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The latest health care cut Republicans are weighing, explained

OMB Director Mick Mulvaney And White House Press Secretary Sean Spicer Brief The Media At The White House
White House budget director Mick Mulvaney is reportedly leading negotiations with the House Freedom Caucus, of which he was a member while a Congressman.
Chip Somodevilla/Getty Images

Politico’s Josh Dawsey and Jennifer Haberkorn report that the White House is in negotiations with the House Freedom Caucus about getting the caucus's hard-line conservative members to support the American Health Care Act, the Obamacare repeal package put forward by House Speaker Paul Ryan and backed by President Trump.

Key to the deal, they report, are changes to the law that would eliminate the Affordable Care Act’s “essential health benefits,” a list of 10 categories of procedure that all insurance plans offered to individuals or small businesses must cover. The 10 are, in the words of Healthcare.gov:

  • Outpatient care without a hospital admission, known as ambulatory patient services
  • Emergency services
  • Hospitalization
  • Pregnancy, maternity, and newborn care
  • Mental health and substance use disorder services, including counseling and psychotherapy
  • Prescription drugs
  • Rehabilitative and habilitative services and devices, which help people with injuries and disabilities to recover
  • Laboratory services
  • Preventive care, wellness services, and chronic disease management
  • Pediatric services, including oral and vision care for children

These provisions set a baseline, mandating that all offered plans meet a certain threshold. They can't skimp out and not cover big things like emergency room visits or pregnancy or mental health. Particularly for previously undercovered areas like mental health and addiction services, which plans didn't have to cover before the ACA, this provision was a huge deal.

But many free market conservatives hate this provision, because it runs counter to the goal of having wide consumer choice among different kinds of health plans offering different types of procedures. They note that this drives up the cost of insurance, and insist that people should have the chance to buy less protective plans that are cheaper.

Even if this change gets the bill through the House, though, it will still face a huge hurdle in the Senate: It’s far from clear that Congress will be able to get rid of essential health benefits through the process they’re planning on using.

This plan could face two big obstacles in the Senate

Setting aside the ideological dispute, though, there are two likely problems this plan would face.

The first is that it might not be able to get through the Senate. That’s not just due to opposition from senators in states hard hit by the opioid crisis, or from senators who fear being the subject of ads calling them out for letting insurers drop, say, maternity coverage. It could also violate Senate rules.

Republicans are using a procedure called “budget reconciliation” that requires only 51 votes to pass. But that procedure comes with a big asterisk, known as the Byrd Rule, which says reconciliation can’t be used to pass certain types of provisions. Those include provisions that don’t change the overall level of federal spending or revenue, or where such a change is merely "incidental.”

In other words, it’s hard to pass anything through reconciliation if you can’t prove it will affect the federal budget.

Eliminating essential health benefits doesn’t directly change government spending; it would probably indirectly change how many people choose to use government subsidies (more on this in a second), but it’s not a straightforward spending change. That means it could be at risk of being struck down under the Byrd Rule.

Richard Kogan, a congressional budget procedure expert at the Center on Budget and Policy Priorities, told me, “I never know for sure about any Senate ruling until after it happens, but there are decent arguments that this should be a Byrd violation.”

“I wouldn’t think [this would pass Byrd Rule muster],” says Marc Goldwein, a budget expert at the Committee for a Responsible Federal Budget. But, he adds, if they can justify changing regulations to allow higher premiums on older customers (an existing provision in the law), “who knows.”

Ed Lorenzen, a CRFB colleague of Goldwein’s and a budget procedure expert, adds, “I don't think it [could survive the Byrd Rule], and most people I talk to don't think so, but there are smart Republicans who used to work in the Senate who think it could, including some who work at the White House.”

Then there’s a second problem, ably summarized by Slate’s Jim Newell. Under the current bill, which doesn’t repeal the essential benefits but reduces tax subsidies available to most low- and middle-income people, a lot of people wouldn’t take advantage of the tax credits because they can’t cover the premiums for a plan that covers all 10 benefits. Those requirements drive up plan costs, and the AHCA, as currently written, cuts subsidies without eliminating the requirements and making cheaper plans available.

But if you eliminated essential health benefits, then a lot more people would use the skimpy tax credits to buy bad, non-comprehensive health coverage.

“If you loosen regulations, more people might actually find it worthwhile to use the dinky tax credits offered them to purchase dinky insurance, driving up the cost to the federal government,” Newell notes.

If the cost of the whole bill goes up, it might go up so much that the bill no longer reduces the deficit. And if it doesn’t reduce the deficit or at least hold it harmless after 10 years, the legislation can’t pass per the Byrd Rule; it has to be phased out after 10 years.

The essential health benefit changes are, so far, just reported and are hardly final, so this discussion could all be very premature. But if the White House and Paul Ryan do decide to placate congressional conservatives this way, they could face two big problems: one with the CBO, which could find the bill is now way more expensive and increases the deficit; and one in the Senate, whose rules seem to preclude a change like this from being passed with a simple majority.