Provisions of the Senate Amendment to
H.R. 3762
Annie L. Mach, Coordinator
Analyst in Health Care Financing
December 9, 2015
Congressional Research Service
7-5700
www.crs.gov
R44300

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Provisions of the Senate Amendment to H.R. 3762

Summary
The FY2016 budget resolution (S.Con.Res. 11) established the congressional budget for the
government for FY2016 and set forth budgetary levels for FY2017-FY2025. It also included
reconciliation instructions for House and Senate committees to submit changes in laws to reduce
the federal deficit to their respective budget committees.
Specifically, S.Con.Res. 11 instructed three committees of the House and two committees of the
Senate to submit changes in laws within each committee’s jurisdiction to reduce the deficit by not
less than $1 billion for the period FY2016-FY2025. Additionally, S.Con.Res. 11 provided that
these committees shall “note the policies discussed in title VI [of S.Con.Res. 11] that repeal the
Affordable Care Act and the health care related provisions of the Health Care and Education
Reconciliation Act of 2010” and “determine the most effective methods” by which these
provisions “shall be repealed in their entirety.”
On October 23, 2015, the House passed the Restoring Americans’ Healthcare Freedom
Reconciliation Act of 2015 (H.R. 3762). The bill would repeal several provisions of the Patient
Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), and it could restrict federal
funding for the Planned Parenthood Federation of America (PPFA) and its affiliates and clinics
for a period of one year. The bill also would appropriate an additional $235 million for each of
FY2016 and FY2017 to the Community Health Center Fund. The Congressional Budget Office
(CBO) and the Joint Committee on Taxation (JCT) estimate that H.R. 3762 would reduce federal
deficits by $78.1 billion over the 2016-2025 period.
In lieu of action on a Senate reconciliation bill, on December 1, 2015, the Senate majority leader
made a motion to proceed to the consideration of H.R. 3762. The motion was non-debatable and
was approved by voice vote. The majority leader then offered an amendment encompassing the
recommendations of the instructed Senate committees as a substitute for the House language
(S.Amdt. 2874). Over the course of December 1, 2, and 3, the Senate debated this substitute and
considered a number of amendments. On December 3, Senator Enzi, chairman of the Budget
Committee, offered an amendment for himself and the majority leader as a substitute for S.Amdt.
2874 (S.Amdt. 2916). On a point of order, a section of S.Amdt. 2874 concerning repeal of certain
premium-stabilization programs was stricken, but the remainder of the amendment was
subsequently adopted by the Senate by voice vote. The Senate then voted to pass the bill, 52-47.
Similar to H.R. 3762, the Senate amendment to H.R. 3762 would repeal several provisions of the
ACA, could restrict federal funding for PPFA and its affiliated clinics for a period of one year,
and would appropriate an additional $235 million for each of FY2016 and FY2017 to the
Community Health Center Fund. Unlike the House bill, the Senate bill includes many more ACA
amendments or repeal provisions, as well as other non-ACA provisions. CBO and JCT estimate
that the Senate bill would reduce federal deficits by $281.6 billion over the 2016-2025 period.
This report includes a table listing all provisions in H.R. 3762 and the Senate amendment to H.R.
3762 that would amend or repeal ACA provisions. It also provides a brief explanation of the
provisions included in the Senate Amendment to H.R. 3762. For information about H.R. 3762,
see CRS Report R44238, Potential Policy Implications of the House Reconciliation Bill (H.R.
3762), coordinated by Annie L. Mach.

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Provisions of the Senate Amendment to H.R. 3762

Contents
Reconciliation and the ACA ............................................................................................................ 2
Summary of Provisions in the Senate Amendment to H.R. 3762 .................................................... 6
Title I—Health, Education, Labor, and Pensions ...................................................................... 6
Section 101: The Prevention and Public Health Fund ........................................................ 6
Section 102: Community Health Center Program .............................................................. 6
Section 103: Territories ....................................................................................................... 7
Section 104: Reinsurance, Risk Corridor, and Risk Adjustment Programs ........................ 7
Section 105: Support for State Response to Substance Abuse Public Health Crisis
and Urgent Mental Health Needs ..................................................................................... 8
Title II—Finance ....................................................................................................................... 8
Section 201: Recapture Excess Advance Payments of Premium Tax Credits .................... 8
Section 202: Premium Tax Credit and Cost-Sharing Subsidies .......................................... 9
Section 203: Small Business Tax Credit ........................................................................... 10
Section 204: Individual Mandate ...................................................................................... 10
Section 205: Employer Mandate ........................................................................................ 11
Section 206: Federal Payments to States ........................................................................... 11
Section 207(1): Medicaid Funding for Territories ............................................................ 13
Section 207(2)(A), 207(2)(C), and 207(3): Medicaid ACA Eligibility Provisions ........... 13
Section 207(4) and 207(5): Various Federal Medicaid Matching Rate Provisions ........... 14
Section 207(2)(B), 207(6), and 207(8): Medicaid ACA Enrollment
Facilitation Provisions ................................................................................................... 15
Section 207(7): Amendments to Medicaid Benchmark Coverage .................................... 16
Section 208: Repeal of Medicaid Disproportionate Share Hospital
Allotment Reductions .................................................................................................... 17
Section 209: Repeal of the Tax on Employee Health Insurance Premiums and
Health Plan Benefits ...................................................................................................... 17
Section 210: Repeal of Tax on Over-the-Counter Medications ........................................ 18
Section 211: Repeal of Tax on Health Savings Accounts ................................................. 18
Section 212: Repeal of Limitations on Contributions to Flexible Spending
Accounts ........................................................................................................................ 18
Section 213: Repeal of Tax on Prescription Medications ................................................. 19
Section 214: Repeal of Medical Device Excise Tax ......................................................... 19
Section 215: Repeal of Health Insurance Tax ................................................................... 19
Section 216: Repeal of Elimination of Deduction for Expenses Allocable to
Medicare Part D Subsidy ............................................................................................... 20
Section 217: Repeal of Chronic Care Tax ......................................................................... 21
Section 218: Repeal of Medicare Tax Increase ................................................................. 21
Section 219: Repeal of Tanning Tax ................................................................................. 21
Section 220: Repeal of Net Investment Tax ...................................................................... 21
Section 221: Remuneration ............................................................................................... 22
Section 222: Economic Substance Doctrine ..................................................................... 22
Section 223: Budgetary Savings for Extending Medicare Solvency ................................ 23

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Provisions of the Senate Amendment to H.R. 3762

Tables
Table 1. ACA Provisions Affected by H.R. 3762, the Senate Amendment to H.R. 3762,
or Both .......................................................................................................................................... 2

