Problem Solvers Caucus Finds Bipartisan Compromise on Health Care

The bipartisan Problem Solvers Caucus last week released a plan to stabilize the individual insurance market and make other changes to health care laws. The caucus, led by Representatives Josh Gottheimer (D-NJ) and Tom Reed (R-NY), proposes to make five key changes to the Affordable Care Act (ACA or “Obamacare”) that would give more latitude to states to reform their individual markets, loosen the mandate that medium-sized employers offer insurance to their employees, and repeal the ACA’s medical device tax, among other changes.

Importantly, the Problem Solvers Caucus also calls for these changes to be paid for. They do not specify precise offsets, but they provide a list of items for discussion that centers around changes to Medicare.

The Details

Building off areas where Republicans and Democrats found agreement in the debate over repealing and replacing the ACA, the proposal includes priorities from each party.

First, the proposal would provide certainty for cost-sharing reductions (CSRs) – an issue where uncertainty is causing insurers to increase premiums. The proposal would make the payments a mandatory appropriation. The Trump Administration has flirted with the idea of abandoning paying insurers for CSRs, which may raise premiums significantly, but this plan would eliminate that uncertainty by ensuring payments will continue. Since the Congressional Budget Office’s (CBO) baseline assumes that these payments will be made, this would not count as a cost under scoring conventions.

Second, the proposal would borrow a policy from most of the ACA repeal and replacement plans in creating a stability fund that could be used for reinsurance programs or other means of lowering premiums and out-of-pocket costs. States would be able to use the stability fund to find the best way to stabilize their individual markets. Fewer details are provided on how much funding there would be, but presumably there would be enough for states to have a positive effect.

Third, the proposal would weaken the employer mandate that requires employers to offer insurance if they have 50 or more employees by raising the threshold to 500. They would also change the definition of what constitutes a full-time employee for this purpose, raising the threshold from those that work a 30-hour week to those who work a 40-hour week. The first policy would likely have significant costs as a result of fewer firms paying the mandate penalty, and the second policy was estimated in 2015 to cost $53 billion over ten years.

Fourth, the plan would eliminate the medical device tax. Although the tax went into effect in 2012, it has been on hold since 2016 and is scheduled to return in 2018. Repeal was also included in all of the iterations of ACA repeal and replacement plans and would cost $20 billion over ten years.

Finally, the proposal recommends changes to the ACA’s Section 1332 waiver authority, which allows states to experiment with health care changes if they are budget neutral and provide the same amount of coverage. This change would likely loosen the criteria for waiver approval so that further experimentation could take place. Additionally, the proposal would require the Department of Health and Human Services (HHS) to release guidelines for Section 1333 of the ACA, which allows states to enter into compacts that let companies sell insurance products across state lines.

Paying for the Changes

Any changes that policymakers wish to make – including the ones above – should be fully offset so that they do not add to the nation’s growing debt. The combined items above will likely cost more than $100 billion over ten years, so they will need similarly large offsets.

The Problem Solvers Caucus voiced their commitment to paying for the changes, specifically citing Medicare policies like encouraging generic drug use over brand-name drugs, closing the Medicare Part D “donut hole” before 2020, bundling payments for post-acute care, reducing coverage of bad debts, and increasing competition in Medicare Advantage. They also point to increasing limits on how much ACA premium tax credit overpayments can be recaptured as an additional offset.

All of the options above are good examples of pay-fors that should considered for offsetting the costs. We have also come up with additional ways to reduce Medicare spending without cutting benefits and pay for the Senate’s health reform bill, including ideas that improve the health care system while reducing spending.

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The Problem Solvers Caucus deserves a great deal of credit for coming to a bipartisan solution to address the problems facing the individual insurance market, and we commend them for committing to pay for their proposal. Rising health care costs continue to be one of the key drivers of the debt, and these changes could help curb cost growth in the individual market.