: In early spring, insurers will begin to release their proposed rates for 2018 plans on the exchange markets. If insurers believe the individual mandate will not be enforced, this could lead to high proposed rate increases. Similarly, some insurers may announce withdraws from certain markets, while other may expand. It will be important see what this looks like, amid Republican concerns of some Americans only having the choice of one insurer. Furthermore, CMS has a role in reviewing premium rate requests for exchange plans. In past years CMS pressured insurers to minimize rate requests. It is unclear whether CMS will continue in that role under Administrator Verma this year.

CONGRESSIONAL ACTION

In the Senate HELP Committee’s hearing on the ACA’s marketplaces, Chairman Alexander argued that even if Hillary Clinton was president, the Congress would still be working on a repair bill for the ACA. Sen. Alexander’s point is not lost on many in Congress, particularly Democrats, who agree that improvements to the law are still needed.

Immediate and Existing Issues: There are existing issues with the ACA that need to be addressed, with two important ones in particular. First, how to address funding for Cost Sharing Reductions for low-income enrollees on the exchanges will need to be dealt with. House Republicans have had success in suing the then-Obama administration on this issue, potentially blocking the funds. However, failing to provide this funding now could dramatically raise costs for low-income individuals and leave insurers on the hook for funds already expended. While the administration may be able to provide these funds, Congress appropriating the funds would address the underlying issue in the Republicans’ lawsuit. Second, insurers are still seeking compensation from the risk corridor program that was meant to stabilize the market in its early years but its funding was undercut by Congress. Currently, lawsuits are moving through the court system and settlements may resolve this issue.

Potential Bipartisan Agreement: In AHCA, Republicans included $100 billion over 10 years for a “Patient and State Stability Fund,” to provide states with money to implement their own efforts to reduce insurance premiums and out-of-pocket costs for individuals. With Republicans on the record supporting this, Democrats may be interested in pursuing this idea. Alaska implemented something similar to this through a Section 1332 Waiver to provide reinsurance to insurers to stabilize its exchange market. Neera Tanden, President of the Center for American Progress and former advisor to President Obama, supported this fund in a recent op-ed. She also acknowledged that the AHCA gave greater financial assistance to older higher income persons than under the ACA and suggested that Republicans and Democrats work to “top up” the financial assistance. Former CMS Acting Administrator Andy Slavitt also wrote a similar op-ed, arguing for state flexibility to reduce costs, also citing Alaska’s reinsurance efforts. Slavitt also notes the importance of funding Cost Sharing Reductions and enforcing the individual mandate.

Other House Legislation: While the Ways and Means Committee and Energy and Commerce Committee worked on the provisions that became the AHCA, the Education and the Workforce Committee advanced three smaller health proposals. These bills include:

  • H.R. 1101, the Small Business Health Fairness Act, which would allow small businesses to form association health plans;
  • H.R. 1304, the Self-Insurance Protection Act, pertaining to stop-loss insurance for employers with self-insured employee health plans; and,
  • H.R. 1313, the Preserving Employee Wellness Programs Act, pertaining to employee wellness programs and the Equal Employment Opportunity Commission;

Of these bills, only the Small Business Health Fairness Act has been approved by the House, in a near party-line vote, with four Democrats supporting the legislation. These bills represent potential Republican proposals that could be included in future legislation. In addition, while Democrats have concerns with the Preserving Employee Wellness Programs Act, employee wellness programs were included in the ACA with bipartisan support, and there has been bipartisan support to improve these programs.

Republicans are also likely to pursue other smaller changes that have been introduced in legislation in the past. Repeal of the ACA’s tax provisions could be included in tax reform. In addition, smaller issues, such as the treatment of tax-advantaged accounts for health expenses, could be addressed.

Cooperative and Constructive Members: The Senate is the most natural place to look for cooperation on repairing and improving the ACA. Legislation changing the law outside of reconciliation will require 60 votes, and Senators in tight reelection races are seeking to be responsive to constituent concerns. The chart below lists these Senators.


These 10 Senate Democrats are running for reelection in states won by President Trump and are seen as the most likely to cooperate with Republicans. In addition, two Republicans are viewed in a similar manner with Senator Dean Heller (R-NV) being the only Republican Senator running for reelection in a state won by Hillary Clinton.

Other Republican Senators, including Senators Lisa Murkowski (R-AK), Susan Collins (R-ME), and Bill Cassidy (R-LA), as well as those from Medicaid expansion states, will be likely to have some interest in provision repairing or improving the law.

Furthermore, in the House, the Tuesday Group could be similarly helpful, as Republican moderates seek to appear able to govern the country. House Members from Medicaid expansion states, particularly states that also have Republican Governors, are also facing pressure to improve the law. The chart below details Republican Governors and Senators in Medicaid expansion states.

Emergence of Democratic Ideas: While Democrats are spending the 115th Congress on defense of the ACA, removing AHCA as an immediate threat and the administration moving to tax reform will create the opportunity for Democrats to be more forward with their proposals to improve the ACA. Already Senator Bernie Sanders (I-VT) has announced that he will introduce legislation to support a single payer system through Medicaid-for-all. However, while that legislation is unlikely to gain widespread support among Democrats, other packages endorsed by moderates could come forward.

It will be important for Democrats to unveil ideas beyond single payer to have credible ideas that could be enacted into law. To that end, House Minority Leader Nancy Pelosi (D-CA) sent a letter to House Democrats soliciting ideas on improvements to the ACA.

Difficult Politics: The challenges of passing AHCA remain for any “repair” endeavor, no matter what legislation it is attached to. The conflict between the House Freedom Caucus and the Tuesday Group will continue to exist, but bipartisan reforms in the House could attract Democratic votes. Meanwhile in the Senate, Senators Ted Cruz (R-TX), Mike Lee (R-UT), and Rand Paul (R-KY) will present their own challenges in repairing the law, among other conservative Republican Senators.

AHCA PAY-FORS

While the initial version of AHCA reduced federal deficits by $337 billion over 10 years largely by repealing the Medicaid expansion and reducing the ACA’s financial assistance for purchasing insurance, the bill included other pay-fors that may reappear as part of other health legislation or other proposals. The chart below details these proposals:

LOOKING AHEAD

While AHCA as proposed is politically dead, there are rumblings from House Members that a repeal and replace effort could return; the difficult politics it has exposed make that unlikely in the near term. In the days and weeks ahead, watch for comments from the President, Speaker Paul Ryan (R-WI), and Senate Democrats on finding areas for mutual cooperation on the ACA.