House Republicans on Monday unveiled their long-awaited plan to repeal and replace the Affordable Care Act, scrapping the mandate for most Americans to have health insurance in favour of a new system of tax credits to induce people to buy insurance on the open market.

The bill sets the stage for a bitter debate over the possible dismantling of the most significant health care law in a half-century. In its place would be a health law that would be far more oriented to the free market and would make far-reaching changes to a vast part of the U.S. economy.

The House Republican bill would roll back the expansion of Medicaid that has provided coverage to more than 10 million people in 31 states, effective in January 2020. The bill would effectively scrap the Affordable Care Act’s unpopular “individual mandate,” eliminating tax penalties for people who go without health insurance. The requirement for larger employers to offer coverage to their full-time employees would also be eliminated.

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People who let their insurance coverage lapse, however, would face a significant penalty: Insurers could increase their premiums by 30 per cent. In that sense, Republicans would replace a penalty for not having insurance with a new penalty for allowing insurance to lapse.

The bill would also cut off federal funds to Planned Parenthood clinics through Medicaid and other government programs for one year. House Republican leaders intend to keep three of the Affordable Care Act’s most popular provisions: the prohibition on barring insurance for pre-existing conditions or imposing lifetime coverage caps, and the rule allowing young people to remain on their parents’ health plans until age 26.

But Republicans hope to undo major parts of President Barack Obama’s signature domestic achievement, including income-based tax credits that help millions of Americans buy insurance, taxes on people with high incomes and the penalty for people who do not have health coverage.

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Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states. And people with pre-existing medical conditions would face new uncertainties in a more deregulated insurance market.

“Obamacare is a sinking ship, and the legislation introduced today will rescue people from the mistakes of the past,” said Rep. Kevin McCarthy of California, the House majority leader.

Democrats denounced the effort as a cruel attempt to strip Americans of their health care.

“Republicans will force tens of millions of families to pay more for worse coverage — and push millions of Americans off of health coverage entirely,” said Rep. Nancy Pelosi of California, the House Democratic leader.

Two House committees — Ways and Means and Energy and Commerce — plan to take up the legislation Wednesday. House Republicans hope the committees will approve the measure this week, clearing the way for the full House to act on it before a spring break scheduled to begin on April 7. The outlook in the Senate is less clear. Democrats want to preserve the Affordable Care Act, and a handful of Republican senators have expressed serious concerns about the House bill.

Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age because health care becomes more expensive as people grow older. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.

Republicans did not offer any estimate of how much their plan would cost, or how many people would gain or lose insurance. The two House committees plan to vote on the legislation without having estimates of its cost from the Congressional Budget Office, the official scorekeeper on Capitol Hill.

But they did get the support from President Donald Trump that they badly need to win House passage.

“Obamacare has proven to be a disaster with fewer options, inferior care, and skyrocketing costs that are crushing small business and families across America,” said White House press secretary Sean Spicer. “Today marks an important step toward restoring health care choices and affordability back to the American people.”

The release of the legislation is a step toward fulfilling a campaign pledge — repeal and replace — that has animated Republicans since the Affordable Care Act passed in 2010. But it is far from certain that Republican lawmakers will be able to get on the same page and repeal the health measure.

On Monday, four Republican senators — Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska — signed a letter saying a House draft that they had reviewed did not adequately protect people in states like theirs that have expanded Medicaid under the Affordable Care Act.

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Three conservative Republicans in the Senate — Mike Lee of Utah, Rand Paul of Kentucky and Ted Cruz of Texas — had expressed reservations about the House’s approach.

In the House, Republican leaders will have to contend with conservative members who have already been vocal about their misgivings about the legislation being drawn up. “Obamacare 2.0,” Rep. Justin Amash posted on Twitter on Monday.

Rep. Mark Meadows, chairman of the conservative House Freedom Caucus, also offered a warning Monday, joining Paul to urge that Republican leaders pursue a “clean repeal” of the health care law. Even the new approach they view as a big government program.

“Conservatives don’t want new taxes, new entitlements and an ‘ObamaCare Lite’ bill,” they wrote on the website of Fox News. “If leadership insists on replacing ObamaCare with ObamaCare-lite, no repeal will pass.”

The move to strip Planned Parenthood of funding and the plan’s provisions to reverse tax increases on the high-income taxpayers will also expose Republicans in more moderate districts to Democratic attacks.

The bill would provide each state with a fixed allotment of federal money for each person on Medicaid, the federal-state program for more than 70 million low-income people. The federal government would pay different amounts for different categories of beneficiaries, including children, older Americans and people with disabilities.

The bill would also repeal subsidies that the government provides under the Affordable Care Act to help low-income people pay deductibles and other out-of-pocket costs for insurance purchased through the public marketplaces. Eliminating these subsidies would cause turmoil in insurance markets, insurers and consumer advocates say.

However, the House Republicans would provide states with $100 billion over nine years, which states could use to help people pay for health care and insurance.

The tax credits proposed by House Republicans would start at $2,000 a year for people younger than 30 and would rise to a maximum of $4,000 for people 60 and older.

Even with those credits, Democrats say, many people would find insurance unaffordable. But Republicans would allow insurers to sell a leaner, less expensive package of benefits and would allow people to use the tax credits for insurance policies covering only catastrophic costs.

While Republicans have argued over how to proceed, Trump has expressed only vague goals for how to repeal the Affordable Care Act and improve the nation’s health care system. On Capitol Hill, lawmakers and their aides are waiting to see whether he uses his platform, Twitter account and all, to press reluctant Republicans to get behind the House plan.

The new version of the House Republican bill makes several changes to earlier drafts of the legislation.

It drops a proposal to require employees with high-cost employer-sponsored health insurance to pay income and payroll taxes on some of the value of that coverage. In addition, it would delay a provision of the Affordable Care Act that imposed an excise tax on high-cost insurance plans provided by employers to workers.

Congress had already delayed this “Cadillac tax” — despised by employers and labour unions alike — by two years, to 2020. The new legislation would suspend the tax from 2020 through 2024.

House Republicans would offer tax credits to help people buy insurance if they did not have coverage available from an employer or a government program. Under earlier versions of the bill, the tax credits increased with a person’s age, but would not have been tied to income. Backbench Republicans said the government should not be providing financial assistance to people with high incomes.

Accordingly, under the new version of the bill, the tax credits would be reduced and eventually phased out.

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