Contacts
Author Contact Information .......................................................................................................... 24
Acknowledgments ......................................................................................................................... 24

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Provisions of the Senate Amendment to H.R. 3762

he FY2016 budget resolution (S.Con.Res. 11) established the congressional budget for the
federal government for FY2016 and set forth budgetary levels for FY2017-FY2025. It also
T included reconciliation instructions for House and Senate committees to submit changes in
laws to reduce the federal deficit to their respective budget committees.
Specifically, S.Con.Res. 11 instructed three committees of the House and two committees of the
Senate to submit changes in laws within each committee’s jurisdiction to reduce the deficit by not
less than $1 billion for the period FY2016-FY2025.1 Additionally, S.Con.Res. 11 provided that
these committees shall “note the policies discussed in title VI [of S.Con.Res. 11] that repeal the
Affordable Care Act and the health care related provisions of the Health Care and Education
Reconciliation Act of 2010” and “determine the most effective methods” by which these
provisions “shall be repealed in their entirety.”
On October 23, 2015, the House passed the Restoring Americans’ Healthcare Freedom
Reconciliation Act of 2015 (H.R. 3762).2 The bill would repeal several provisions of the Patient
Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), and it could restrict federal
funding for the Planned Parenthood Federation of America (PPFA) and its affiliates and clinics
for a period of one year.3 The bill also would appropriate an additional $235 million for each of
FY2016 and FY2017 to the Community Health Center Fund. The Congressional Budget Office
(CBO) and the Joint Committee on Taxation (JCT) estimate that H.R. 3762 would reduce federal
deficits by $78.1 billion over the 2016-2025 period.4
In lieu of action on a Senate reconciliation bill, on December 1, 2015, the Senate majority leader
made a motion to proceed to the consideration of H.R. 3762. The motion was non-debatable and
was approved by voice vote. The majority leader then offered an amendment encompassing the
recommendations of the instructed Senate committees as a substitute for the House language
(S.Amdt. 2874). Over the course of December 1, 2, and 3, the Senate debated this substitute and
considered a number of amendments. On December 3, Senator Enzi, chairman of the Budget
Committee, offered an amendment for himself and the majority leader as a substitute for S.Amdt.
2874 (S.Amdt. 2916). On a point of order, a section of S.Amdt. 2874 concerning repeal of certain
premium-stabilization programs was stricken, but the remainder of the amendment was
subsequently adopted by the Senate by voice vote. The Senate then voted to pass the bill, 52-47.
Similar to H.R. 3762, the Senate amendment to H.R. 3762 would repeal several provisions of the
ACA, could restrict federal funding for PPFA and its affiliated clinics for a period of one year,
and would appropriate an additional $235 million for each of FY2016 and FY2017 to the
Community Health Center Fund. However, the Senate bill includes many more ACA amendments

1 The three House committees are the Committees on Education and the Workforce, Energy and Commerce, and Ways
and Means. The two Senate committees are the Committees on Finance and on Health, Education, Labor, and Pensions
(HELP).
2 For information about H.R. 3762, see CRS Report R44238, Potential Policy Implications of the House Reconciliation
Bill (H.R. 3762), coordinated by Annie L. Mach.
3 For more information on Planned Parenthood Federation of America and the services its facilities provide, see CRS
Report R44295, Factors Related to the Use of Planned Parenthood Affiliated Health Centers (PPAHCs) and Federally
Qualified Health Centers (FQHCs), by Elayne J. Heisler.
4 Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT), Estimate of Direct Spending and
Revenue Effects of H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act, As Passed by the
House and Following Enactment of the Bipartisan Budget Act of 2015, November 4, 2015, at https://www.cbo.gov/
sites/default/files/114th-congress-2015-2016/costestimate/hr3762aspassed.pdf.
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link to page 6 Provisions of the Senate Amendment to H.R. 3762

or repeal provisions, as well as other non-ACA provisions. CBO and JCT estimate that the Senate
bill would reduce federal deficits by $281.6 billion over the 2016-2025 period.5
This report includes a table listing all provisions in H.R. 3762 and the Senate amendment to H.R.
3762 that would amend or repeal ACA provisions. It also provides a brief explanation of the
provisions included in the Senate Amendment to H.R. 3762. For information about H.R. 3762,
see CRS Report R44238, Potential Policy Implications of the House Reconciliation Bill (H.R.
3762), coordinated by Annie L. Mach.
Reconciliation and the ACA
Table 1 lists the ACA provisions that would be modified or repealed by H.R. 3762, the Senate
amendment to H.R. 3762, or both. Neither bill would repeal the ACA in its entirety. The
provisions included in the Senate bill are described in more detail in the subsequent section.
Table 1. ACA Provisions Affected by H.R. 3762, the Senate Amendment to H.R. 3762,
or Both
ACA Provision
H.R. 3762
Senate Amendment to H.R. 3762
General Provisions
42 U.S.C.
Prevention and
Section 101 would eliminate the
Section 101 would repeal all PPHF
Section 300u-
Public Health Fund authority and permanent annual
appropriations for FY2016 and subsequent
11
(PPHF)
appropriation for the PPHF and
fiscal years; rescinds any unobligated PPHF
rescinds any unobligated funds for
balances from prior years
the fiscal year in which the bil is
enacted
26 U.S.C.
Individual Mandate
Section 201 would repeal the
Section 204 would effectively eliminate the
Section 5000A
individual mandate and its
penalty for noncompliance with the
associated penalty, effective January
individual mandate by reducing it to $0,
1, 2015
effective January 1, 2015
26 U.S.C.
Employer Mandate Section 202 would repeal the
Section 205 would modify the tax penalty
Section 4980H
employer mandate, effective January associated with the employer mandate,
1, 2015
effectively eliminating it by reducing the
penalties to $0 beginning in calendar year
2015
Subchapter E
Medical Device
Section 203 would repeal the tax,
Section 214 would repeal the tax, effective
of IRC
Tax
effective in calendar quarters
for sales in calendar quarters beginning after
Chapter 32
beginning after the bil is enacted
December 31, 2015
26 U.S.C.
Excise Tax on
Section 204 would repeal the tax,
Section 209 would repeal the tax, effective
Section 4980I
High-Cost
effective January 1, 2015
taxable years beginning after December 31,
Employer-
2017
Sponsored
Coverage
42 U.S.C.
Territories
No provision
Section 103 would provide that the section
Section 18043
of the ACA providing funding for territories
would have “no force or effect” as of
January 1, 2018

