4 key policy changes in Paul Ryan’s revised health care bill, explained

Republicans released a revised draft of their controversial health care bill on Monday night, just three days before it is scheduled to head to the House floor for a full vote.

The “manager’s amendment” — so called because its revisions are being made after the committee process — was crafted with input from Senate Republicans to get Speaker Paul Ryan’s American Health Care Act closer to President Donald Trump’s desk, according to a House GOP aide. As originally drafted, the bill appeared in danger of not garnering enough Republican votes to clear the House.

The amended bill contains a mix of new policies aimed at winning over the remaining GOP holdouts — in part by mollifying House conservatives who demanded that AHCA go further to dismantle Obamacare; in part by creating a mechanism aimed at preventing premiums from soaring too high for older Americans; and in part by offering specific packages for reticent members, particularly New York state’s delegation.

Here are four of its most important policy changes, as revealed by Politico:

• A new reserve fund for older Americans’ tax credits: The new bill creates a reserve fund of at least $75 billion that would fund health care tax credits for Americans in their 50s and 60s. The Senate would need to decide how to allocate this extra money — likely with the hope that doing so will shore up support from moderate Republicans in that chamber, who are worried about millions of older Americans being priced out of the health insurance market under Ryan’s bill.
• Allowing states to block-grant Medicaid, and imposing Medicaid work requirements: Meeting a key demand of the most conservative House Republicans, the new bill will give states more flexibility on Medicaid, turning over control of funding for health care programs to state governments in a way that will likely reduce the number of Americans who benefit from the program. The bill also includes an amendment to require “able-bodied adults of a working age without any dependents” to pass a work requirement to be enrolled in Medicaid.
• Accelerating the repeal of Obamacare’s taxes on the rich: The AHCA planned to eliminate two big taxes imposed by Obamacare — taxes that almost entirely hit the highest earners. Ryan’s new revisions would accelerate this change so the taxes on the rich are repealed almost immediately, rather than phased out over two years.
• Specific sweeteners to meet members’ demands: The revised draft also has a provision aimed at meeting a key demand of the New York state GOP delegation, which wants to help prevent Gov. Andrew Cuomo (D-NY) from passing off new Medicaid costs onto the state’s counties. (At least three House Republicans from upstate New York had balked at supporting the original bill.)

Despite these concessions, it’s hard to imagine this attempted compromise will make it very far. Already, Freedom Caucus Chair Mark Meadows (R-NC) has said he has enough votes to kill the bill. On the other side of the Republican caucus, the revisions don’t appear to do anything to erase many of the key reasons moderate Republicans in the Senate — since the bill will still likely cost millions of Americans their health care.

1) An unspecified $75 billion to help older Americans with skyrocketing premiums

Ryan’s bill does include changes meant to shore up support among House conservatives. But if it did that alone, and he rammed it through the lower chamber, the bill would be all but certain to die in the Senate, where the bill has come under fire from many Republicans for not doing enough to offer government assistance for health care recipients.

The revision nods to that Senate “Coverage Caucus” through an estimated $75 to $85 billion “reserve fund” for recipients of AHCA tax credits. It generates the revenue through changing the tax deductibility of medical expenses, according to Ed Lorenzen, an analyst at the Committee for a Responsible Federal Budget.

One of the main criticisms Republican senators have lodged against the AHCA is that it would cause older Americans’ premiums to skyrocket, by effectively scaling back Obamacare’s support for many Americans who buy insurance policies on the individual market.

Ryan is trying to offer the Senate GOP a way to fix this problem by giving them more money to work with, says Lorenzen, who was in talks this week with Ryan’s team on the bill.

If the bill reaches the Senate, Republicans can designate that the money be used exclusively to offset premiums for older Americans. Or they could just give it to the Department of Health and Human Services and let them figure out what to do with it, Lorenzen said.

Ryan is being purposively vague about how he wants this money spent. “Figuring out exactly how to design the tax credits to maximize their impact and benefits is complicated and difficult,” Lorenzen said. “This is a way to both punt the issue to the Senate and to buy more time to design it.”

Ryan’s hands are tied by the rules of budget reconciliation, the complicated legislative procedure Republicans are using to repeal the ACA. If this were a normal bill, he could leave out all the extra funding for older Americans — and if the moderate Republicans in the Senate wanted it back in, then the upper chamber could simply add more funding to the bill and send it back to him.

But under the rules of reconciliation, the Senate can’t increase the budget deficit on a bill sent up by the House — it can only modify the existing House bill in a way that doesn’t change its impact on the deficit. So Ryan needs his caucus to approve the additional funding now.

Lorenzo adds that the Congressional Budget Office may not be able to project exactly how the fund will help older Americans, since exactly how it will be used isn’t clear. That could give Ryan political cover to say that the CBO’s massive coverage loss estimates don’t incorporate this new provision in the bill.

