Analysis: Republican budget bill proposes marked changes in Medicare coverage

Washington Watch

Check off “budget” on the Republicans “can govern” checklist. Congressional Republicans recently approved a budget bill, the first passed by Congress in six years, and the first since the party took control of both chambers earlier this year.

The non-binding document, however, does not go to President Obama for his signature. Instead, it helps guide Congress in framing how it wants to consider all of the government agency appropriations bills. It will also serve as a Republican fiscal policy guideline and sets the stage for the 2016 presidential elections.

The document, however, is certain to raise concerns from seniors and their advocates, as the GOP budget plan would slash spending on the social safety net – particularly Medicare and Medicaid – as well as education, infrastructure and other domestic programs by $5.3 trillion over 10 years with no tax increases. At the same time, it boosts defense spending next year by adding about $38 billion to an off-budget war operations account.

Just to be clear, most of the prescribed cuts will be ignored, as the new budget plan does not instruct congressional committees to implement them. Instead, the “reconciliation” instructions are focused on easing the way to repealing the Affordable Care Act.

Yes, the House and Senate Republican leaders are again planning to push to get rid of the ACA, known as Obamacare – this time with a new and powerful tool in their arsenal. Conservative Republicans intentionally avoided internal Republican feuds in the Senate in order to strengthen efforts to repeal the president’s health care initiative. The Senate passed the measure 51-48 with all Senate Democrats and two Republicans voting against it: presidential candidates Ted Cruz, R-Tex., and Rand Paul, R-Ky. The House adopted the measure 226-197.

One other significant change in this budget document is the dropping of a controversial House proposal to radically overhaul the Medicare program by transforming it into a “premium support” plan that would save significant money in future years by subsidizing purchases of private health insurance on the open market.

That plan would have started in 2024 covering a smaller share of retirees’ health costs as time goes on, which has drawn fierce opposition from Democrats and has unnerved Republican senators up for re-election in swing states.

Under the approved budget, the final compromise endorses about $430 billion in cuts to Medicare over the coming decade.

The dropped plan, which was adopted by the House for five straight years, was authored by Rep. Paul Ryan, R-Wis., and made him the guru of Republicans’ efforts to shrink government and elevated him to his party’s vice-presidential candidacy in 2012. His plan called for converting the popular fee-for-service health care program into a system of subsidies for seniors to buy coverage from private insurers or a scaled back Medicare starting in 2024.

Also facing cuts in the recently approved GOP plan is Medicaid, which provides assisted-living care for millions of frail elderly people, as well as food stamps and other safety net programs.

The reconciliation fight

The budget agreement would let Republicans use reconciliation to send Obamacare legislation to the president without needing Democratic votes. While the House has voted more than 50 times to delay or repeal Obamacare, Democrats controlled the Senate until last January and still have the power as the minority party to block most legislation.

But the reconciliation process would let Republicans pass an Obamacare repeal with no Democratic support on a 51-vote majority, instead of needing the usual 60 votes. Republicans’ chances of an outright repeal remain slim, because Democrats would have the votes to sustain a certain presidential veto.

But Republicans privately say the fight is worth having because it will mark a sharp divide between parties when it comes to the 2016 presidential and congressional elections. They also are hoping that an upcoming U.S. Supreme Court decision on the subsidies portion of the health care law may force the president to compromise if the High Court strikes down the law’s health insurance subsidy mechanism in many states.

Republicans are planning to keep the reconciliation tool in their legislative quiver if they need a response, should the Supreme Court rule with the states and against the federal government in the King v. Burwell case.

Supreme Court takes on Obamacare, again

The Justices are deciding if the law, as written, only allows the federal government to subsidize premiums in states that have set up their own insurance markets, also known as exchanges. Most states have not done so, relying instead on the federal website.

Opponents of the law say the Supreme Court must read the law as literally written. The Obama administration says opponents are misreading the Affordable Care Act by focusing on just a few words. They say eliminating the payments would make many people drop coverage, driving up premiums for everyone else because only the sickest and most expensive recipients would retain their policies. When the legislation is read in context, it’s clear that lawmakers wanted to help uninsured people in every state, the administration maintains.

If the court sides with the plaintiffs, it’s estimated that 9 million people in the 37 states using the federally run insurance marketplace could lose coverage. Of those, around 7.7 million qualified for subsidies, which they receive as tax credits. They would be unable to afford their premiums without the subsidies, which are keyed to household income. A decision is expected late in June.

So what happens if the Court annuls the federal subsidies?

Republicans broadly agree that Congress should respond by temporarily replacing that aid, aware that abruptly ending it would anger millions of voters before next year’s presidential and congressional elections. With so many people covered under the law, some way will have to be found by Congress to make sure that people covered by the law are still able to keep their insurance somehow.

Some Congressional lawmakers are preparing legislation to provide a Republican solution should the High Court invalidate aspects of Obamacare.

At least five lawmakers – and counting – have made legislative suggestions so far, but none have won a big consensus. The most likely idea would be a package from three key Republicans, Senate Finance Chairman Orrin Hatch, R-Ut., House Energy and Commerce Committee Chairman Fred Upton, R-Mich., and Sen. Richard Burr, R-N.C., who have introduced legislation to replace Obamacare with an alternative that would halt the expansion of Medicaid and scale back subsidies for middle-income people to buy private insurance.

Hatch’s plan would retain some consumer protections in the Affordable Care Act, but would reduce federal regulation of insurance policies. States would have more authority to specify the “essential health benefits” that must be provided by insurance.

But there is one potentially explosive idea contained in Hatch’s proposal. People would have to pay federal income tax on the value of employer-provided health benefits that exceed annual thresholds – $12,000 for individuals and $30,000 for families, according to Hatch’s plan. Benefits above those levels would be taxed as regular income for employees with the thresholds increasing over time.

Republicans point to economists who say that the current tax break for employer-provided insurance is fueling the growth of health costs. But as an incentive to continue to provide coverage, Hatch and his colleagues would allow employers to still take tax deductions for the cost of employee health benefits. Both employees and employers have been vocal in their strong objection to proposals that would limit the tax break.

Hatch and his colleagues have not provided a formal cost estimate of their proposal or an estimate of the number of people who would be covered. Democratic critics of the plan say they wouldn’t come close to covering the 16.4 million people currently with health coverage under the Affordable Care Act, which includes several million receiving coverage through Medicaid.

Hatch’s plan would repeal the individual and employer mandates currently in place under the ACA, which require most Americans to carry insurance and makes larger employers offer it or pay penalties. But sensitive to criticisms that people could be devastated by wiping out the current health care law, the Republican proposal says that “no one can be denied coverage based on a pre-existing condition.”

But it says this guarantee would apply mainly to people who had been continuously covered by insurance. For those uninsured, the Republican plan envisions a “one-time open enrollment period in which individuals would be able to purchase coverage regardless of their health status or pre-existing conditions.”

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