5 CBO and JCT, Estimate of Direct Spending and Revenue Effects of H.R. 3762, The Restoring Americans’ Healthcare
Freedom Reconciliation Act, as Passed by the Senate on December 3, 2015, December 8, 2015.
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Provisions of the Senate Amendment to H.R. 3762

ACA Provision
H.R. 3762
Senate Amendment to H.R. 3762
42 U.S.C.
Reinsurance
No provision
Section 104 would prohibit the HHS
Section 18061
Program
Secretary from col ecting fees and making
payments under the reinsurance program,
effective January 1, 2016
26 U.S.C.
Reconciliation of
No provision
Section 201 would temporarily repeal the
Section 36B
Premium Tax
repayment limits for qualifying individuals
Credits
who receive excess premium tax credits,
effective taxable years ending after
December 31, 2015 and before January 1,
2018
26 U.S.C.
Premium Tax
No provision
Section 202 would repeal authorization for
Section 36B
Credits
the premium tax credits, effective taxable
years beginning after December 31, 2017
42 U.S.C.
Cost-sharing
No provision
Section 202 would repeal authorization for
Section 18071
Subsidies
the cost-sharing subsidies, effective
December 31, 2017
42 U.S.C.
Administration of
No provision
Section 202 would repeal requirements
Sections
Premium Tax
related to premium tax credits and cost-
18081 and
Credits and Cost-
sharing subsidies, specifically, provisions
18082, 26
sharing Subsidies
related to eligibility determinations,
U.S.C. Section
advanceability, and disclosure of taxpayer
6103(l)
information
26 U.S.C.
Small Business Tax No provision
Section 203 would stipulate that the small
Section 45R
Credit
business credit would not be available
beginning tax year 2018
26 U.S.C.
Definition of
No provision
Section 210 would repeal the requirement
Sections 223,
Medical Expenses
that expenses for medicine or drugs are
220, 106
only qualified expenses for Health FSAs,
HRAs, Archer MSAS, and HSAs if made for
prescribed drugs or insulin, generally
effective beginning tax year 2016
26 U.S.C.
Penalty for
No provision
Section 211 would reduce the tax imposed
Sections 223,
Nonqualified
on distributions from Archer MSAs and
220
Archer MSA and
HSAs that are used for purposes other than
HSA Distributions
paying for qualified medical expenses from
20% to 15% and 10%, respectively, effective
for distributions made after December 31,
2015
26 U.S.C.
Limit Health FSA
No provision
Section 212 would repeal the $2,500
Section 125
to $2,500
contribution limit on health FSAs, effective
beginning tax year 2016
Section 9008
Annual Fee on
No provision
Section 213 would repeal the annual fee on
of the ACA
Pharmaceutical
pharmaceutical manufacturers and
Manufacturers and
importers of branded drugs, effective
Importers of
beginning calendar year 2016
Branded Drugs
Section 9010
Annual Fee on
No provision
Section 215 would repeal the annual fee on
of the ACA
Health Insurance
health insurance providers, effective
Providers
beginning calendar year 2016
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ACA Provision
H.R. 3762
Senate Amendment to H.R. 3762
26 U.S.C.
Eliminate
No provision
Section 216 would reinstate business
Section 139A
Deductions for
expense deductions for retiree prescription
Expenses
drug costs without reduction by the amount
Allocable to
of any federal subsidy, effective for taxable
Medicare Part D
years beginning after December 31, 2015
Subsidy
26 U.S.C.
Medical Expenses
No provision
Section 217 would reduce the threshold for
Section 213
Deduction
deducting medical expenses from 10% to
7.5%, effective beginning tax year 2016
26 U.S.C.
Additional
No provision
Section 218 would repeal the 0.9%
Sections
Hospital Insurance
Medicare surtax, effective beginning tax year
1401(b) and
(Medicare) Surtax
2016
3101(b)
IRC Chapter
Excise Tax on
No provision
Section 219 would repeal the tax, effective
49
Indoor Tanning
for services performed on or after
Services
December 31, 2015
Chapter 2A of
Net Investment
No provision
Section 220 would repeal the net
IRC Subtitle A
Tax
investment tax, effective beginning tax year
2016
26 U.S.C.
Remuneration
No provision
Section 221 would repeal the provision that
Section
prohibits covered health insurance
162(m)(6)
providers from deducting the remuneration
paid to employees in excess of $500,000,
effective beginning tax year 2016
26 U.S.C.
Economic
No provision
Section 222 would repeal the codification of
Sections
Substance
the economic substance doctrine, as well as
7701(o),
Doctrine
the related penalty provisions, effective for
6662(b)(6)&(i),
transactions entered into after December
6664, 6676.
31, 2015
Medicaid Provisions
42 U.S.C.
Medicaid Funding
No provision
Section 207(1) would make additional
Section
for Territories
Medicaid funding to the territories available
1308(g)
through September 30, 2017 rather than
September 30, 2019
42 U.S.C.
Eligibility for ACA
No provision
Section 207(2)(A) would repeal the ACA
Section
Medicaid
Medicaid expansion eligibility pathway after
1396a(a)(10)(i)
Expansion
December 31, 2017
(VIII)
42 U.S.C.
Optional Medicaid
No provision
Section 207(2)(A) would repeal the optional
Section
Eligibility for
Medicaid eligibility pathway for adults with
1396a(a)(10)(i
Adults with
income above 133% of the federal poverty
)(XX)
Income Above
level after December 31, 2017
133% of FPL
42 U.S.C.
Medicaid Eligibility
No provision
Section 207(2)(C) would repeal the
Section
for Stairstep
mandatory eligibility pathway for stairstep
1396a(l)(2)(C)
Children
children after December 31, 2017
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Provisions of the Senate Amendment to H.R. 3762