“To be cynical about it, CBO won’t be able to estimate the effect this fund will have — in all likelihood — and they’ll just say, ‘This additional money will help more people afford health insurance relative to the original bill,’” he said. “So then leadership can say, ‘Look, this fund is going to help more people get coverage, so the CBO number of 24 million doesn’t apply.’ So they can claim this new fund has huge benefits, and it may or may not.’”

2) Harsher cuts to Medicaid, by enabling states to block-grant spending

Vox’s Dylan Matthews has a full explainer on how the new revisions to Ryan’s bill would take big cuts to the safety net and exacerbate them. The main way the bill does so is by block-granting Medicaid — a move intended to win over the votes of House conservatives, as well as Sen. Rand Paul (R-KY), who have said the original AHCA did too much to preserve Obamacare’s expansion of the program.

Matthews explains why block-granting Medicaid would lead to poor people losing health care:

Under the manager’s amendment, states could opt for a full block grant instead. That would give states a fixed amount of money every year, regardless of how many people they enroll. That could lead to significant incentives for states to, say, kick off expensive long-term care patients who are disabled or elderly, and enroll more young, healthy parents of children.

It would also prevent the program from swelling in recessions, when more people’s incomes fall below the eligibility line and rely on the program. A per capita cap allows more federal spending in situations like that. A block grant doesn’t.

He also explains in detail the second main change — imposing work requirements on Medicaid recipients:

Most of the evidence we have on work requirements come from traditional cash welfare, where work requirements have been in effect since the 1996 welfare reforms. But even some supporters of work requirements in that context, and for programs like food stamps, oppose applying them to adults on Medicaid, because the guarantee of emergency room care makes the promise to cut off aid if work requirements aren’t met an empty threat.

This amendment is in line with what Rep. Gary Palmer (R-AL), a House Freedom Caucus member, proposed in the Budget Committee last week. Palmer, who was among the three Republicans who voted against the bill’s passage out of committee, has since expressed his support for AHCA, and said he would vote for the bill on Thursday — a clear win in Ryan’s negotiations. The provision might still hit a snag in the Senate, however, if Democrats can make the case that it does not meet directly impact the federal budget, a requirement of budget reconciliation bills.

3) Speeding up the repeal of Obamacare’s taxes on high earners

Before Monday, the AHCA cut taxes imposed by Obamacare by nearly $600 billion. About one-third of those tax cuts would exclusively help the wealthy.

The two biggest tax cuts the AHCA repeals are the hospital insurance payroll tax on high earners and the Medicare tax on unearned income. Both fall primarily on high earners. Ryan’s new bill no longer delays the repeal of these taxes until 2019 — it calls for doing so immediately. That will cut into the bill’s deficit reduction, which CBO currently estimates would be a bit more than $300 billion over 10 years.

There are other Obamacare taxes that AHCA did away with, including a tax on pharmaceutical companies and on tanning companies. As Matthews has illustrated, the main beneficiary of the cuts is the wealthiest 0.1 percent of Americans — who would save nearly $200,000 each in a single year, according to an analysis by the Joint Committee on Taxation. The new bill make sure that savings begins even sooner.

4) Specific sweetener for fence-sitting Republicans

At least three Republicans from upstate New York have threatened to withhold their support for Ryan’s health care bill unless it did something to ease the financial burden on New York’s counties. Many in the state have accused Gov. Andrew Cuomo (D-NY) of unsustainably pushing the costs of Medicaid expansion, by forcing local counties to foot the bill.

In an interview with Syracuse.com’s Mark Weiner last month, Rep. Claudia Tenney (R-NY) promised to vote against AHCA if it didn’t address this problem. Rep. Chris Collins (R-NY) proposed an amendment that would force New York state’s government to pick up a $2.3 billion tab it currently pushes onto local counties — or lose its access to federal money for Medicaid.

The Wall Street Journal’s Steven Dennis explained how this works in a tweetstorm.

What’s next for the bill?

It’s not yet clear if the new bill will mollify its wide range of GOP critics, including conservatives who deride it as too similar to Obamacare and more moderate members who blanched at the CBO’s projection that 24 million fewer Americans would have health coverage in a decade if the bill were to become law.

Late Monday afternoon, Rep. Kevin Brady (R-TX) told reporters that the CBO would score the bill before it heads to the floor, suggesting the new analysis could drop on Tuesday or Wednesday.

Procedurally, the bill is almost out of the House — it has to survive one vote through the Rules Committee, and then a second vote when it comes in front of the entire House floor.

But Ryan’s real obstacle was always the Senate, and the early reaction to his new revisions was not good.

For now, Republicans in the House are banking on President Donald Trump being able to swing the hammer down and unify his party behind the deal at the last minute.

“He’s been working. He’s the closer,” House Energy and Commerce Committee Chair Greg Walden (R-OR) said Monday on MSNBC. “He knows how to put this together. He’s got great negotiating skills, and we’re coming together with it.”

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