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(Update: 9/24/2017) Amendments have been added to the original version of this legislation and can be found at the bottom of the summary. This bill page represents Senate Republicans’ proposed amendment to the House-passed American Health Care Act, commonly known as Graham-Cassidy. It would gradually repeal the structure of the Affordable Care Act (aka Obamacare) and replace it with a block grant given annually to states to help individuals pay for healthcare. The bill would repeal Obamacare’s individual and employer mandates along with the medical device tax, improve the ability of states to get waivers from Obamacare regulations, protect patients with pre-existing medical conditions, and equalize the treatment between Medicaid expansion and non-expansion states through the block grant system. Obamacare’s Medicaid expansion, cost-sharing reduction program, and premium tax credits would end on December 31, 2019.

Block Grants

Federal block grants would be provided annually to states to help individuals pay for healthcare, giving states significant discretion over how to best use those funds to provide for the needs of patients in each state. Grant funding would be run through the Children’s Health Insurance Program (CHIP) and would be subject to the appropriations process. The total federal grant funding would replace what’s currently being spent on Medicaid expansion, tax credits, and cost-sharing reduction subsidies.

States would be able to use the money from their block grant to:

Assist individuals in purchasing health insurance coverage with premium support (like tax credits, cost-sharing reduction (CSR) payments, etc.) including for plans that don't meet Obamacare's required benefits like maternity care, mental health coverage, and prescription drugs;
Enter into agreements with insurers, including managed care providers, to encourage market participation;
Pay healthcare providers;
Help with out-of-pocket costs, and potentially modify the federal cap on out-of-pocket costs;
High risk or reinsurance pools, or multiple risk pools;
Help the traditional Medicaid population with up to 20 percent of the funds.

To get the federal block grants, states would have to certify that funds would only be used on allowed activities and that none were used for prohibited activities. States would have to describe how they will regulate plans using funds in the block grant, including how they'll maintain access to adequate and affordable coverage for individuals with pre-existing conditions.

The distribution of funding would start at a level dependent on the amount received in 2017 through the Medicaid expansion, ACA tax credits, and CSR payments before eventually converging to a base rate in 2026 at which each state will receive the same amount of money for each beneficiary between 50 and 138 percent of the federal poverty level (FPL). To ease the transition, the incremental increase in total national funding available is distributed evenly each year between 2020 and 2026.

Starting in 2021, the total number of eligible beneficiaries between 50 and 138 percent of the FPL in the U.S. would be calculated each year. Then, the percentage of those in each state is calculated and the total amount of federal money is multiplied by the state’s percentage to determine the amount of the state’s funding for the year.

Also beginning in 2021, a risk adjustment formula would be applied to block grant amounts which accounts for factors like disease burden, age, regional cost of living, and gender. It could adjust the per-beneficiary amount that’s the basis for the block grant by 10 percent over and below the mean for all states. The Centers for Medicare and Medicaid Services (CMS) would be responsible for developing the formula over the next three years and it’d be based on information in the Transformed Medicaid Statistical Information System.

The following amounts would be appropriated for block grants:

Fiscal year 2020: $136 billion;
Fiscal year 2021: $146 billion;
Fiscal year 2022: $157 billion;
Fiscal year 2023: $168 billion;
Fiscal year 2024: $179 billion;
Fiscal year 2025: $190 billion;
Fiscal year 2026: $200 billion.

Medicaid

The Obamacare Medicaid expansion would end on December 31, 2019 and no state would be allowed to expand after September 1, 2017. States that expanded pre-Obamacare would get a match rate of 90 percent in 2018 and 2019, after which point the match rate would go to 0 percent.

Starting in fiscal year 2020, federal Medicaid funding would be reformed to a per capita model based on enrollees (currently the federal government matches state spending dollar-for-dollar). States would have targeted spending amounts that increase annually by an inflation factor which varies based on enrollee category, and if states exceed their targeted amount they would receive reduced block grants the following fiscal year.

Starting October 1, 2017 states would be allowed to require non-disabled, non-elderly, non-pregnant individuals to satisfy a work requirement as a condition of receiving Medicaid medical assistance. Individuals would be exempt if they’re pregnant (and 60 or fewer days postpartum), under age 19, the sole parent or caretaker of a disabled child under age 6, under age 20 and enrolled in secondary school or employment-related education, in drug or alcohol rehabilitation, or a full-time student at an institution of higher education.

Taxes

The following tax provisions would be affected by this legislation:

The 2.3 percent excise tax on medical devices -- which is currently delayed through December 31, 2017 -- would be repealed.
Business-expense deductions for retiree prescription drug costs would be reinstated without reduction by the amount of any federal subsidy.
Small business health insurance tax credits would be repealed as of January 1, 2020, and in the meantime would only be available to purchase health plans that don’t cover abortions except for those necessary to save the mother’s life or for pregnancies resulting from rape or incest.
Premium tax credits would be repealed as of January 1, 2020, and in the meantime would only be available to purchase health plans that don’t cover abortions except for those necessary to save the mother’s life or for pregnancies resulting from rape or incest.

Health Savings Accounts

The following provisions would apply to health savings accounts:

Taxes on Archer Medical Savings Accounts and Health Savings Accounts would be lowered to 15 percent and 10 percent taxes, respectively. The lower rates would apply to distributions made after December 31, 2016.
The requirement that only prescription drugs be be considered qualified expenses from tax-advantaged health accounts would be eliminated, allowing individuals to use health savings accounts to purchase over-the-counter medications.
Limits on contributions to health savings accounts would be increased to $6,650 and $13,300 for individuals and families, respectively. Funds from such accounts could be spent on health insurance premiums, including catastrophic plans.

Other provisions of this bill include:

Abortion providers such that perform abortion in cases that don’t meet the Hyde Amendment’s exception for federal payment (cases of rape, incest, to save the mother’s life), such as Planned Parenthood, wouldn’t receive federal funding for one year.
All individuals would be allowed to enroll in a low-premium catastrophic health insurance plan beginning on or after January 1, 2019.
An additional $422 million for fiscal year 2017 would be provided to the Community Health Center Fund.
Obamacare’s Prevention and Public Health Fund would be repealed.

Amendments

A total of $500 million would be available to states that set up 1332 waiver systems under Obamacare, with Alaska and Hawaii being the only states to have done so. States that recently expanded Medicaid would have $750 million available to them in each fiscal year from 2023-2026.

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Graham-Cassidy: Repealing Obamacare and Giving States Block Grants to Help People Buy Health Insurance