GOP Repeal and Replace Plan Will Be Devastating to California

Last updated: March 8, 2017

The House and Senate Republicans are attempting to pass a health care bill that will be devastating to the health of California seniors, children and communities of color. The proposed bills would strip away healthcare from 20 million Americans and repeal consumer protections for millions of Californians. Below are highlights of the GOP plan:

Medi-Cal:

• Combined Cuts to Medi-Cal of $20 billion or more out of a $100 billion program in California, from the repeal of the current Medi-Cal expansion and implementation of a new federal per-capita-cap financing structure, undermining care for kids, people with disabilities, and seniors as detailed below.
• Institutes Drastic Cuts to Medi-Cal ($8-10 billion a year) by moving states to a per-capita cap financing system or a limit on federal spending for all Medi-Cal enrollees (including expansion adults) in 2020. The caps would be based on states’ per-beneficiary spending in fiscal year 2016 with costs trended forward using a rate that is less than the current growth in the Medicaid program.[1] Because this is a cut to state Medicaid funding, federal capped amounts are not expected to keep pace with the cost of Medicaid per beneficiary. Thus states will be on the hook for billions of dollars that will be lost over the next decade.[2] The per-capita cap structure limits the flexibility of states to expand the program to new populations like undocumented adults, or to respond to changes in health care costs due to unforeseen factors such as higher prescription drug costs, increases in the prevalence of chronic disease or the adoption of new health care technology.
• Repeals the current Medi-Cal expansion ($8 billion a year) by 2019. Current enrollees would be allowed to keep their Medi-Cal but only if they do not have a break in eligibility for more than one month effective 2020. After that date, these individuals could still apply for coverage but the state would have to pay a larger share of the cost of care a disincentive for states to continue to provide this coverage. Starting in 2020 states would receive only regular federal Medicaid matching rates (in California 50% instead of 90% for newly enrolled expansion adults.  Thus California would pay 50% of the cost for each expansion adult who enrolls after 2020, rather than 10% of the cost, or four times as much. While states could still get the expansion matching rate for beneficiaries who were enrolled before the end of 2019 and stayed enrolled without a break in coverage,  most beneficiaries are expected to fall off the program after two years due to changes in income, family situations and living environments.
• Eliminates Essential Health Benefits requirements in Medi-Cal, removing the protection and subsequent federal funding that helps to ensure Medi-Cal enrollees can access a broad range of health care services, particularly mental health, substance use disorder, and preventive services.
• Creates additional eligibility and enrollment barriers for Medi-Cal recipients making it even harder for beneficiaries to obtain and maintain their health care coverage. The plan:
  • Repeals presumptive eligibility determinations for adults, except for pregnant women. States would still be allowed to institute presumptive eligibility for children, pregnant women, and breast and cervical cancer patients. The loss of presumptive eligibility will make it difficult for individuals who show up at hospitals or in emergency rooms to get the care they need when they need it.
  • Repeals presumptive eligibility determinations for lawfully present immigrants by requiring all new enrollees to show documentation of citizenship or lawful presence before obtaining coverage. This is a harmful proposal as immigrants who have filed for a change in status may not have the necessary immigration documents at the time of enrollment. The result will be delayed care.
  • Encourages states to institute a six-month redetermination requirement for Medi-Cal expansion adults, by providing a temporary 5% FMAP increase to states who enforce this. Additionally, this provision would increase civil penalties for individuals who intentionally defraud Medi-Cal.
  • Requires states to consider monetary winnings from state lotteries as part of MAGI determination for Medi-Cal and Healthy Families.
  • Eliminates retroactive Medi-Cal, under this provision, applicants awaiting eligibility determinations would only be covered for the month in which they applied rather than the current 3-months. This will make it much harder for the uninsured who show up in hospitals and emergency rooms to receive financial assistance to help pay for their care People are more likely to have medical debt as a result.

