The Act’s sponsors, Senator Richard Burr (R-NC), Senator Orrin Hatch (R-Utah) and Representative Fred Upton (R-Mich.), introduced an outline of their plan. As this issue went to press, however, none had introduced it as a legislative bill in their respective houses. The following information was current as of early April.
The Patient CARE Act would not require individuals to buy coverage. It also would not require businesses to provide health insurance for their employees. There would be no penalties for failing to have or provide coverage. Although the Patient CARE Act would repeal the Affordable Care Act, it would keep some of the popular changes ushered in by the Affordable Care Act. Affordable Care Act changes the Patient CARE Act would keep include:
- Prohibiting insurers from denying coverage based on a pre-existing medical condition.
- Eliminating lifetime coverage limits on health insurance policies.
The Patient CARE Act would also take the following cost-reduction measures:
- Eiminate “mandated benefits,” or a list of benefits that health insurance policies must cover. It would also eliminate the ACA’s prohibition on annual coverage limits for health insurance policies. This would lower premium costs, but could increase out-of-pocket costs for less-healthy individuals.
- Make it more difficult to qualify for subsidized coverage. The Affordable Care Act offers “advance premium tax credits” for people whose income is up to four times the federal poverty level. The Patient CARE Act would limit eligibility to people whose income is up to three times the federal poverty level.
- Allow states to opt out of the requirement to offer coverage to dependents up to age 26. The Affordable Care Act requires health insurance plans in all states to offer coverage to dependents until age 26. The Patient CARE Act would continue this requirement for health plans, unless the state opted out of the requirement.
- Eliminate certain taxes created by the Affordable Care Act. These include the 2.3 percent excise tax on the medical device industry and certain taxes and fees on pharmaceutical companies. For individuals, the Act would eliminate the Net Investment Income Tax and Additional Medicare Tax. The Net Investment Income Tax is a tax of 3.8 percent that applies to certain net investment income of individuals, estates and trusts. An individual must have a modified adjusted gross income over $200,000 for the tax to apply. The Additional Medicare Tax of 0.9 percent applies to wages, self-employment income and Railroad Retirement Tax Act compensation over $250,000 for married taxpayers filing jointly, $125,000 for married filing separately and $200,000 for all others.
- Lower the tax on so-called “Cadillac plans.” These taxes recognize that employer-paid health plans that provide “rich” benefits with few or no out-of-pocket costs give insureds little incentive to control their medical spending. The ACA imposes a 40 percent excise tax on Cadillac plans, paid by health insurers or self-insured employer groups. The Patient CARE Act would instead include the cost of coverage that exceeds a threshold in an employee’s income. Employees could receive up to $12,000 in employer-sponsored individual coverage per year tax-free and up to $30,000 for family coverage. Employees would pay taxes at their regular income tax rate on any coverage costs over that amount.
- Allow individuals to use funds in a tax-advantaged medical spending accounts for over-the-counter drugs when prescribed by a licensed healthcare provider. This would apply to flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and Archer Medical Savings Accounts (MSAs).
- Reform medical malpractice laws to reduce the cost of “defensive medicine.” Defensive medicine consists of unnecessary medical tests medical providers do to protect themselves from unwarranted malpractice lawsuits. In a 2014 issue brief, the nonpartisan National Conference of State Legislatures estimated medical liability system costs eat up 2.4 to 10 percent of total health spending. This includes settlements, legal and administrative costs and defensive medicine.
- Would allow Medicaid-eligible individuals the option of using the health tax credit to help buy private insurance. The Affordable Care Act requires Medicaid-eligible people to enroll in Medicaid.
- Would create a “continuous coverage protection.” This would prohibit insurers from medically underwriting an individual who moves from one health plan to another (whether an individual, small group or large employer plan) with no significant break in coverage. This means insurers will not be able to deny coverage or require a person to pay higher premiums because of a pre-existing medical condition. The proposal does not define a “significant break” in coverage. The Affordable Care Act prohibits insurers from refusing to cover an individual or charge more because they have a pre-existing condition.
Since the Patient CARE Act is a proposal and not yet a bill, the Congressional Budget Office cannot calculate its cost or effects on the healthcare system.