Where Does The AHCA Go From Here?

5/04/2017

Where Does The AHCA Go From Here?
Courtesy of Mehlman Castagnetti Rosen & Thomas, Inc.

This afternoon, the House of Representatives passed by a narrow vote of 217-213 the American Health Care Act (AHCA).   All House Democrats opposed the legislation, joined by 20 Republicans who defected from the Leadership-supported bill.  Passage of the AHCA represents a major victory for President Trump and the House Republican leadership.  Now, the focus turns to questions about when the bill may emerge from the U.S. Senate and what it may look like if and when it does.  Below are some of our initial thoughts.
 
Senate Timing:  Unlike the House, the Senate cannot really begin work on the bill until the Congressional Budget Office (CBO) provides an official score.  The CBO analysis  of the cost of the bill and the impact on health costs and coverage will be an important factor in beginning to determine which provisions of the House-passed bill may remain and which may be subject to a budget point of order under the Budget Reconciliation process.   Moreover, key Senate Republican leaders signaled today that the process will not be rushed.  Senate Lamar Alexander, who chairs the Senate Health, Education, Labor and Pensions Committee, for example, said that the Senate “will take the time to get it right.”  His colleague Orrin Hatch who chairs the powerful Finance Committee also sought to right-size expectations, noting that Senators should “manage expectations” and “remain focused on the art of the doable.”
The FY17 budget reconciliation instruction being used for health care reform will expire at the end of the fiscal year this coming September.  So that is really the only hard deadline for getting the repeal bill to President Trump’s desk.  However, there probably will be pressure to pass the bill out of the Senate before the August recess, at the latest, IF Republicans in Congress want to use the baseline changes to assist with tax reform negotiations.
 
GOP Senate Positioning:  Republican Senators will be careful in the coming days and weeks not to completely dismiss the House bill.  It is very likely, however, that some key details of the House product (especially those provisions directly impacting individual market insurance rules, state waivers, preexisting conditions, and essential health benefits which have been subject of key compromises over the past few weeks to make passage possible) will have to be modified-not only because the politics of the Senate are different, but because the requirements of Budget Reconciliation will demand it.  Senator Hatch may have been signaling as much earlier today when he noted that the Senate process would be guided in part by “the constraints imposed by the budget reconciliation process.”  As a result, the House bill will become, at best, a starting point given Senate rules. 
 
Impact of Senate Budget Rules:  The rules of budget reconciliation will become critical.  Democratic leaders including Senators Schumer, Murray, and Wyden today made clear that they would continue to attack the House product and that Republicans were essentially on their own in their attempt to repeal Obamacare.  That means they will have to use reconciliation and get to 51 votes-not 60.  While the Senate parliamentarian hasn’t ruled on the House bill, many long-standing Senate observers believe that there are several areas of the bill that are likely to be subject to the Byrd rule and will have to drop out of any Senate bill.  These include many of the insurance market reforms noted previously.  Senate parliamentarians are guided by precedent.  And there is precedent for ruling out of order pieces of reconciliation bills where budget impact is merely incidental to a broader policy change.  But, this is a new bill and this parliamentarian may well decide that these provisions can stay in.  We shall see. But that will be a huge initial question as the Senate begins shaping the product and searching for at least 51 votes.
 
Possible Substantive Changes:  Beyond changes in the Senate to the insurance provisions in the House bill or others that may be forced by the rules of reconciliation, there are other areas which will come under political pressure from various Senate factions and that MAY result in changes, depending on where the Senate needs to go to achieve a majority vote.  These include: (1) abortion provisions (planned parenthood funding restrictions and limitations on use of tax credits for abortion-related services); (2) Medicaid (both block grant and per capita cap provisions, as well as impact on Medicaid expansion states, and DSH payments); (3) risk pool funding  and stabilization funding (could go up, down, criteria could be changed, etc); and (4) the size and structure of the current age-based tax credits in the legislation. These areas may not necessarily be changed, but COULD be changed, and are the most likely to change.
 
Senate Politics:  The Senate is a different animal than the House.  The law of small numbers rules.  Leaders can only afford to lose two votes (50 plus the Vice President for passage).  So, small groups of members can tank the bill.  There are more than three conservatives in the Senate (who may think the House bill still spends too much and leaves in place too much regulation).  There are at least three GOP Senators opposed to some of the House bill’s abortion restrictions.  And there are more than three Senators representing so-called “expansion states” that may want more Medicaid funding.  It will be interesting to see how the Senate leadership balances these factions.
 
Impact on Other Health Care Priorities:   Congress has shown an incredible ability to compartmentalize.  The same week the very partisan AHCA repeal bill passed, the House and Senate also will pass a mostly bipartisan deal to fund the federal government for the remainder of fiscal year 2017, for example.  Senate and House health committee leaders also have been working closely in a bipartisan manner on other health care legislation, including FDA user fee reauthorizations and chronic care legislation.  Now that the AHCA has been sent to the Senate, however, some key questions arise. Among them: (1) Will consideration of a party-line bill in the Senate sidetrack or slow down work on other legislation-especially those like the chronic care bill that have no hard deadline?  (2) Will bipartisan work on a Medicare extenders bill, and Children’s Health Insurance Program (CHIP) reauthorization bill slow down, or speed up? Or become more partisan? (3) With the timing of AHCA in the Senate likely backstopped by a fall 2017 deadline, is it possible that CHIP and Medicare extenders could be folded into the repeal effort? Or will those bills remain on a separate track?
 
We hope this real-time analysis helps provide some insight into the road ahead.  Please let us know your thoughts, and share your questions.

Sincerely,
Mehlman Castagnetti
Rosen & Thomas
1341 G Street, NW Suite 1100
Washington, DC 20005
http://www.mehlmancastagnetti.com

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Martin Trussell
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mtrussell@ecfc.org

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