Manager’s Amendment to the AHCA: Executive Summary

Quick Jump

I. Introduction
II. Individual Mandate
III. Medicaid Funding
IV. Work Requirements for Medicaid
V. Cost of Purchasing Plans on the Marketplace
VI. Miscellaneous Taxes

I. Introduction

On March 20, 2017, House Republicans released a 21-page Manager’s Amendment to the American Health Care Act (“AHCA”).  This amendment contains a series of both policy and technical adjustments designed to draw more votes from House Republicans who were unsatisfied by the original version of the bill.

The full text of the Manager’s Amendment policy changes can be found here and the technical changes can be found here.

The official Energy and Commerce Committee’s and the Ways and Means Committee’s summary of the policy changes can be found here and the technical changes can be found here.

If you would like to read about these changes alongside our summary of AHCA, you may do so here.

II. Individual Mandate

The Manager’s Amendment would apply the 30% premium penalty only in the individual market.  Small group markets would not have to face this penalty.  For the CBO’s analysis of how the 30% premium penalty would discourage healthy individuals from participating in the market, see our summary of the CBO report.  Note that the CBO has not had an opportunity to score the Manager’s Amendment and thus there is no CBO analysis of the effects of not applying this penalty to the small group market.

III. Medicaid Funding

The Manager’s Amendment would end the ACA’s mandatory expansion of Medicaid coverage for childless, non-disabled, non-pregnant adults up to 133% of the poverty level.  In addition, after 2017, states would no longer receive enhanced federal matching funds if they wish to cover adults above 133% of the poverty level. They would continue to receive the normal federal match if choosing to expand above 133% of the poverty level after 2017.

Individuals enrolled in the Medicaid expansion prior to 2020 would receive “grandfathered” status.  Thus, states would receive the enhanced matching rate under current law (90% in 2020) for grandfathered enrollees as long as such individuals remain eligible and enrolled in the program.  In other words, as long as a state has expanded Medicaid by March 1, 2017, and an enrollee got coverage under the expansion by 2020, the state would retain the enhanced match rate after 2019.

The amendment also makes a technical change that would allow the AHCA to freeze the ACA-enhanced federal funding that was provided to certain states that covered low-income adults prior to the ACA at the regular matching level.

One of the biggest changes that the Manager’s Amendment would bring is that a state could choose a block grant rather than a per capita cap to fund its adult and children populations.  However, states would not have the option of funding elderly and disabled populations with block grants.

States choosing a block grant would be given considerable flexibility in determining which populations they would cover (although they would have to cover certain low-income women and children) and the services they would provide to them.

The amount of block grant funding would be calculated by the following formula:

The funding would increase by the growth in the consumer price index but would not adjust for changes in population.  Unused funds would rollover and remain available for expenditure so long as a state has a block grant.

States under a block grant scheme would need to provide medical assistance for hospital care; surgical care and treatment; medical care and treatment; obstetrical and prenatal care and treatment; prescribed drugs, medicines and prosthetics; other medical supplies and services; and health care for children under 18 years of age.  A state could choose to provide healthcare to either non-expansion adults and children, or just non-expansion adults.

A plan submitted by a state to administer a block grant program would be deemed approved unless the Department of Health and Human Services (“HHS”) concludes within 30 days that the plan was incomplete or actuarially unsound.

IV. Work Requirements for Medicaid

The Manager’s Amendment would also allow states to institute a work requirement on non-disabled, non-elderly, non-pregnant adults as a condition of Medicaid coverage.  This requirement is modeled after similar requirements in the Temporary Assistance for Needy Families (“TANF”) program.  The amendment defines a countable work requirement as including:

–  unsubsidized employment;
– subsidized private or public sector employment;
– on-the-job training;
– job search or readiness assistance;
– community service programs;
– vocational educational training;
– satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence (as long as the recipient has not already completed secondary school or  received a certificate);
– education directly related to employment (if the recipient has not received a high school diploma or GED); or
– providing childcare to an individual participating in a community service program.

Note that college and graduate studies do not appear on this list.

A state would not be allowed to impose a work requirement as a condition for Medicaid to the following:

– pregnant women;
– children under the age of 19;
– an individual who is the only parent/caretaker of a child under the age of 6;
– an individual who is the only parent/caretaker of a child with a disability; and
– an individual under the age of 20 who is married or is the head of the household and maintains satisfactory attendance at school or participates in education directly related to employment.

The bill would grant broad flexibility to implement the requirement as they see fit.

To ensure that states have the tools to implement the work requirement, the federal government would provide a 5% administrative FMAP bump to states who choose to implement a work requirement.

For current statistics on employment rates for Medicaid recipients as under the ACA, read the Henry J. Kaiser Family Foundation’s issue brief on employment status of Medicaid enrollees.

V. Cost of Purchasing Plans on the Marketplace

According to the Press Release from the House Energy and Commerce Committee, the Manager’s Amendment is intended to help individuals between the ages of 50-64 who may face higher premiums under the AHCA. Under the Amendment, individuals could deduct from their taxes the cost of medical expenses if they exceed 5.8 percent of their income (under current law costs must exceed 10% of income before they can be deducted).

The Amendment also creates a $75 billion fund that states can use to assist older adults purchasing insurance. The Manager’s Amendment leaves the the work of deciding how to create and use this fund to the Senate.

VI. Miscellaneous Taxes

The AHCA would repeal several ACA tax provisions, including the:

Cadillac tax;
tanning tax;
branded prescription drug tax;
medical device excise tax;
health insurance tax;
$500,000 limit on business expense deductibility for compensation to insurance executives;
Medicare tax imposed on unearned income on taxpayers earning more than $200,000 ($250,000 for joint filers);
– repeal of the ACA’s Medicare 0.9% tax surcharge on taxpayers with incomes exceeding $200,000 ($250,000 for joint filers);
prohibition against paying for over-the-counter drugs with tax-subsidized funds from Health Savings Accounts (HSAs), Archer MSAs, or flexible spending or health reimbursement arrangements;
ACA’s increase in the penalty for the use of HSA and Archer MSA funds for non-medical purposes (reducing the penalty from 20 to 10 percent for HSAs and 20 to 15 percent for MSAs);
$2500 limit on contributions to flexible spending accounts; and
– requirement that employers reduce their deduction for expenses allowable for retiree drug costs without reducing the deduction by the amount of retiree drug subsidy.

The Manager’s Amendment would move the repeal of the Cadillac tax from 2025 to 2026.  According to the Health Affairs blog, this was delayed “to satisfy Senate prohibitions on reconciliation provisions that increase out-year deficits.”  All other repeals would be accelerated from 2018 to the beginning of 2017.  The tanning tax repeal would take effect June 30, 2017.

The CBO has not yet scored the Manager’s Amendment, but other experts anticipate that the acceleration of tax repeals, combined with additional funds appropriated through the amendment, will eliminate any deficit reduction originally projected to result from the AHCA by the CBO.