March 22, 2017
United States House of Representatives
Washington, DC 20515
On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I write to urge you to vote against H. R. 1628, the American Health Care Act (AHCA), which repeals the Affordable Care Act (ACA). The ACA is highly complex legislation that includes benefit increases for seniors, makes improvements that help to contain health care costs, and extends the solvency of the Medicare Part A trust fund. The AHCA would unwind ACA provisions that are essential to seniors. The ACA is not perfect, but it should be improved and not repealed. The AHCA would only make matters worse for American seniors.
Harming Medicare’s financing
The AHCA reduces the Medicare Part A Hospital Insurance trust fund’s solvency by three years by repealing the ACA’s 0.9 percent Hospital Insurance trust fund payroll tax on wages above $200,000 per individual or $250,000 per couple. By repealing this tax on high wage earners, the House bill would accelerate the exhaustion of Medicare’s Part A trust fund by three years, from 2028 to 2025, according to the Chief Actuary of the Centers for Medicare & Medicaid Services in a letter to Senator Ron Wyden. The AHCA further reduces Medicare solvency by increasing the number of uninsured and, as a result, increasing Medicare Disproportionate Share Hospital (DSH) payments which are in part paid out of the Part A trust fund. These two provisions would lead to the trust fund’s insolvency up to four years earlier than projected, from 2028 to 2024. The Manager’s Amendment to repeal the tax in 2017 rather than 2018 would likely speed up the insolvency date. This could lead to cuts in Medicare, including privatizing the program, that would be detrimental to current and future beneficiaries.
Jeopardizing long-term care and other services
In addition, the AHCA would harm seniors by drastically cutting Medicaid. Millions of Medicare beneficiaries rely on Medicaid to help fill in Medicare’s coverage gaps. Medicare does not pay for most long-term services and supports; consequently, middle class Americans often rely on Medicaid for long-term services and supports when they exhaust their savings. Nearly two-thirds of all nursing home residents’ care is financed in part by Medicaid. In addition, Medicaid provides home and community-based services that allow seniors to stay in their homes.
CBO estimates that the AHCA cuts $880 billion in federal outlays for Medicaid. AHCA accomplishes these cuts by ending the Medicaid expansion and by restructuring Medicaid into per capita caps. States that expanded their Medicaid programs under the Affordable Care Act would be hit especially hard by cuts to both its expansion and non-expansion population.
Under the AHCA, the federal payment for the Medicaid expansion program would be cut from 90 percent under the ACA to the regular federal Medicaid matching rate – on average, 57 percent of Medicaid costs. While the AHCA allows states to get the ACA expansion matching rate for current beneficiaries, obtaining the enhanced match is contingent upon these beneficiaries staying continuously enrolled in the program. However, Medicaid beneficiaries often churn in and out of the program. As a result, most current enrollees are anticipated to fall off the rolls after two years. Therefore, most federal Medicaid expansion funding would lapse to the pre-ACA matching rate within a few years.
The AHCA’s per capita cap structure limits federal funding for state Medicaid programs to an arbitrary per-beneficiary funding level. This would ultimately shift costs to states by eliminating the guarantee of additional federal funds if state costs increase because of underlying health care costs, demography or complexity of care. For example, as the baby boom generation nearly doubles the senior population, state Medicaid programs would be unable to keep up with demands for long-term services and supports. Over time, states would be forced to make up the funding themselves, cut benefits and/or limit eligibility if federal funds do not keep up with their Medicaid population’s needs.
Changes to the AHCA in the Manager’s Amendment would provide states with the flexibility to block grant certain populations. While the elderly and disabled populations cannot be block granted under the AHCA, if block grants lead to more total cuts to Medicaid, they will ultimately reduce the ability of states to live within their budgets – making cuts to seniors’ services inevitable.
If Medicaid is cut by nearly $880 billion, states could address their funding shortfalls in ways that would harm seniors and their families, including limiting the number of individuals it serves; or scaling back nursing home quality, service and safety protections. Since the AHCA also repeals the Community First Choice option, which provides an enhanced federal match to states for providing community-based services, these services are particularly vulnerable.
Making services more difficult to access
The AHCA eliminates retroactive and hospital presumptive eligibility of Medicaid beneficiaries. Many people do not enroll in Medicaid, often because they aren’t aware they are eligible. Under current rules, when they come to a hospital for care and are eligible for Medicaid, they can be enrolled temporarily. Under current law, individuals can be retroactively enrolled for a 90-day period. The AHCA would reduce the retroactive enrollment period to a month. These changes will make it harder for seniors to get prompt care and for doctors and hospitals to be reimbursed.
Driving up premiums for people age 50-64
The AHCA reduces ACA protections against age-rating premiums. Under the ACA, marketplace plan enrollees, including seniors age 64 and younger, can be charged no more than three times what a 21-year-old would pay. The AHCA would broaden the age bands to 5 to 1, allowing insurers to charge the oldest consumers five times more than younger ones. In addition, the proposal would give states the latitude to broaden those limits even further or to constrict them back to 3 to 1 or another level. CBO predicts that by 2026 this provision will substantially raise premiums for older people, e.g., 20 percent to 25 percent higher for a 64-year-old.
Driving up seniors’ out-of-pocket costs
The AHCA would also increase out-of-pocket costs for seniors by repealing the ACA’s subsidies, based on income and the cost of health insurance, that help defray the cost of premiums. The AHCA would provide refundable tax credits ranging from $2,000 to $4,000, based solely on age. It is unlikely that a $4,000 tax credit would make it possible for many people age 60 and older to afford a health policy that provides comprehensive coverage, which could lead to much higher out-of-pocket costs. Also, it is unclear how the change in the Manager’s Amendment which liberalizes the threshold for the medical deduction would help low-income seniors who likely do not itemize deductions, and there is no guarantee that the Senate would use this change to increase tax credits for 50 to 64-year-olds. For individuals with income over 150 percent of the federal poverty level, the legislation would reduce the percentage of income that younger people have to pay toward their premiums while increasing that percentage for older people, according to CBO.
Imposing onerous premium penalties
The ACA requires insurers to cover people with pre-existing conditions, coupled with a mandate that all people have insurance or pay a fee. The AHCA requires plans to offer coverage to all, but instead of the mandate, which is repealed, it forces individuals to have continuous coverage or pay a penalty – a 30 percent surcharge for up to 12 months – when reentering the insurance market after a lapse in coverage of over 63 days. Although this applies to all individuals, it could be particularly burdensome for older, sicker individuals who rely more heavily on health insurance than younger and healthier individuals. Also, breaks in coverage are often due to honest mistakes or misinformation, but the AHCA does not include any exemptions to help in such cases.
The National Committee opposes H. R. 1628, the American Health Care Act, because it would weaken Medicare’s solvency leaving it vulnerable to benefit cuts and privatization, threaten access to Medicaid’s long-term care benefits, and require seniors to pay more for less health care coverage. The AHCA helps those who need it least—the wealthy—providing them billions of dollars in tax cuts and putting seniors and people with disabilities at significant risk of ending up uninsured and losing access to needed care.
President and CEO