United States: How Congress, President-Elect Trump Might Proceed On Promise To Repeal, Replace ACA

Summary

President-elect Donald Trump has vowed to repeal and replace the Affordable Care Act (ACA). This campaign promise, which echoes a familiar refrain from Republicans since ACA's passage, is more complex than it may seem. 

There are pathways to quickly "repealing" key elements of ACA such as the individual mandate and its subsidies, but this could result in significant market disruption in the absence of a replacement. Republicans will now be in charge of putting together a health reform replacement package; what that replacement will look like is an open question.

In Depth

 "On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare."

- Donald J. Trump, Healthcare Reform to Make America Great Again

President-elect Donald Trump has vowed to repeal and replace the Affordable Care Act (ACA). This campaign promise, which echoes a familiar refrain from Republicans since ACA's passage, is more complex than it may seem.  

There are pathways to quickly "repealing" key elements of ACA such as the individual mandate and its subsidies, but this could result in significant market disruption in the absence of a replacement. Republicans will now be in charge of putting together a health reform replacement package; what that replacement will look like is an open question.     

Potential Pathways for "Repealing" the ACA

US Congress and the incoming administration will consider at least three potential pathways for achieving full or partial repeal of ACA:

• Use reconciliation to quickly repeal funding; delay effective date in order to develop a replacement

Congress can use the budget reconciliation process to quickly repeal some key elements of the ACA. Reconciliation measures can be passed with a majority in the Senate, thereby avoiding a Democratic filibuster which would require 60 votes to defeat. However, Senate rules allow reconciliation to be used only for budgetary measures addressing federal outlays and revenue. Items that have only an incidental effect on the budget may not be included.

Congress could use this pathway to repeal (effective as of some future date) the most well-known features of ACA and satisfy a key campaign promise—features such as the individual mandate, funding for exchanges and for Advanced Premium Tax Credits and Cost Sharing Reductions would be likely targets for repeal. Popular insurance market reforms—such as requirements to issue health insurance coverage without regard to an individual's health status or pre-existing conditions—would likely not be addressed through reconciliation. Congress used this pathway last year in a reconciliation bill that President Barack Obama vetoed. That legislation would have repealed ACA's tax provisions such as the medical device and health insurer taxes, but would have left intact ACA's Medicare payment cuts to providers and Medicare Advantage organizations. Such an approach this time around could be attractive because it would allow Republicans to retain ACA's savings while eliminating its spending provisions, thereby reducing the repeal's effect on the deficit.

Congress could postpone the effective date of these limited repeals to avoid immediately disrupting individuals' coverage and to give Congress time to develop a replacement. However, even with a delay, uncertainty about the shape of any replacement might disrupt the individual insurance market and state Medicaid programs in the interim.

• Repeal and replace simultaneously

Alternatively, Congress could wait and package repeal and replacement together. This approach would take longer to enact, as Republicans would need to develop the replacement legislation. Moreover, the "replacement" would need buy-in from a supermajority in the Senate, assuming the Senate filibuster rule remains in place.  

• Executive branch options

The new administration could also take a number of executive actions that would have an impact on ACA in the short term. For example, it could take the position that Congress did not appropriate funding to pay cost sharing reductions, as a district court concluded earlier this year in a case that is currently on appeal to the US Court of Appeals for the DC Circuit. The administration also has substantial authority over the operation of the exchanges through executive orders, agency regulations and informal agency guidance.

What Might "Replace" Look Like?

The scope of ACA replacement legislation is difficult to predict, but President-elect Trump's high-level campaign proposals and more detailed proposals from House and Senate Republicans point to some common themes:

• Providing tax-favorable treatment for individual-market health insurance premiums
• Expanding Health Savings Accounts and Consumer Directed Health Plans
• Continuing to prohibit pre-existing condition exclusions or rating based on health status
• Creating high-risk pools for costly patients
• Permitting the sale of health insurance across state lines
• Funding Medicaid through per capita payments or block grants

This new health reform effort will face many of the same policy and political hurdles as prior health reform efforts—how to make health coverage available at an affordable cost; how to provide health insurance to low income individuals; how to keep health insurance coverage affordable while providing robust benefits; and how to avoid the problem of adverse selection, in which individuals wait until they need health care before they buy insurance. Republicans will also have to fund the individual market tax credits proposed by President-elect Trump and key Republican leaders; given the party's reluctance to adopt tax increases and its criticism of many of the ACA funding mechanisms, it is unclear what funding options would be politically acceptable.

Although some of the policy hurdles may be the same, the new effort will take place in a different environment from earlier health reform efforts. Republicans will be the ones trying to solve the puzzle, rather than Democrats, and in the popular view, they may own the post-repeal health care system. Moreover, the status quo has changed since 2010; the Congressional Budget Office estimates that approximately 20 million more Americans have health insurance today than before enactment of ACA, while the exchanges are in place but facing challenges. Moreover, the consumer protections in ACA are popular and consumers have become accustomed to them; we anticipate that any replacement plan will take account of these realities.

As we delve into the health care reform debate all over again, Republicans will be in charge and will own the eventual solution they come up with. The election took place only two days ago; the next few weeks will be very active as congressional Republicans and the incoming administration decide on a path forward.

Watch our webinar "The Election and the 2017 Health Policy Agenda" (registration required).

How Congress, President-Elect Trump Might Proceed On Promise to Repeal, Replace ACA

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