ACA Provision
H.R. 3762
Senate Amendment to H.R. 3762
42 U.S.C.
Medicaid and
No provision
Section 207(3) would repeal Medicaid and
Section
CHIP Maintenance
CHIP maintenance of effort for children
1396a(gg)(2)(
of Effort
after September 30, 2017
C) and 42
U.S.C. Section
1397ee(d)(3)(
A)
42 U.S.C.
FMAP Rate for the No provision
Section 207(4)(A) would change the federal
Section
Territories
medical assistance percentage rate for the
1396d(b)
territories from 55% to 50% on or after
January 1, 2018
42 U.S.C.
Newly Eligible
No provision
Section 207(4)(B) would repeal the newly
Section
Medicaid Matching
eligible matching rate on January 1, 2018
1396d(y)(1)(B) Rate
42 U.S.C.
Expansion State
No provision
Section 207(4)(C) would repeal the
Section
Medicaid Matching
expansion state matching rate on January 1,
1396d(z)(2)
Rate
2018
42 U.S.C.
FMAP
No provision
Section 207(5) would repeal the increased
Section
Enhancement for
FMAP rate for the Community First Choice
1396n(k)(2)
Community First
Option on January 1, 2018
Choice Option
42 U.S.C.
ACA Medicaid
No provision
Section 207(2)(B) would terminate
Section
Presumptive
authority for existing and future state ACA
1396a(a)(47)(B
Eligibility
presumptive eligibility elections as of January
)
1, 2018
42 U.S.C.
Medicaid
No provision
Section 207(6) would repeal the state
Section 1396r-
Presumptive
option to provide a presumptive eligibility
1(e)
Eligibility for
period any time after December 31, 2017
Pregnant Women
for pregnant women and children in: (1) the
and Children
ACA expansion group, (2) the mandatory
foster care group through age 26, or (3) for
low-income families
42 U.S.C.
Streamlined
No provision
Section 207(8) would repeal the
Section
Enrol ment System
requirement for states to coordinate their
1396w-3(a)
for Medicaid
eligibility and enrol ment systems across all
of the ACA low-income subsidy programs
as of January 1, 2018
42 U.S.C.
Medicaid
No provision
Section 207(7) would repeal the ACA
Section
Benchmark
amendments to benchmark coverage after
1396u-7(b)(5)
Coverage
December 31, 2017
42 U.S.C.
Medicaid DSH
No provision
Section 208 would repeal Medicaid
Section 1396r-
Reductions
disproportionate share hospital allotment
4(f)
reductions
Source: H.R. 3762; S. Amdt. 2874.
Notes: ACA = Patient Protection and Affordable Care Act (P.L. 111-148, as amended); U.S.C. = United States
Code; FSA = flexible spending account; HRA = health reimbursement arrangement; MSA = medical savings
account; HSA = health savings account; FPL = federal poverty level; FMAP = federal medical assistance
percentage; DSH = disproportionate share hospital; CHIP = State Children’s Health Insurance Program.
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Provisions of the Senate Amendment to H.R. 3762

Summary of Provisions in the Senate Amendment to
H.R. 3762
Title I—Health, Education, Labor, and Pensions
Section 101: The Prevention and Public Health Fund
Background
ACA Section 4002 established the Prevention and Public Health Fund (PPHF), to be administered
by the Secretary of the Department of Health and Human Services (HHS), and provided the
PPHF with a permanent annual appropriation.6 Under the ACA, the PPHF’s annual appropriation
would increase from $500 million for FY2010 to $2 billion for FY2015 and each subsequent
fiscal year. However, the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96)
reduced the PPHF appropriation from FY2013 through FY2021 as part of a package of offsets.
Annual appropriations to the PPHF are now as follows:7
 $500 million for FY2010;
 $1 billion for each of FY2012 through FY2017;
 $1.25 billion for each of FY2018 and FY2019;
 $1.5 billion for each of FY2020 and FY2021; and
 $2 billion for FY2022 and each fiscal year thereafter.
Amounts for each fiscal year are available to the HHS Secretary beginning October 1, the start of
the respective fiscal year. Congress may explicitly direct the distribution of PPHF funds and did
so for FY2014 and FY2015.
Provision
Section 101 of the Senate bill would amend ACA Section 4002(b) by repealing all PPHF
appropriations for FY2016 and subsequent fiscal years. It also would rescind any unobligated
PPHF balances from prior fiscal years.
Section 102: Community Health Center Program
Background
Section 221(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L.
114-10)8 provided a mandatory appropriation of $3.6 billion to the Community Health Center
Fund9 for each of FY2016 and FY2017.

6 For more information on the Prevention and Public Health Fund, see Appendix C in CRS Report R43304, Public
Health Service Agencies: Overview and Funding (FY2010-FY2016), coordinated by C. Stephen Redhead and Agata
Dabrowska.
7 As provided in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) §4002(b), as
amended (42 U.S.C. §300u–11(b)).
8 CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10),
(continued...)
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Provisions of the Senate Amendment to H.R. 3762

Provision
Section 102 of the Senate bill would provide an additional $235 million for each of FY2016 and
FY2017 to the Community Health Center Fund. It would do so by adding $235 million to the
mandatory appropriation provided in Section 221(a) of MACRA.
Section 103: Territories
Background
Under the ACA, a U.S. territory may elect to establish a health insurance exchange but is not
required to do so. ACA Section 1323(c) provides funding to territories that establish exchanges;
the funds provided under an agreement between a territory and HHS can be used only for
financial assistance for individuals who obtain health insurance through an exchange. Section
1323(c) provides $1 billion to be available for this purpose beginning in 2014 and ending in 2019.
The HHS Secretary is directed to allocate $925 million to Puerto Rico and divide the remaining
$75 million among American Samoa, Guam, the Northern Mariana Islands, and the Virgin
Islands. If a territory does not establish an exchange, the territory is entitled to an increase in
Medicaid funds.
Provision
Section 104 of the Senate bill would provide that ACA Section 1323(c), which provides funding
for territories, shall have no “force or effect,” as of January 1, 2018.
Section 104: Reinsurance, Risk Corridor, and Risk Adjustment Programs
Background
ACA Section 1341 requires the HHS Secretary to determine standards enabling states to establish
and maintain a reinsurance program. Under the program, certain health insurers are required to
make payments into the reinsurance program; those payments are then used to compensate a
subset of health insurers for a portion of the cost of high-risk (i.e., high-cost) individuals who
enrolled in their plan. The program runs for the three-year period beginning January 1, 2014. The
HHS Secretary is required to determine both the methodology for calculating contributions to the
reinsurance program and a method for equitable allocation of funds, although the total amount of
funds to be collected is specified in statute.
Provision
Section 105 of the Senate bill would prohibit the HHS Secretary from collecting fees and making
payments under ACA Section 1341, the reinsurance program, effective January 1, 2016.

