On Monday March 20, 2017, Ways & Means Committee Chairman Kevin Brady (R-TX) and Energy & Commerce Committee Chairman Greg Walden (R-OR) introduced technical and policy amendments to the American Health Care Act of 2017, H.R. 1628 (AHCA), designed to address concerns by more conservative Republicans. The House is expected to vote on the AHCA as early as Thursday, March 23, 2017, but passage is uncertain. If approved, the bill would then move onto consideration in the Senate where it is expected to face a number of challenges.

The technical and policy amendments would make the following changes to the version of the AHCA that was approved by the Ways & Means and Energy & Commerce Committees of the House last week. You can view our summary of the AHCA here:

• Delays the implementation date of the Cadillac Tax from 2025 to 2026;

• Accelerates the repeal of ACA taxes from 2018 to 2017 including:

• • The increase in the penalty for Health Savings Account (HSA) contributions for non-medical expenses (would reduce the excise tax from 20 percent to 10 percent);

  • The $2500 limit on contributions to flexible spending accounts;

  • The medical device excise tax;

  • Reinstatement of the Medicare Part D Subsidy tax deduction for retiree drug costs under a retiree drug subsidy arrangement;

  • The $500,000 limit on the deduction for compensation to insurance executives as a business expense;

  • The tax on branded prescription drugs;

  • The health insurance issuer tax;

  • The Medicare tax imposed on unearned income on taxpayers earning more than $200,000 ($250,000 for joint filers);

  • The prohibition against paying for over-the-counter medications with pre-tax dollars;

  • The repeal of the Medicare 0.9 percent tax surcharge on taxpayers with incomes exceeding $200,000 ($250,000 for joint filers);

  • The Net Investment Tax;

  • The tanning tax repeal is accelerated by six months and repealed effective June 30, 2017; and

  • The income threshold on medical expense deductions would be lowered from 10 percent to 5.8 percent (the pre-ACA threshold was 7.5 percent).

In addition, the manager’s amendments make the following policy changes to the Medicaid program:

• Provides additional financing for the Patient and State Stability Fund, to provide the states with $100 billion to design programs that meet the needs of their unique patient populations;

• Provides flexibility to the states to enhance the tax credit under the AHCA for individuals ages 50–64;

• Clarifies that tax credits can only be used to help purchase insurance plans that do not cover abortions or abortion services;

• Gives the states additional flexibility for Medicaid programs by allowing states to opt out of the per capita allotment baseline and instead receive federal funds through a block grant starting fiscal year (FY) 2020. The amount of the block grant will be calculated by computing the per capita cost for the eligible population, multiplied by the number of enrollees in the year prior to adopting a block grant. The funding will increase by the growth in the consumer price index but will not adjust for changes in population. Unused funds will rollover and remain available for expenditure so long as a state has a block grant. The grant would only apply to traditional adult and children Medicaid populations, with funding for elderly and disabled populations calculated through a per capita allotment. States may receive a block of funds for a period of 10 years. After 10 years, states that selected the block grant option could revisit whether or not to continue receiving block granted funds or return to a per capita allotment for their full Medicaid population;

• Gives the states the ability to implement optional work requirements for individuals with no dependents for Medicaid programs, which could be satisfied through employment, vocational or skills training, education in pursuit of employment and community service. A state may not impose a work requirement as a condition of receiving medical assistance under Medicaid on pregnant women, children under the age of 19, an individual who is the only parent or caretaker of a child under the age of 6 or who is the only parent or 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. A 5 percent administrative Federal Medical Assistance Percentage will be given to states that choose to implement a work requirement;

• Prevents states from newly opting into Medicaid expansion effective March 1, 2017. (Terminates Obamacare’s mandatory requirement for states to expand Medicaid for certain childless non-disabled, non-elderly, non-pregnant adults up to 133 percent Federal Poverty Level (FPL), but preserves the ability of states to cover Medicaid expansion enrollees (childless non-disabled, non-elderly, non-pregnant adults) at a state’s regular Federal Medical Assistance Percentage. Also sunsets the optional ability for a state to cover adults above 133 percent FPL, effective December 31, 2017);

• Permits beneficiaries who enroll in the expansion prior to December 31, 2019, to be “grandfathered” into the program, ensuring that states will continue to receive enhanced funding levels (90 percent in CY 2020), as long as those individuals remain eligible and enrolled in the program; and

• Increases reimbursement rates under Medicaid for elderly and disabled Medicaid enrollees by increasing the annual inflation factor from CPI-U Medical to CPI-U Medical +1.