Key Senate Republicans Offer Their Plan To Replace Obamacare

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Republicans have offered a wide array of proposals to "repeal and replace" the Affordable Care Act since it became law in 2010. But few have come with the pedigree of the plan just unveiled by a trio of senior Senate Republicans.

The Patient Choice, Affordability, Responsibility and Empowerment Act, or CARE for short, is a proposal being floated by Sens. Richard Burr, R-N.C., Orrin Hatch, R-Utah, and Tom Coburn, R-Okla.

Hatch is the senior Republican on the Senate Finance Committee; Burr is on the health subcommittee of the Health, Education, Labor and Pensions Committee; Coburn is a physician. All three have spent much or all of their legislative careers working on health policy.

"Obamacare just isn't working," Hatch said on the Senate floor Monday afternoon. "Try as he might during tomorrow night's State of the Union address, President Obama will not be able to convince the American people that his health care law is anything other than an unmitigated disaster."

At a briefing for health reporters, aides to the senators said the goal of their proposal is to focus on bringing down costs. Hence the plan would repeal the ACA's requirements that most people have insurance, as well as requirements that insurers offer minimum benefits and employers offer insurance or face potential fines.

The Republican proposal also would eliminate most of the taxes and fees that the law imposes to pay for the generous tax credits offered to help people pay for the required insurance.

And the plan would repeal the requirement that insurers cover people with pre-existing health conditions, although people who remain "continuously covered" for at least 18 months could not be denied or charged more. And while the plan would keep the ACA's ban on insurers' imposing a lifetime limit on insurance benefits, annual limits could return.

The GOP plan offers its own set of tax credits to help those with lower incomes afford coverage, and like those in the ACA, they would be adjusted for age but not for geography. That means the tax credit would be the same across the nation, even though insurance costs differ widely in different parts of the country.

The tax credits also would be available to those earning up to three times the federal poverty line, or $34,470 in 2013. That's less than in the ACA, which provides help for those earning up to four times the poverty level, or $45,960.

The GOP plan also would let insurers charge older people more than the ACA does, which could lower premiums for younger people. The ACA limits premium differences for older people to three times more than those for young people; the GOP proposal would allow premiums for older people to be as much as five times higher, although states could opt for different "age rating," staffers said.

The proposal would leave the Medicare provisions of the health law untouched ("this is not about Medicare," said one of the aides). But it would dramatically remake the Medicaid program, which is undergoing a big expansion as a result of the ACA.

The GOP plan would end the expansion of Medicaid to include all people below a certain income level. It would cap Medicaid's currently unlimited funding, except for the elderly and disabled. States would instead get payments based on the number of low-income families and children, described by staffers as the program's "traditional populations." But there apparently would be no plan to continue insurance for people who are currently signing up for Medicaid in the half of states now expanding the program. Instead, those people would be offered tax credits.

And while the aides insisted that the overall plan is intended to create less disruption for people insured through their jobs, the GOP plan would be financed via a highly controversial mechanism: capping the so-called employer health insurance exclusion at 65 percent. That means that for the average worker, 35 percent of the health insurance benefits that are currently tax-free would instead be considered taxable income.

Economists across the political spectrum have recommended such a change as a way to curb the growing generosity of employer-provided health benefits. But the first small step toward that, a so-called Cadillac tax in the ACA, has proved so radioactive that most people doubt it will ever take effect as scheduled in 2018.