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    Replacement for Obamacare?
    The Vault

    Replacement for Obamacare?

    July 2016

    Last week, the Paul Ryan-led House of Representatives delivered a proposed revision of America’s healthcare system. The 37-page proposal to reform nearly every federal health care program, including Medicare, Medicaid, and Obamacare, is not an official bill, as any attempt to undo the president’s signature health plan in his last few months of office would certainly be met with swift veto.  Rather, it’s a “conversation starter” that House GOP leadership hopes to have with its rank-and-file members, and with the public, in order to build support around a more market-based approach to health reform. Any actual GOP health reform bill in the future and what Speaker Ryan has published will have significant differences.  Still, it’s important to know what’s on the table.

    Overhauling the system

    First and foremost, the plan focuses first on repealing the ACA -- “Obamacare” -- and replacing it with a system of tax credits with which the uninsured could buy health coverage.  Employer and individual healthcare mandates, which have been on Republican hit lists from the beginning, would be a thing of the past.  The plan goes on to include a wealth of reforms, including giving individuals and states more flexibility on healthcare plans; allowing coverage across state lines; giving states flexibility with Medicaid funding; and creating private options for Medicare patients, among other policies.  The plan also allows small businesses to pool together to sell cheaper health plans to employees.  

    Of particular note are the following items:


    Ryan’s plan would reform Medicare by giving younger Americans the option of choosing premium support for private coverage, reforming Medigap, and unifying the Part A and Part B cost-sharing provisions.


    Ryan’s plan would give states the option to take their Medicaid dollars in a block grant -- a lump sum each year -- to then manage their Medicaid programs as they choose. As a default, however, the federal government would offer states a “per capita cap” in which federal support would depend on how many individuals were enrolled in Medicaid in a given state. (This is somewhat similar to the block grants as a path for Medicaid reform then-House Speaker Newt Gingrich (R., Ga.) proposed in the 1990s; President Bill Clinton proposed per capita caps as an alternative).  Lastly, Ryan’s plan would impose a work requirement for receiving Medicaid.

    Employer-based coverage

    The plan would expand the ability of employers to offer Health Savings Account-like products to their workers, and give individuals and non-employer associations, like church groups and professional societies, the ability to form association health plans. The plan would replace Obamacare’s Cadillac tax with a lighter cap on the employer tax exclusion, a point which is already coming under criticism for reducing assistance for the uninsured while increasing assistance for upper-income Americans.

    FDA reform

    The plan backs efforts to promote medical innovation by streamlining the FDA’s regulatory system, starting with the House-passed 21st Century Cures Act.

    The Ryan-led plan does not yet contain any tables with estimates of coverage and deficit numbers.  

    The tax credit is the crux of the matter.

    Ryan’s plan advocates a system of tax credits that is uniform regardless of health status or income. (Older individuals would receive a larger subsidy than younger ones.) Paul Ryan has long been a fan of a uniform tax credit that isn’t means-tested or adjusted for health status, unlike other House GOP leaders who have favored a means-tested approach.

    This is a critical debate. Critics of a uniform tax credit, in which everyone gets the same credit regardless of income or health status, maintain that, in a more market-oriented system, the most vulnerable Americans will be priced out. In other words, the people who most need help most with their medical costs will face the greatest difficulties.  

    A means-tested health insurance tax credit, on the other hand, is often criticized for creating disincentives for recipients of these benefits to seek work, because the value of their benefits would offset the value of working.

    Republicans are going to have to have this debate internally before making any of Ryan’s plan official proposal.  That is part of the “conversation starter”, I suppose.

    Looking ahead

    Again, don’t take any of this as “official business”. There’s much work to be done to take this House GOP plan and turn it into something that could actually become law -- including winning the White House and maintaining both chambers of Congress.  More than anything, Ryan’s proposals will fuel campaign speeches this fall, and shape the conversation regarding healthcare and employers’ responsibility to provide coverage.  That’s of major concern to you as a business owner, so pay close attention as that discussion takes shape.


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