(...continued)
coordinated by Jim Hahn and Kirstin B. Blom.
9 For more information about the Community Health Center Fund, see CRS Report R43911, The Community Health
Center Fund: In Brief, by Elayne J. Heisler.
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Provisions of the Senate Amendment to H.R. 3762

Section 105: Support for State Response to Substance Abuse Public
Health Crisis and Urgent Mental Health Needs
Background
The Substance Abuse and Mental Health Services Administration (SAMHSA) supports
community-based substance abuse and mental health treatment and prevention services through
formula grants to the states and U.S. territories and through competitive grant programs to states,
territories, tribal organizations, local communities, and private entities.10 SAMHSA and most of
its programs and activities are authorized under Public Health Service Act (PHSA) Title V; its two
largest grant programs, the Substance Abuse Prevention and Treatment block grant and the
Community Mental Health Services block grant, are authorized under PHSA Title XIX. PHSA
Section 399O requires the HHS Secretary to award formula grants to states to support state
prescription drug monitoring programs (PDMPs);11 appropriations were authorized through
FY2010, and the grant program has not received funding since then. Other agencies within HHS
also support substance abuse or mental health prevention and treatment under more general
authorities.
Provision
Section 105 of the Senate bill would authorize to be appropriated, and would appropriate, out of
monies in the Treasury not otherwise obligated, $750 million for each of FY2016 and FY2017, to
the HHS Secretary to award grants to states to address the substance abuse public health crisis or
respond to urgent mental health needs by (1) improving state prescription drug monitoring
programs, (2) implementing and evaluating substance abuse prevention activities, (3) training
health care practitioners in topics related to substance abuse, (4) supporting access to substance
abuse or mental health services, and/or (5) other public health-related activities related to
substance abuse or mental health.
Title II—Finance
Section 201: Recapture Excess Advance Payments of Premium Tax Credits
Background
Internal Revenue Code (IRC) Section 36B and related amendments, as added by Section 1401 of
the ACA, authorize new federal tax credits to help eligible individuals pay for health insurance.12
The tax credits apply toward premiums for private health plans offered through exchanges. Under
the ACA, the amount received in premium tax credits is based on the prior year’s income tax
returns. Section 1412 of the ACA requires the credit to be both refundable and advanceable,
meaning tax filers may claim the full credit amount even if they have little or no federal income
tax liability, and may receive the credits in “advance” (during the tax year) by direct payment to

10 For more information about the Substance Abuse and Mental Health Services Administration, see CRS Report
R43968, SAMHSA FY2016 Budget Request and Funding History: A Fact Sheet, by Erin Bagalman.
11 For more information about prescription drug monitoring programs, see CRS Report R42593, Prescription Drug
Monitoring Programs, by Kristin Finklea, Lisa N. Sacco, and Erin Bagalman.
12 For more information about the premium credits, see CRS Report R43945, Health Insurance Premium Credits in the
Patient Protection and Affordable Care Act (ACA) in 2015, by Bernadette Fernandez.
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insurers to coincide with monthly insurance premiums. These amounts are reconciled when
individuals file tax returns for the actual year in which they receive the credits. If a tax filing
unit’s income decreases during the tax year, and the filer should have received a larger credit, this
additional credit amount will be included in the tax refund for the year. On the other hand, any
excess amount that was overpaid in credits will have to be repaid to the federal government as a
tax payment. The ACA imposes limits on the excess amounts to be repaid under certain
conditions. For households with incomes below 400% of the federal poverty level (FPL), the
ACA includes specific limits that apply to single and joint filers separately.
Provision
Section 201 of the Senate bill would not apply IRC Section 36B(f)(2)(B), relating to limits on the
excess amounts to be repaid with respect to the premium tax credits, to taxable years ending after
December 31, 2015 and before January 1, 2018. In other words, for tax years 2016 and 2017, any
individual who was overpaid in premium tax credits would have to repay the entire excess
amount, regardless of income.
Section 202: Premium Tax Credit and Cost-Sharing Subsidies
Background
As noted, IRC Section 36B and related amendments, as added by Section 1401 of the ACA,
authorize new federal premium tax credits. According to Section 1411 of the ACA, the premium
tax credit generally is available to those who do not have access to subsidized public coverage
(e.g., Medicaid) or employer-sponsored coverage that meets certain standards. Eligibility for and
amount of the credit are based on household income. The credit is designed to provide larger
amounts to eligible individuals with lower incomes compared to eligible individuals with higher
incomes. Section 1412 of the ACA requires the credit to be both refundable and advanceable,
meaning tax filers may claim the full credit amount even if they have little or no federal income
tax liability and may receive the credits in “advance” (during the tax year) by direct payment to
insurers to coincide with monthly insurance premiums. Section 1414 of the ACA authorizes the
disclosure of taxpayer information by amending IRC Section 6103(l).
Section 1402 of the ACA also authorizes subsidies to reduce cost-sharing expenses (e.g., annual
out-of-pocket, or OOP, limit) for eligible individuals.13 Cost-sharing assistance is provided in two
forms. The first form of assistance reduces the OOP limit applicable to a given exchange plan; the
second reduces actual cost-sharing requirements (e.g., lowers the deductible or reduces a co-
payment) applicable to a given exchange plan. Both subsidy types provide greater subsidy
amounts to individuals with lower household incomes.
Provision
Section 202 of the Senate bill would repeal authorization for the premium tax credits (IRC
Section 36B), effective beginning tax year 2018, and for the cost-sharing subsidies (ACA Section
1402), effective on December 31, 2017. This provision also would repeal relevant ACA
provisions regarding eligibility determinations for these programs (generally ACA Section 1411)
and for receiving premium credits and cost-sharing subsidies in advance (ACA Section 1412),

13 For more information about the cost-sharing subsidies, see CRS Report R43945, Health Insurance Premium Credits
in the Patient Protection and Affordable Care Act (ACA) in 2015, by Bernadette Fernandez.
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effective on December 31, 2017. In addition, the new provision would amend IRC Section
6103(l), related to the disclosure of taxpayer information, by providing that no disclosures may be
made after December 31, 2017.
Section 203: Small Business Tax Credit
Background
IRC Section 45R, as added by Section 1421 of the ACA, provides for a small business health
insurance tax credit.14 The credit is intended to help make the premiums for small-group health
insurance coverage more affordable for certain small employers. The credit generally is available
to nonprofit and for-profit employers with fewer than 25 full-time equivalent (FTE) employees
with average annual wages that fall under a statutorily specified cap. To qualify for the credit,
employers must cover at least 50% of the cost of each of their employees’ self-only health
insurance coverage.
As of 2014, small employers must obtain insurance through a Small Business Health Options
Program (SHOP) exchange to receive the credit, and the credit is available for two consecutive
tax years only. The two-year period begins with the first year an employer obtains coverage
through a SHOP exchange. For example, if an employer first obtains coverage through a SHOP
exchange in 2016, the credit will only be available to the employer in 2016 and in 2017.
Provision
Section 203 of the Senate bill would provide that IRC Section 45R, the small business health
insurance tax credit, would not be available beginning tax year 2018.
Section 204: Individual Mandate
Background
IRC Section 5000A, as added by Section 1501 of the ACA, creates an individual mandate, a
requirement for most individuals to maintain health insurance coverage or pay a penalty for
noncompliance.15 To comply with the mandate, most individuals need to obtain minimum
essential coverage, which includes most types of private (e.g., employer-sponsored) coverage and
public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate
and its associated penalty.
The individual mandate went into effect in 2014. Individuals who are not exempt from the
mandate are required to pay a penalty for each month of noncompliance. The annual penalty is
the greater of a percentage of income or a flat dollar amount (but not more than the national
average premium of a specified health plan). The percentage of income increases from 1.0% in
2014 to 2.5% in 2016 and beyond. The flat dollar amount increases from $95 in 2014 to $695 in
2016 and is adjusted for inflation thereafter.

