California still faces big cuts under revised Senate health bill
The revised Senate health care bill released by Republicans on Thursday largely maintains the dramatic cuts in federal Medicaid spending and premium subsidies as the previous version of the proposal — changes that experts say would lead to millions of poor Californians losing some benefits or paying more for insurance.

The revised Senate health care bill released by Republicans on Thursday largely maintains the dramatic cuts in federal Medicaid spending and premium subsidies as the previous version of the proposal — changes that experts say would lead to millions of poor Californians losing some benefits or paying more for insurance.

But the newly released plan also introduces language, advanced by conservative Sens. Ted Cruz, R-Texas, and Mike Lee, R-Utah, that would allow insurance companies to sell bare-bones plans with lower premiums that do not meet the consumer protection requirements put in place by the Affordable Care Act. To do so, however, the insurers must also offer some plans that do comply with the requirements, which include guaranteed access to coverage for people with pre-existing conditions, and a prohibition on charging sick people more than healthy people.

Health policy experts say this would probably separate the individual insurance market into two pools — younger, healthier people who would buy cheaper, skimpier plans, and older, sicker people who would be paying much higher premiums for the more comprehensive plans. As a result, many sick people would no longer be able to afford insurance, experts said.

“Prior to Obamacare, many states allowed insurers to segment the market legally, and Obamacare eliminated that. So all this proposal is doing is reinstating pre-Obamacare market rules,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “We know what that produces — millions of people who are priced out of the market.”

To address this, the bill would allocate $70 billion to insurance companies to help pay for the higher-cost patients.

However, in California — which has its own regulations mandating what insurance companies must cover — it appears that state law would continue to apply despite the exemptions allowed in the Cruz and Lee proposal, according to the California Department of Insurance.

Covered California, the state health insurance marketplace created under the ACA, would not allow the sale of plans that do not comply with state rules, a spokeswoman said.

States would still have authority to regulate insurance plans, so they could impose more stringent requirements and prevent the exemptions in the Senate bill from taking effect, said Larry Levitt of the Kaiser Family Foundation.

The newly revised bill also includes some additions designed to appeal to both the conservative and moderate Senate Republicans, whose votes are needed to advance the measure. It would send $5 billion a year, for nine years, to states for opioid addiction and treatment services. And it would keep two Affordable Care Act taxes on high earners that the previous version of the bill sought to repeal — a 3.8 percent tax on investment income and a 0.9 percent payroll tax for individuals who earn over $200,000 a year.

Like the previous version of the bill, the Senate measure, called the Better Care Reconciliation Act, would eliminate the requirement to buy insurance, known as the individual mandate, that was enacted by the Affordable Care Act. A similar bill, passed by the House in May, would do the same. Both measures are part of Republicans’ efforts to fulfill their campaign promise to repeal and replace the Affordable Care Act.

Senate Majority Leader Mitch McConnell, R-Ky., tweeted that the plan “will give Americans more tools for managing their own health care, not giving more power to the federal government.”

In California, which operates the nation’s largest Medicaid program, the Senate bill’s biggest impact would be to Medi-Cal, which covers 13.5 million residents — about a third of the state’s population. Like the previous version of the bill, the proposal would cap the amount of federal dollars that each Medicaid enrollee could receive each year, resulting in a 35 percent reduction in federal Medicaid spending in 2036, according to the nonpartisan Congressional Budget Office analysis of the original bill.

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To make up for the drop in federal money, California would have to come up with an additional $30 billion in 2026 to maintain the program’s current benefits.

“In California, the lifeblood for our safety net of public hospitals and clinics is Medi-Cal funds,” said Andrew Bindman, a professor of medicine and health policy at UCSF and a former congressional fellow who helped draft parts of the ACA. “If this bill were to pass, our safety net would be dramatically undermined. We’d more than likely lose institutions that have become dependent on the flow of funds from Medi-Cal to sustain their work.”

The Senate proposal would keep in place the general structure of the ACA subsidies that, in California, go to about 1.5 million residents who buy insurance on Covered California. But it would change the eligibility requirements to receive this assistance, making it no longer available for tens of thousands of low-income people who earn between roughly $42,000 and $48,000 a year. And the subsidies under the Senate bill would be linked to a less generous insurance plan with a higher deductible — meaning even those who would continue to receive the assistance would probably pay higher out-of-pocket costs.

Meanwhile, Sens. Lindsey Graham, R-S.C., and Bill Cassidy, R-La., announced Thursday on CNN that they are working on an alternative repeal-and-replace plan that would retain most of the ACA taxes but funnel the money to states to allow governors to manage their own insurance markets. It is not a formal bill, and could be incorporated into the official Senate measure as an amendment.

The path forward for the Senate Republican bill is narrow. McConnell said Thursday that the chamber will take it up next week, but two GOP senators have already announced their opposition — and one more would prevent the repeal effort from even reaching a procedural motion to proceed.

Catherine Ho is a San Francisco Chronicle staff writer. Email: cho@sfchronicle.com

Twitter: @Cat_Ho