A New Republican 
Health Care Alternative

On Monday, Jan. 27, 2014, a group of Republican senators—Sens. Richard Burr (NC), Tom Coburn (OK), and Orrin Hatch (UT)—announced an alternative to the Affordable Care Act called the Patient Choice, Affordability, Responsibility, and Empowerment Act. The proposal has received considerable press as the first substantive proposal by Republicans to replace the Affordable Care Act (ACA) and could serve as a foundation for future legislative efforts should Republicans regain control of the Senate in November. The proposal hasn’t evolved into full-fledged legislative language, and the Congressional Budget Office has not estimated its cost; rather, at this point, it is serving as a white paper for discussion. It differs from Obamacare in that there are no exchanges or essential benefit requirements mandated under this plan. Medicaid expansion is optional for states and limited to pregnant women and children below the federal poverty level (FPL). Tax credits are the primary vehicle for expanded coverage. Subsidies for coverage are less generous. Industry taxes are repealed and replaced by a cap on the tax exclusion for employer-sponsored coverage. The overall cost or impact on the uninsured population has not been determined by the Congressional Budget Office. Here is a rundown of the key titles in the bill: Title I: Repeal Obamacare—The proposal would repeal all of the provisions in the ACA except its changes to Medicare (e.g., expansion of the Medicare DME competitive bidding program). Title II: Replace Obamacare with Sustainable, Patient-Centered Reforms—Overall, the proposal is similar to previous Republican efforts to reform health care and maintains several of the insurance reforms currently in place. Notably, it includes federal funding for state high-risk pools, ability for small businesses to come together to negotiate small business plans, and state flexibility to enter into compacts for individuals to purchase insurance across state lines. Title III: Modernize Medicaid to Provide Better Coverage and Care to Patients—The proposal would transition Medicaid to a block grant system, in keeping with various Republican proposals from House conservatives and the Republican Governors Association. States would adopt a capped allotment, where federal Medicaid dollars would “follow-the-patient based on the patient’s health status, age and life circumstances.” Under the Patient CARE proposal, states would continue to receive grants for pregnant women, low-income children and low-income families, while the original pre-ACA funding formula for the acute care of low-income elderly and disabled individuals would be restored. Grant funds would be distributed to states based on the number of individuals with incomes at 100 percent of the poverty level or lower. Unlike the ACA, individuals who qualify for Medicaid would have the option of taking that coverage or using the tax credits to help buy a plan. Title IV: Reduce Defensive Medicine Practices and Getting Rid of Junk Lawsuits—The proposal envisions adopting a range of potential solutions to tackle the problem of junk lawsuits and defensive medicine. Regarding medical liability reforms, states could establish expert panels to provide an avenue for swift resolution informed by individuals qualified to evaluate the type of alleged injury. States could also elect to establish a state Administrative Health Care Tribunal, or health court, presided over by a judge with health care expertise who can commission experts and make the same binding rulings that a state court can make. States could also encourage settlement of medical malpractice cases sooner by adopting patient compensation system reforms modeled after worker’s compensation. Title V: Increasing Price Transparency to Empower Consumers and Patients—In an effort to address increased consumerism in health care, the proposal would adopt new measures to increase transparency on cost, quality, and outcomes. Health insurance plans would be required to disclose covered items and services, any plan limitations or restrictions, potential cost sharing, the actual cost of services, the claims appeal process, as well as the number and type of providers participating in the plan. Meanwhile, states would be incentivized with enhanced Medicaid grants if they establish and maintain requirements regarding the disclosure of information on hospital charges and make such information publicly available, and provide individuals with information about estimated out-of-pocket costs of health care services. Finally, hospitals which participate in Medicare must provide consumers the average amount paid by uninsured and insured patients for the most common inpatient and outpatient procedures. They would also be required to publicly post their charity care policies along with the amount of charity care provided. Title VI: Reducing A Distortion in the Tax Code That Increases Health Costs—Presently, the federal government does not tax health insurance when it is provided to an employee by an employer. In order to fund the tax credits provided under Title II, the proposal would limit the tax exclusion to 65 percent of the average health insurance plan. The value of employer-sponsored health insurance would be capped and indexed to grow at an annual rate of CPI +1. The plan would repeal the ACA employer mandate to prevent the erosion of employer-sponsored coverage.