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States – like Congress – are divided on replacing Obamacare

Democratic leaders from both the Senate and House met with President Barack Obama on Wednesday to discuss the future of his signature healthcare law. "They're like the dog who caught the bus," said Schumer of his Republican colleagues who are vowing to im

But it would strip away the individual mandate that requires everyone to have insurance or pay a fine. Democrats say the plan would be unworkable without the mandate, which spreads risk by covering healthy people as well as those with illnesses.

Under the Collins/Cassidy plan, states would decide coverage for their residents. States could chose one of three options, including keeping the Affordable Care Mandate and its requirements. The state would continue to receive federal premium tax credits, cost-sharing subsidies, and Medicaid dollars.

A second option, which Collins said she would expect most states to embrace, would allow states to continue to receive funding equal to 95 percent of federal premium tax credits and cost-sharing subsidies, as well as a federal match for Medicaid expansion. States could choose to receive funds in various forms, including per beneficiary grants or refundable tax credits, but the money would be deposited in patient-directed health savings accounts.

A third option would allow the states to opt out entirely from the federal program and develop their own health care programs, without federal assistance.

The Congressional Budget Office, which has warned that repealing the health care law could lead to 18 million Americans losing insurance, has not reviewed the legislation, but Cassidy said he believes the plan would “bend the cost curve down” by seeing that states are managing costs, along with the federal government.

The bill does not repeal the taxes that pay for Obamacare, including one on medical devices.

“The revenue is essential,” Cassidy said. “If we repeal all the revenue now, that’s obviously going to create a hole.” He said the taxes could be repealed at a later date, possibly as part of larger tax reform bill.

“President Trump has said he wishes to cover all, take care of those with pre-existing conditions without mandates,” Cassidy said. “For that, you need revenue, bottom line.”

Sam Halabi, a professor for the University of Missouri law school, said the Patient Freedom Act may be politically popular but that it lacks the necessary details to determine whether it will succeed at making health care more affordable.

“It is a shrewd first move that looks like it’s keeping some important benefits of Obamacare while fulfilling this promise that Trump and the Republican party made to the American public to at least repeal the parts the public didn’t like,” Halabi said.

Halabi said the Patient Freedom Act never addresses the economic feasibility of repealing the individual mandate while preserving the prohibition on denying coverage due to a pre-existing condition.

But he’s also not sure about the expanded use of health savings accounts or HSAs.

“The real questions about the proposal are going to revolve around the structure of the health savings account alternatives, and how those are going to work for states,” he said.

Another unknown in the Collins and Cassidy proposal is how states would respond to having greater flexibility to create their own health care systems.

Halabi imagined a future where some states would choose to keep the Affordable Care Act while others developed an alternative model.

“It isn’t clear that states would compete on the things you would want them to compete on,” Halabi said. “So it could end up being that states would ultimately construct their health care systems to as to attract the fewest number of sick or non-wealthy patients.

“It’s just a big question,” he added, “as to what putting states in charge of the system, or block grants to states, is really going to look like and what conditions if any the federal government might impose.”

Caiola of the Sacramento Bee reported from Sacramento, California. Chang of the Miami Herald reported from Miami. Lowry of the Wichita Eagle reported from Topeka, Kansas.

Lesley Clark: 202-383-6054, @lesleyclark

Sammy Caiola: 916-321-1636, @SammyCaiola

Bryan Lowry: 785-296-3006, @BryanLowry3

Daniel Chang: 305-376-2012, @dchangmiami

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