Obama and Bush take aim at Trump in separate speeches

Goldman boss signals Brexit shift to Frankfurt in tweet

PM makes high-stakes claim to EU 27 amid sluggish Brexit progress

Ex-MI6 chief: Brexit means more spending to retain UK influence

SpaceX to retry satellite launch after explosion

Elon Musk in talks to restore power to storm-hit Puerto Rico using solar

GM unveils futuristic self-driving army truck

Theresa May ‘prepared to demote Boris Johnson in Cabinet reshuffle’

EDUCATION TOP STORIES

Repeal-and-Delay Would Make Budget Neutrality for ACA Replacement Difficult

Stethoscope over the dollar bills.

ACA repeal and delay sets up a budgetary cliff for replacement legislation

Finding sufficient savings to offset the costs of a delayed ACA replacement will be challenging

As Congress considers options to repeal and replace the Affordable Care Act (ACA), it will need to confront how the federal budget scoring process can affect the fate of legislation. The Congressional Budget Office (CBO) is required to produce a “score,” or budget estimate, for most bills approved by a full committee in both the House of Representatives and the Senate. Each score represents CBO’s best estimate of the 10-year impact of legislation on the federal deficit. Bills scored as deficit-increasing may be difficult to pass given certain statutory and procedural rules intended to prevent new legislation from increasing the federal deficit.

Under the plans currently being discussed, repeal of the ACA’s coverage expansions may be delayed for two to three years to avoid immediately ending coverage for the 20 million people who became newly insured through the ACA.1 Another rationale for the potential delay is to allow Congress time to coalesce around a single replacement policy. Yet the repeal-and-delay approach could also set up a budgetary cliff by taking credit for the savings and leaving the costs of any replacement for future legislation.

CBO evaluates legislation relative to a baseline that reflects existing law. Under a repeal-and-delay approach, Congress would partially repeal the ACA in 2017 using budget reconciliation, a process that allows expedited consideration of legislation that affects the federal deficit. To do so, the House and the Senate would need to pass a budget resolution requiring Congress to reconcile the budget to achieve specific changes to revenues or spending. Congress could then repeal provisions of the ACA that directly affect the federal budget, including federal funding for Medicaid expansion and marketplace tax credits, with a simple majority of votes, avoiding the potential of a filibuster in the Senate.

With this approach, lawmakers would be able to act quickly and decisively on a key promise made by president-elect Donald Trump, namely to repeal the ACA within the first 100 days after taking office. But disagreement among lawmakers about appropriate replacements for the ACA could cause disruption for insurers and health care providers, who would face uncertain regulatory and marketplace environments.

Moreover, the repeal-and-delay approach could make it difficult for any replacement legislation to be budget neutral. In a score of a previous partial repeal bill, H.R. 3762, CBO projected that repealing the coverage provisions in the ACA would reduce federal spending by $1.4 trillion between 2016 and 2025. Once repealed, the savings associated with eliminating the ACA’s coverage expansions would be part of current law and hence the baseline budget. This means that a future replacement bill could be scored as deficit-increasing, even if it cost less than $1.4 trillion.

For example, suppose that, after repealing the ACA, Congress developed a replacement proposal that required $1.3 trillion in spending over 10 years to finance provisions such as tax credits, high-risk pools, and health savings accounts. If enacted as part of a repeal proposal similar to H.R. 3762, CBO would score the combined legislation as achieving $100 billion in savings over the next decade. However, if Congress repealed the coverage expansions through reconciliation and later attempted to enact the same replacement proposal in separate legislation, it would be scored as increasing the deficit by $1.3 trillion.

One seemingly simple solution would be to repeal and replace the law in a single piece of legislation, so that savings from repeal are immediately credited against the cost of replacement. However, it would take time to reach consensus on a replacement policy, and a combined bill could be subject to a filibuster if it included components that could not be put into place through reconciliation, such as changes to insurance regulations that only incidentally affect the federal budget. Assuming that a reconciliation-based repeal moves forward without a replacement, congressional leaders may find it challenging to retain the cost savings from repeal. Under the concurrent budget resolution introduced on January 3, 2017, Congress would establish a “reserve fund for health care legislation” that is intended to retain at least some of the savings from repeal for a future replacement bill.2

Even if the savings were retained, to the extent that a reconciliation-based repeal eliminates some of the ACA’s revenue-generating provisions, such as the additional Medicare tax, that revenue will be lost for a future replacement bill. Despite the $1.4 trillion in savings from repeal of the ACA’s coverage expansions, CBO scored H.R. 3762 as reducing the deficit by only $516 billion over 10 years, because the bill also eliminated many ACA revenue-generators. Even if the $516 billion in savings were set aside through a legislative or procedural workaround, Congress would have only about one-third of the funding available for replacement compared with the cost of the ACA’s coverage expansions. A reconciliation bill that eliminated all of the ACA’s revenue generators, including changes to Medicare payment policy, would be scored as deficit-increasing, leaving no funding available for a replacement.3

Partially repealing the ACA through reconciliation and developing a replacement policy that can incorporate enough savings to achieve deficit neutrality, should that be a congressional goal, could be difficult. Many coverage expansion provisions included in leading replacement policies will increase federal spending or reduce tax revenue. Depending on the ultimate cost of a replacement plan, finding sufficient savings to offset these costs while maintaining budget neutrality could exacerbate the already daunting challenge of achieving consensus on a replacement.

-Christine Eibner

Leave a Comment