GOP Releases Alternative to the Affordable Care Act

June 24, 2016

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The GOP alternative/replacement for the Affordable Care Act (ACA) wasreleased in a June 22 white paper. The plan would make changes to Medicare andMedicaid and would allow association health plans (AHPs), buying across statelines and high-risk pools, among other changes. Many of the ideas have beenbrought up in the past in various contexts.


  1. Repeal the ACA’s expansion of Medicaid.
  2. Each state would receive a fixed amount of money for each beneficiary or default into a per capita allotment approach. The per capital allotment approach, according to the outline, would achieve “three inter-related aims: reforming Medicaid’s financing, restoring Medicaid’s focus on the most vulnerable and restoring federalism by empowering states with new freedoms and flexibilities to run their Medicaid programs.”

In 2019, a total federal Medicaid allotment would be available for each stateto draw down based on its federal matching rate. The amount of the allotmentwould be the product of the states’ per capital allotment for the four majorbeneficiary categories — aged, blind and disabled, children and adults — and thenumber of enrollees in each of those four categories. The capital allotment foreach beneficiary category would be determined by each state’s average medicalassistance and non-benefit expenditures per full-year equivalent enrollee duringthe base year (2016), adjusted for inflation.

The allotment would grow at a rate slower than current law. The plan arguesthat this would provide certainty for state budgets.

For states that did not expand Medicaid under the ACA as of January 1, 2016,this per capital allotment approach would permit them to expand. States that hadalready expanded would be given new authority to better control the costs of theexpansion population.

In 2019, states that have already expanded Medicaid under the ACA wouldreceive the same amount of dollars received today under the plan. However,states would be able to shift dollars from “less needy populations to targetmore funding to help those who need it the most.” The current enhanced federalmedical assistance percentage (FMAP) for the expanding adult population would bephased-down each year starting in 2019 until it reached the state’s normal FMAPlevel.

Allow states to establish work requirements for able-bodied adults onMedicaid, which the Obama Administration has opposed.

States could charge “reasonable enforceable premiums or offer a limitedbenefit package” and use “waiting lists and enrollment caps” for certain groupsof Medicaid beneficiaries.

Medicaid Waiver Process:

The proposal grandfathers “successful waivers for managed care” if they havealready been renewed twice. The proposal would also grandfather waivers thatmeet “fast track parameters so that states could fold them into the state planand no longer be required seek renewals.”

The proposal does away with the requirement in current law that states obtaina waiver for enrolling some populations in managed care. The proposal wouldadopt a waiver “clock” to track progress and deliver a decision to states in anabbreviated time period.

Children’s’ Health Insurance Plan (CHIP)

The GOP plan would roll back the ACA’s FMAP rate for CHIP but continue theprogram.


  1. Medicare Advantage:
    1. Repeal Benchmark Caps: Current law provides that Medicare Advantage (MA) plans are paid relative to a benchmark that is based in fee for service.
    2. Limit the Ability to Cut MA plan reimbursement through the regulatory process: This issue relates to “coding” and it is a factor that impacts how Medicare pays for MA. The plan would freeze the ability to negatively adjust the MA payments based on accurate coding.
    3. Open Enrollment Period: Medicare beneficiaries would switch into a new MA plan during the first three months of the next year for specific reasons. The ACA locked beneficiaries into a plan regardless of changes. This Republican plan repeals that provision.
  2. Independent Payment Advisory Board: The Republican plan repeals this board, which has never been staffed and was created by the ACA. It was to make recommendations to cut Medicare spending if spending exceeded certain targets.
  3. Repeal the Center for Medicare and Medicaid Innovation: This center was created by the ACA and was tasked with testing and evaluating payment and service models. The GOP plan asserts the center has expanded beyond its authority.
  4. Repeal the ban on physician-owned hospitals that went into effect in 2010.
  5. Repeal the hospital wage index provisions of the ACA that benefited some states at the expense of others (also known as the “Bay State Boondoggle”).
  6. Provide value-based insurance design for MA plans.
  7. Restrict Medigap plans coverage related to cost-sharing: Prohibit Medigap plans from covering cost-sharing below a combined amount and limit the plan from covering no more than half of the cost-sharing between the deductible and the out-of-pocket cap.
  8. Combine Medicare Parts A and B and have a unified deductible.
  9. Personal Care Demonstration Program: Permit beneficiaries and healthcare professionals to voluntarily enter into an arrangement for items and services outside of the Medicare system.
  10. Uncompensated Care Pool: Require the secretary to create one national pool of uncompensated care funds and distribute funds to disproportionate share hospitals (DSHs) based on the use of certain federally collected data. This is to address the lower than anticipated enrollment in Medicaid and the exchanges under which the ACA reduced Medicaid DSH funds with the anticipation that as more people had coverage, these funds would no longer be needed.
  11. Update Medicare Compare: Report performance on a new Medicare Compare website comparing Medicare Advantage and traditional Medicare for each Metropolitan Statistical Care on a core set of quality measures.
  12. Increase the age of eligibility for Medicare: Gradually increase the age of eligibility to correspond with that of full eligibility for Social Security benefits.
  13. End fee for service and put in place premium support: This concept has been discussed at different times, including in 2011 when Congress created a special committee to deal with the fiscal cliff. Some Democrats say that if appropriately designed, this could be a workable plan. Under Medicare premium support proposals, private health insurance plans that meet certain standards would compete head-to-head for the enrollment of Medicare beneficiaries. Some proposals would guarantee coverage for at least a common benefit package; others would leave benefit decisions to the plans. In some proposals, fee-for-service Medicare would compete under the same rules as the private insurance plans.