Individual Market:

• Repeals the Individual and Employer Mandate Penalty, retroactive to January 1, 2016.[3] These repeals will make it less likely that employers will offer coverage and healthier individuals will purchase health coverage, leading to sicker, more expensive insurance markets.
• Repeals ACA Cost-Sharing and Tax Credit Subsidies, replacing income-based assistance with age adjusted tax credits that would range from $2,000 a year for an individual under 30 to $4,000 a year for an individual 60 years or older.[4] The proposed tax credits are worth about half the financial help available under the ACA.[5] The new subsidies do not take cost changes based on geographic location and other factors into account.[6]
• Institutes Continuous Coverage Requirement, starting in 2019, enrollees in the individual market, including those with pre-existing conditions, would be required to maintain continuous coverage or pay a penalty. Individuals who go longer than 63 days without coverage would be assessed a 30% late enrollment surcharge on top of their base premiums for a full year. This penalty will more than likely be borne by older, sicker individuals who cannot afford to have their coverage lapse. Healthier individuals will be more inclined not to purchase coverage or pay the penalty, which will lead to higher prices for those needing to purchase insurance.
• Creates new Patient and State Stability Fund, available to the states from 2018 through 2026. The bill appropriates $15 billion each year for 2018 and 2019 and $10 billion a year for succeeding years through 2026, a total of $100 billion. To receive the remaining 15% of funds, states must have fewer than three plans that offer coverage on-exchange in 2017 or total uninsured rate must have increased from 2013-2015. States can use funds provided under this program for a number of purposes including to:
  • Provide financial assistance to high-risk individuals;
  • Provide incentives to “appropriate entities” to provide reinsurance to stabilize individual market insurance premiums
  • Reduce the cost of insurance for individuals with high rates of utilization of health services;
  • Promote participation and health insurance options in the individual and small group markets;
  • Promote preventive, dental, vision care, and mental health and substance use disorder services;
  • Pay providers directly for the provision of such services; and
  • Provide assistance to individuals to reduce out-of-pocket costs.
• Expands Age Bands from 3-to-1 to 5-to-1, forcing individuals over the age of 50 to pay more for their premiums, perhaps twice as much as they do today, while cutting income-based financial assistance for the poor and middle class to help pay for the cost of coverage.
• Maintains Standards Benefits Package but Eliminates Actuarial Value Calculations, or the requirement for health plans to over four tiers of coverage (Platinum, Gold, Silver and Bronze). While plans will still be required to offer access to the same benefits[7], the GOP proposal eliminates the current requirement that plans cover at least 60% of the cost of care for these services. As a result, a health plan could pay for less than what is currently required which will result in higher co-pays and deductibles for consumers and coverage that costs more overall.

Financing:

The GOP plan repeals taxes on the health care industry that were used to finance tax credit subsidies for the poor and middle income to purchase health coverage under ACA.[8] Without an analysis from the Congressional Budget Office it is unknown how the GOP plan would be paid for. Specifically the plan:

• Repeals the medical device tax
• Restores the pre-ACA threshold for tax deductions based on medical-expenses (from 10 percent to 7.5 percent)
• Repeals the tanning tax in 2018
• Repeals net investment tax in 2018
• Repeals the limit on remunerations paid to health insurance executives in 2018. The ACA had capped this at $500,000.
• Repeals health insurance tax beginning after December 31, 2017.

Other Reforms:

• Repeals funding for the Prevention and Public Health Trust Fund (PPHTF) which provides support for community based prevention efforts, including controlling tobacco use, promoting healthy eating and active living, and providing communities with vital resources for immunizations. California stands to lose over $300 million in prevention funding over the next 5 years.
• Increases Funding for Community Health Centers, by $422 million to provide health services to medically underserved populations including those who will be newly uninsured due to GOP proposed cuts to the Medi-Cal program.
• Freezes funding for one-year for Planned Parenthood, beginning with the enactment of the law.
• Provides additional Safety-Net funding for non-Expansion States, the Republican plan rewards states that chose not to implement the expansion by allocating $10 billion over five years for safety-net funding. The Plan Repeals DSH cuts for expansion states in 2020, presumably to help pay for the emergency care they will now have to cover for the higher rates of uninsured.

Moving forward, CPEHN anticipates the GOP plan will change during the Committee Mark-Up. To view the full GOP proposals, visit Energy & Commerce and Ways & Means. The National Academy for State Health Policy has also created a very helpful crosswalk of ACA provisions with proposed language under the House American Health Care Act. CPEHN will continue to monitor and weigh in on the proposed GOP plan to ensure policymakers are adequately prioritizing the health of our most vulnerable communities.