How the House Affordable Care Act (ACA) Repeal Legislation Affects Seniors

The Affordable Care Act is a highly complex piece of 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.  To follow is a summary of how the House ACA repeal legislation would undermine the enhanced health security provided to seniors and people with disabilities by the health care reform law.

Reduces Medicare Part A Hospital Insurance Trust Fund Solvency by Three Years:  The ACA included a 0.9 percent Hospital Insurance Trust Fund payroll tax on wages above $200,000.  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.^[1]  This could lead to cuts in Medicare, including privatizing the program, that would be detrimental to current and future beneficiaries.

While the House bill 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.  But 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.  As a result, within a few years, most federal Medicaid expansion funding would lapse to the pre-ACA matching rate.  Total cost savings over ten years:  $253 billion.[2]

Per Capita Cap on Federal Medicaid Payments to States:  In addition to repealing the Medicaid expansion, the House bill would restructure the program for the non-expansion population.  Under the House bill, the federal Medicaid payment would be based on per-beneficiary spending in fiscal year 2016 and would raise annually to the medical-Consumer Price Index.  The Center on Budget and Policy Priorities estimates that per-beneficiary Medicaid costs would increase by about 0.2 percent faster than the capped amounts.  The resulting cuts would grow each year.  Total cost savings over ten years:  $116 billion.[3]

The House bill’s per capita cap structure limits federal funding for state Medicaid programs to an arbitrary per-beneficiary funding level. This will 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 will be unable to keep up with demands for long-term services and supports.  Over time, states will 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.  States that expanded their Medicaid programs under the Affordable Care Act will be hit especially hard by cuts to both its expansion and non-expansion population.

Medicaid Restructuring Implications for Seniors:  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, Americans who worked during their pre-retirement years 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.

If Medicaid is cut by nearly $369 billion, states would have to make up the lost funding or – more likely – cut eligibility and/or benefits – including long-term care coverage.  States could address their funding shortfalls in ways that would harm seniors and their families, including:

• Limiting the number of individuals it serves;
• Scaling back nursing home quality, service and safety protections;
• Asking patients’ spouses, children or other family members to cover the cost of nursing home care, exhausting much or all of their savings; and
• Tightening eligibility criteria for home and community-based services, resulting in more individuals moving into nursing homes.

Reduces ACA Protections Against Age-Rating Premiums:  Under the ACA, marketplace plan enrollees, including “near seniors” age 50 to 64, can be charged no more than three times what a 21-year-old would pay.  The House bill 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 the states the latitude to broaden those limits even further or to constrict them back to 3 to 1 or another level.  According to the AARP Public Policy Institute, moving to a 5-to-1 rating would increase monthly premiums for an ACA marketplace silver plan in 2018 by 22 percent, from $14,700 to $17,900, for someone 60 and older before premium tax credits.[4] 

Limiting age rating of health insurance plans is an important consumer protection and necessary to ensure that older Americans not yet eligible for Medicare can afford coverage.  In addition, higher premiums for older enrollees would only slightly reduce premiums for younger adults or boost their enrollment.

Increases Out-of-Pocket Costs and Reduces Care:  The ACA provides subsidies, based on income and the cost of health insurance, to help defray the cost of premiums.  The House bill would repeal the subsidies and 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 find a health policy that provides comprehensive coverage, which could lead to much higher out-of-pocket costs.

The ACA includes important protections such as requiring insurers to cover people with pre-existing conditions, coupled with a mandate that all people have insurance or pay a fee.  The House bill requires plans to offer coverage to all but instead of the mandate which is repealed, it requires individuals to have continuous coverage or pay a penalty – a 30 percent surcharge for 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 House bill does not include any exemptions to help in such cases.

National Committee Position

The National Committee opposes the House bill to repeal the Affordable Care Act because it would weaken Medicare’s solvency – leaving it vulnerable to benefit cuts and privatization; threaten access to Medicaid long-term care benefits, and require “near seniors” to pay more for less health care coverage.  The House ACA repeal bill puts seniors and people with disabilities at significant risk of ending up uninsured or losing access to needed care.

Government Relations and Policy Department, March 2017