Private Sector

  1. Tax Credits: Provide new refundable and advancable tax credits to low and modest income Americans.
  2. Cadillac tax repeal: Instead of the Cadillac tax on more expensive health plans offered by employers, the GOP plan would discourage companies from providing richer healthcare plans by limiting tax exclusion on employer provided health benefits.
  3. Health Savings Accounts (HSAs):
    1. allow spouses to make catch-up contributions to the same HSA account;
    2. allow qualified medical expense incurred before HSA qualified coverage begins to be reimbursed through an HSA account as long as the account is established in 60 days;
    3. set the maximum contribution to an HSA at the maximum combined allowed annual deductible and out of pocket expense limits; and
    4. expand accessibility for certain groups like those who get services through the Indian Health Service and TRICARE.
  4. Heath Reimbursement Accounts (HRAs): Encourages the uses of HRAs to permit individuals to choose the insurance plan that best fits their needs.
  5. Purchase coverage across state lines: Permits states to enter into interstate compacts for pooling and allows consumers a choice of plans to purchase across state lines.
  6. Association health plans and individual health pools: Allows small businesses to band together to offer AHPs. These new proposals would be prohibited from cherry-picking and prohibited from charging higher rates for sicker people on the plan except to the extent already allowed under the relevant state rating law. The plan allows individuals to band together for individual health pools. These pools would operate similarly to AHPs.
  7. Wellness programs: While the ACA permits variability in premiums to required employees who participate in prevention and wellness programs, the plan states that the way the Obama administration has implemented this provision has left uncertainty. The GOP plan would clarify implementation.
  8. Medical liability reform: Encourages states to address frivolous lawsuits and defensive medicine.
  9. Antitrust: Have the U.S. Government Accountability Office (GAO) study the advantages and disadvantages of removing McCarran-Ferguson antitrust exemptions.
  10. Pre-existing condition protections: Keep the ACA pre-existing condition protections.
  11. Dependents: Allow dependents to stay on their parents’ plan up to age 26.
  12. No rescissions: Insurance companies would not be allowed to turn away patients when they renew their plan simply because the patient may be sick.
  13. Continuous coverage: Individuals who experience a qualifying life event would not be charged more than standard rates even if they are dealing with a medical issue. This would apply to everyone who remains enrolled in a health insurance plan, whether the individual switches from employer-based health care to the individual market or within the individual market.
  14. Insurance premiums: The default age rating ration would be set at 5-to-1 but states would have the ability to narrow or expand that ratio. Current law is a 3-to-1 ratio.
  15. State innovation grants: Provide states with grants to develop effective reforms that make health care more affordable and accessible. Participating states must achieve a certain target for the reduction of individual premiums, small group premiums and the number of uninsured in the state.
  16. High-risk pools: Provide at least $25 billion in dedicated federal funding for risk pools. Premiums would be capped and wait lists prohibited.
  17. One-time open enrollment period: This would be for individuals to enroll in a plan, if they have not already done so.


The GOP plan codifies what is known as the Weldon Amendment and expands thatamendment. It will codify provisions to give providers the freedom to exercisetheir conscience. Federal funds are barred from going to states thatdiscriminate against individuals or entities that exercise their conscience.

The GOP plan also codifies the Hyde Amendment to ensure that federal fundsare not used for abortion or abortion services.


The rollout of this plan sets the stage for debate in the next Congress overchanges to the Affordable Care Act. However, it is notable that the planimplicitly acknowledges that sick people should be able to obtain healthinsurance and that most Americans need some kind of assistance in payinginsurance premiums. Many of the ideas have been discussed in other contexts.