14For more information, see CRS Report R41158, Summary of the Small Business Health Insurance Tax Credit Under
ACA, by Annie L. Mach.
15For more information, see CRS Report R41331, Individual Mandate Under the ACA, by Annie L. Mach.
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Provision
Section 204 of the Senate bill would effectively eliminate the annual penalty associated with IRC
Section 5000A, the individual mandate, by reducing the percentage of income to 0% and the flat
dollar amount to $0, retroactively beginning calendar year 2015.
Section 205: Employer Mandate
Background
IRC Section 4980H, as added by Section 1513 of the ACA, requires that employers either provide
health coverage or face potential employer tax penalties.16 The potential employer penalty applies
to all common-law employers, including government entities (such as federal, state, local, or
Indian tribal government entities) and nonprofit organizations that are exempt from federal
income taxes. The penalties are imposed on firms with at least 50 full-time equivalent (FTE)
employees if one or more of their full-time employees obtain a premium tax credit through a
health insurance exchange. Transition relief in 2015 limits the penalty to employers with at least
100 FTE employees.
The total penalty for any applicable large employer is based on its number of full-time employees
(averaging 30 hours or more per week) and whether the employer offers affordable health
coverage that provides minimum value.
Provision
Section 205 of the Senate bill would modify the tax penalty associated with IRC Section 4980H,
effectively eliminating it by reducing the penalties to $0 beginning in calendar year 2015.
Section 206: Federal Payments to States
Background
The PPFA is an umbrella organization supporting 59 independent affiliates that operate
approximately 700 health centers across the United States. Government funding—which includes
federal, state, and local funds—constitutes the PPFA’s largest source of revenue, an estimated
41% in the year ending June 30, 2014.17 CBO estimates that federal funds accounted for about
one-third of PPFA’s total revenue in 2013.18 PPFA receives federal grants (either directly or
through another entity, such as a state) and reimbursements for providing services to beneficiaries
enrolled in federally-funded programs (e.g., Medicaid). It does not receive a direct annual
appropriation of any kind.
CBO and the U.S. Government Accountability Office (GAO) found that PPFA’s largest source of
federal funding is reimbursements for covered services provided to Medicaid beneficiaries.

16For more information, see CRS Report R43981, The Affordable Care Act’s (ACA) Employer Shared Responsibility
Determination and the Potential ACA Employer Penalty, by Julie M. Whittaker.
17 For more information about the Planned Parenthood Federation of America and the services it provides, see CRS
Report R44295, Factors Related to the Use of Planned Parenthood Affiliated Health Centers (PPAHCs) and Federally
Qualified Health Centers (FQHCs), by Elayne J. Heisler.
18Letter from Congressional Budget Office to Senator Mike Enzi, Chairman of the Committee on the Budget, August 3,
2015, at https://www.cbo.gov/publication/50700.
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Specifically, CBO estimated that PPFA’s federal Medicaid revenue was approximately $390
million in 2013. 19 GAO examined FY2012 PPFA reimbursements and expenditures and found
that PPFA had either received reimbursements or expended funds from discretionary programs
and from direct spending (as defined in the Balanced Budget and Emergency Deficit Control Act
of 1985, 2 U.S.C. 900(c)(8)). Direct spending refers to budget authority provided by laws other
than through appropriations acts; entitlement authority; and the Supplemental Nutrition
Assistance Program (SNAP).20 PPFA’s reimbursements or expenditures from direct spending
include reimbursements from Medicaid, Medicare, and the State Children’s Health Insurance
Program (CHIP) (listed in order of the amount of reimbursements received according to GAO);
certain expenditures from the Social Service Block Grant, the Crime Victims Assistance Program
(administered by the Department of Justice), the Personal Responsibility and Education Program,
and SNAP (administered by the Department of Agriculture). PPFA also received funds from a
number of discretionary programs either directly or through another entity (e.g., a state). For
example, in FY2012, GAO found that PPFA had expended discretionary funds from the Maternal
and Child Health Block Grants programs, which are provided to states and some states provided
funds to PPFA entities to provide services.21
Under federal law, federal funds are generally not available to pay for abortions, except in cases
of rape, incest, or endangerment of a mother’s life. This restriction is the result of statutory and
legislative provisions like the Hyde Amendment,22 which has been added to the annual HHS
appropriations measure since 1976. Similar provisions exist in the appropriations measures for
foreign operations, the District of Columbia, the Department of the Treasury, and the Department
of Justice. Other codified restrictions limit the use of funds made available to the Department of
Defense and the Indian Health Service.
Provision
Section 206 of the Senate bill would prohibit federal funds made available to a state through
direct spending from being provided to a prohibited entity (as defined), either directly or through
a managed care organization, for a one year period beginning on the date of enactment of this act.
The provision specifies that this prohibition would be implemented notwithstanding certain
programmatic rules (e.g., the Medicaid freedom of choice of provider requirement).
This provision does not explicitly specify that certain federal funds would not be made available
to PPFA or its affiliated entities; instead it refers to and defines a “prohibited entity,” as an entity
that meets the following criteria at enactment: (1) it is designated as a not-for-profit by the
Internal Revenue Service (IRS); (2) it is described as an essential community provider that is

