Republican bill imposes major new out-of-pocket costs on the near-poor

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The draft legislation released by the House Energy and Commerce Committee on Sunday night (May 11) gnaws at Medicaid and marketplace spending from so many angles and inhibits enrollment in so many ways, it’s hard to know where the bulk of the enrollment reductions and benefit degradation will come from. By CBO’s preliminary estimate, the Medicaid and marketplace provisions will cut federal spending by $715 billion over ten years and increase the ranks of the uninsured by 13.7 million (if you include failure to extend funding for the enhanced marketplace subsidies provided by the American Rescue Plan Act, which are funded only through this year; expiration of those subsidies accounts for 4.2 million of the coverage losses).

On the Medicaid side, work requirements (a.k.a. red tape requirements) have been clearly shown to drive eligible people off the rolls without boosting employment. Work requirements may account for more than half of the 7.7 million reduction in Medicaid enrollment that CBO forecasts, based on prior Urban Institute estimates (CBO has not yet itemized its Medicaid enrollment loss estimate by provision). Increasing the frequency of redeterminations and suspension of Biden administration rules designed to streamline enrollment would also take a significant toll on enrollment.

Here I want to focus on a double-barreled assault imposing a different form of harm: increased out-of-pocket costs for those who do enroll in coverage, in particular those with income a step above poverty, i.e. 100-138% of the Federal Poverty Level (FPL). In the 2025 ACA marketplace, which uses prior-year FPL, that’s income up to $20,783 for an individual, $43,056 for a family of four. For Medicaid, which uses current-year FPL, the thresholds are 3.9% higher. In the marketplace, we’ll also look at the broader 100-150% FPL bracket, since benchmark silver plans are available at zero premium up to 150% FPL under the enhanced subsides.

House Republican "moderates" sign on to gutting the ACA Medicaid expansion

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Punchbowl News provides valuable daily intelligence as to the progress of the Republican reconciliation package, but they have this story exactly backwards:'

The red lines begin: A dozen House Republicans say no to big Medicaid cuts

News: If you’re looking for a sign that House Republicans are getting worried about cuts to Medicaid, here it is.

A dozen House Republicans are warning GOP leaders that they won’t back a reconciliation package that includes massive cuts to Medicaid, according to a letter first obtained by Punchbowl News.

What the letter* actually does is sign onto the hard-right Republican plan, advanced by House Energy and Commerce Chair Brett Guthrie, to defund the ACA Medicaid expansion, which covers 20 million low-income adults. Ending the ACA’s 90% federal funding for the expansion population yields $561 billion in “savings” over ten years, according to the Congressional Budget Office. It’s the centerpiece of meeting the $880 billion 10-year cut target established for the Energy and Commerce Committee by the House budget resolution.

Triage: A dedicated source of funding to extend the ARPA subsidy boosts (if all else fails)

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The increases to premium subsidies in the ACA marketplace provided through 2022 by the American Rescue Plan Act (ARPA) have been a policy success, helping to boost marketplace enrollment by 21% this year.  During Democrats' long, weary negotiations over the Build Back Better bill in the fall, extension of those subsidies (first permanently, then, foolishly, for just 3 years) was taken as a given.  Even when BBB negotiation collapsed, failure to extend the subsidies seemed unthinkable...until it didn't.  

By May, it began to seem that Joe Manchin might not allow any Democratic priorities to pass via a reconciliation (bypassing the filibuster, and requiring all Senate Democrats to be on board). More recently, there's been a pulse -- apparently serious negotiations for a stripped-down bill possibly including climate investments, repeal of Republican tax cuts, empowering Medicare to negotiate prescription drug costs, and, maybe maybe, extension of the ARPA subsidy boosts for marketplace coverage.

Most recently, Manchin has made vaguely sympathetic but equivocal noises about extending the subsidy boosts, which are not a priority for him (the ACA Medicaid expansion insures about ten times as many West Virginians as the ACA private plan marketplace). And as Politico's Adam Cancryn outlines, his maunderings have left Democrats trying to squeeze them in with a dilemma.

Manchin hath decreed that a) any programs included in the reconciliation package be permanent, rather than sunsetting after a fixed number of years, and b) half the money raised through tax increases go to deficit reduction, leaving about $500 billion over ten years for all spending priorities. CBO estimated the 10-year cost of permanent extension of the ARPA subsidies at $210 billion. Prescription drug pricing reforms are projected to raise somewhere over $100 billion, depending on how they're structured. The three-year cost of ARPA subsidy extension, per CBO, is $74 billion. But, per Manchin rules...no temporary programs!

Given this Catch-22, it may be worth thinking about ever-present but studiously ignored (rightly, on the extra-Manchin merits) policy option: Fund the ARPA-level subsidies by funding the marketplace's Cost Sharing Reduction (CSR) subsidies in the original, statutory way, directly reimbursing insurers for their CSR costs.  CSR reduces out-of-pocket costs for low income enrollees (a slight majority of enrollees) who select silver plans.