19 Government Accountability Office (GAO), Health Care Funding: Federal Obligations to and Expenditures by
Selected Entities Involved in Health-Related Activities, 2010–2012, GAO-15-270R, March 20, 2015,
http://www.gao.gov/products/GAO-15-270R. GAO does not provide a grand total for federal funding to PPFA
affiliates in FY2012; however, for specific federal funding sources see report Tables 15, 16, 24, 25, and 26 and
Congressional Budget Office (CBO), Budgetary Effects of Legislation that Would Permanently Prohibit the
Availability of Federal Funds to Planned Parenthood, September 22, 2015; https://www.cbo.gov/publication/50833.
20 Direct spending is explained in CRS Report 98-721, Introduction to the Federal Budget Process, coordinated by
James V. Saturno.
21 GAO, Health Care Funding: Federal Obligations to and Expenditures by Selected Entities Involved in Health-
Related Activities, 2010–2012, GAO-15-270R, March 20, 2015, http://www.gao.gov/products/GAO-15-270R. GAO
does not provide a grand total for federal funding to PPFA affiliates in FY2012; however, for specific federal funding
sources see report Tables 15, 16, 24, 25, and 26.
22 For information about the Hyde Amendment and similar provisions, see CRS Report RL33467, Abortion: Judicial
History and Legislative Response, by Jon O. Shimabukuro.
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primarily engaged in family planning services, reproductive health, and related medical care; (3)
it is an abortion provider that provides abortion in cases that do not meet the Hyde amendment
exception for federal payment; and (4) it received more than $350 million in Medicaid
expenditures (both federal and state) in FY2014. When evaluating nearly identical language
included in H.R. 3762, CBO determined that the prohibited entity would likely be PPFA because
few other health care providers would meet the bill’s definition.23
Section 207(1): Medicaid Funding for Territories
Background
Federal Medicaid funding to the states and the District of Columbia is open-ended, but the
Medicaid programs in the territories are subject to annual federal spending caps (i.e., allotments).
In FY2015, the Medicaid allotments to the territories totaled $378.3 million. Prior to the ACA, all
five territories typically exhausted their federal Medicaid funding prior to the end of the fiscal
year. For this reason, the ACA provides $6.3 billion in additional Medicaid federal funding to the
territories available between July 1, 2011, and September 30, 2019. This funding is distributed
among the territories in proportion to the capped amounts available to the territories prior to the
ACA. The territories claimed $2.4 billion of this funding from July 1, 2011, through September
30, 2014.
Provision
Section 207(1) of the Senate bill would make the $6.3 billion in Medicaid funding to the
territories available through September 30, 2017, rather than September 30, 2019, by amending
Section 1108(g)(5) of the SSA.
Section 207(2)(A), 207(2)(C), and 207(3): Medicaid ACA Eligibility Provisions
Background
Eligibility for Medicaid is determined by federal and state law, whereby states set individual
eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly,
individuals with disabilities, children, pregnant women, parents, certain non-elderly childless
adults) and financial (i.e., income and sometimes assets limits) criteria. In addition, individuals
must meet federal and state requirements regarding residency, immigration status, and
documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with
a Medicaid program must cover them; others are optional. States are permitted to apply to the
Centers for Medicare & Medicaid Services (CMS) for a waiver of federal law to expand health
coverage beyond the mandatory and optional groups listed in federal statute.24
The ACA makes several changes to Medicaid eligibility, including the following:
The ACA Medicaid Expansion. The ACA established 133% of FPL as the new mandatory
minimum Medicaid income-eligibility level for most non-elderly individuals beginning January
1, 2014. On June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of

23 Congressional Budget Office and Joint Committee on Taxation, H.R. 3762 Restoring Americans’ Healthcare
Freedom Reconciliation Act of 2015, October 20, 2015, at https://www.cbo.gov/publication/50918.
24 For more information about Medicaid eligibility, see CRS Report R43357, Medicaid: An Overview, coordinated by
Alison Mitchell.
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Independent Business v. Sebelius, finding that the enforcement mechanism for the ACA Medicaid
expansion violated the Constitution, which effectively made the ACA Medicaid expansion
optional for states. On January 1, 2014, 24 states and the District of Columbia implemented the
ACA Medicaid expansion. Since then, six additional states have decided to implement the
expansion.25
State Option for Coverage for Individuals with Income that Exceeds 133% of FPL. In
addition to the ACA Medicaid expansion, the ACA creates an optional Medicaid eligibility
category for all non-elderly individuals with income above 133% of FPL up to a maximum level
specified in the Medicaid state plan (or waiver). No state has implemented this option.
Stairstep Children. The ACA changes the mandatory Medicaid income eligibility level for
poverty-related children aged 6 through 18 from 100% to 133% of FPL, beginning January 1,
2014. These children are sometimes referred to as stairstep children. For the 21 states that
transitioned these children from CHIP to Medicaid due to this ACA provision, coverage continues
to be financed with states’ CHIP annual allotment funding (i.e., state-specific annual limits) at the
higher enhanced federal medical assistance percentage (E-FMAP), which is the CHIP federal
matching rate.26
Medicaid and CHIP MOE. The ACA extends and expands the maintenance of effort (MOE)
provisions in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). Under
the ACA MOE provisions, states are required to maintain their Medicaid and CHIP programs with
the same eligibility standards, methodologies, and procedures in place on the date of enactment of
the ACA (March 23, 2010) until January 1, 2014, for adults and through September 30, 2019, for
children up to the age of 19. The penalty to states for not complying with the Medicaid and CHIP
MOE requirements is the loss of all federal Medicaid matching funds.27
Provisions
The provisions in Sections 207(2)(A) and 207(2)(C) of the Senate bill would repeal the ACA
Medicaid expansion and state option to extend coverage to adults above 133% of FPL (Section
1902(a)(10)(A)(i)(VIII) and Section 1902(a)(10)(A)(ii)(XX) of the SSA respectively) and the
stairstep children provision (Section 1902(l)(2)(C)) of the SSA) by specifying the end dates of
these provisions as December 31, 2017. Section 207(3) of the Senate bill would repeal the
Medicaid and CHIP MOE for children by changing the end date of this provision to September
30, 2017, instead of September 30, 2019, in Sections 1902(gg)(2) and 2105(d)(3)(A) of the SSA.
Section 207(4) and 207(5): Various Federal Medicaid Matching Rate Provisions
Background
Medicaid is jointly financed by the federal government and the states. The federal government’s
share of a state’s expenditures for most Medicaid services is called the federal medical assistance

25 For more information about the ACA Medicaid expansion, see CRS Report R43564, The ACA Medicaid Expansion,
by Alison Mitchell.
26 For more information about stairstep children, see CRS Report R43627, State Children’s Health Insurance Program:
An Overview, by Evelyne P. Baumrucker and Alison Mitchell.
27 For more information about the ACA Medicaid and CHIP Maintenance of Effort (MOE) for children, see CRS
Report R43909, CHIP and the ACA Maintenance of Effort (MOE) Requirement: In Brief, by Alison Mitchell and
Evelyne P. Baumrucker.
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percentage (FMAP) rate, which varies by state and is designed so that the federal government
pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the
national average (and vice versa for states with higher per capita incomes). Exceptions to the
regular FMAP rate have been made for certain states, situations, populations, providers, and
services.28 The ACA adds a few FMAP exceptions, including the following:
 the newly eligible federal matching rate (i.e., the matching rate for individuals
who are newly eligible for Medicaid due to the ACA expansion);
 the expansion state federal matching rate (i.e., the matching rate for individuals
in expansion states29 who were eligible for Medicaid on March 23, 2010, and are
in the new eligibility group); and
 a six-percentage-point increase to the FMAP rate for services covered under the
Community First Choice Option, which allows states to offer community-based
attendant services and supports as an optional Medicaid state plan benefit.
In addition, the ACA increases the Medicaid FMAP rate available to all of the territories from
50% to 55% beginning July 1, 2011.
Provision
Sections 207(4) and 207(5) of the Senate bill would repeal the (1) newly eligible matching rate on
January 1, 2018 (Section 1905(y)(1) of the SSA); (2) expansion state matching rate on January 1,
2018 (Section 1905(z)(2) of the SSA); and (3) increased FMAP rate for the Community First
Choice Option on January 1, 2018 (Section 1915(k)(2) of the SSA). Sections 207(4) of the Senate
bill also would change the FMAP rate for the territories back to 50% on or after January 1, 2018
(Section 1905(b) of the SSA).
Section 207(2)(B), 207(6), and 207(8): Medicaid ACA Enrollment
Facilitation Provisions
Background
Presumptive Eligibility. Prior to the enactment of the ACA, states were permitted to enroll
certain groups (i.e., children, pregnant women, and certain women with breast and cervical
cancer) for a limited period of time before completed Medicaid applications were filed and
processed, based on a preliminary determination of likely Medicaid eligibility by certain specified
Medicaid providers. Such individuals then had to formally apply for coverage within a given time
frame to continue receiving Medicaid benefits.
The ACA expands the types of entities that are permitted to make Medicaid presumptive-
eligibility determinations as well as the groups of individuals for whom presumptive-eligibility
determinations may apply. Specifically, the ACA allows states to permit all hospitals that

28 For more information about the FMAP rate, see CRS Report R43847, Medicaid’s Federal Medical Assistance
Percentage (FMAP), FY2016, by Alison Mitchell.
29 This definition of expansion state was established prior to the Supreme Court decision making ACA Medicaid
expansion optional for states. In this context, expansion state refers to states that already had implemented (or partially
implemented) the ACA Medicaid expansion at the time the ACA was enacted. Specifically, expansion states are
defined as those that, as of March 23, 2010 (the ACA’s date of enactment), had provided health benefits coverage
meeting certain criteria statewide to parents with dependent children and adults without dependent children up to at
least 100% of FPL.
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participate in Medicaid to make presumptive-eligibility determinations for all Medicaid-eligible
populations, beginning January 1, 2014.
In addition, states that elected the option to provide a presumptive-eligibility period to children
and pregnant women are permitted to provide a presumptive-eligibility period for (1) the ACA
Medicaid expansion group, (2) the mandatory foster care coverage group through the age of 26,
or (3) low-income families eligible under Section 1931 of the SSA.
Streamlined Enrollment System. As a condition of the receipt of federal financial assistance,
the ACA requires states to coordinate their eligibility and enrollment systems across all of the
ACA low-income subsidy programs (including Medicaid, CHIP, and the health insurance
exchanges).
Provision
Presumptive Eligibility. Sections 207(2)(B) and 207(6) of the Senate bill would terminate
existing state ACA presumptive-eligibility elections as of January 1, 2018, and would prohibit
states from making such elections going forward by modifying Section 1902(a)(47)(B) of the
SSA. However, states still would be permitted to enroll children, pregnant women, and certain
women with breast and cervical cancer based on a preliminary determination by a specified
Medicaid provider of likely Medicaid eligibility.
For states that elected the option to provide a presumptive-eligibility period to children and
pregnant women, these provisions would repeal the state option to provide a presumptive-
eligibility period any time after December 31, 2017, for (1) the ACA expansion group, (2) the
mandatory foster care group through the age of 26, or (3) low-income families (Section 1920(e)
of the SSA).
Streamlined Enrollment System. Section 207(8) of the Senate bill would repeal the requirement
for states to coordinate their eligibility and enrollment systems across all of the ACA low-income
subsidy programs as of January 1, 2018 (Section 1943(a) of the SSA).
Section 207(7): Amendments to Medicaid Benchmark Coverage
Background
As an alternative to providing all the mandatory and selected optional benefits under traditional
Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) gives states the option to enroll
state-specified groups in what previously was referred to as benchmark or benchmark-equivalent
coverage but currently is called alternative benefit plans (ABPs). States that choose to implement
the ACA Medicaid expansion are required to provide ABP coverage to the individuals eligible for
Medicaid through the ACA Medicaid expansion (with exceptions for selected special-needs
subgroups). In addition, states have the option to provide ABP coverage to other subgroups.
The ACA makes significant changes to both ABP design and requirements. The ACA requires
such packages provide at least the 10 essential health benefits, which are (1) ambulatory patient
services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental
health and substance use disorder services, including behavioral health treatment; (6) prescription
drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9)
preventive and wellness services and chronic disease management; and (10) pediatric services,
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including oral and vision care. In addition, the ACA adds prescription drugs and mental health
services to the list of basic services that must be covered under ABPs.30
Provision
Under Section 207(7) of the Senate bill, the ACA amendments to benchmark coverage would not
apply after December 31, 2017 (Section 1937(b)(5) of the SSA).
Section 208: Repeal of Medicaid Disproportionate Share Hospital
Allotment Reductions
Background
The Medicaid statute requires states to make disproportionate share hospital (DSH) payments to
hospitals treating large numbers of low-income patients. The federal government provides each
state an annual DSH allotment, which is the maximum amount of federal matching funds that
each state can claim for Medicaid DSH payments. The ACA included a provision directing the
HHS Secretary to make aggregate reductions in Medicaid DSH allotments for FY2014 through
FY2020, but multiple subsequent laws have amended these reductions. Under current law, the
aggregate reductions to the Medicaid DSH allotments are to impact FY2018 through FY2025.
After FY2025, allotments will be calculated as though the reductions never occurred, which
means the allotments will include the inflation adjustments for the years during the reductions.31
Provision
Section 208 of the Senate bill would repeal the Medicaid DSH allotment reductions.
Section 209: Repeal of the Tax on Employee Health Insurance Premiums and
Health Plan Benefits
Background
Section 9001 of the ACA creates a new excise tax on high-cost employer-sponsored coverage (the
so-called Cadillac tax).32 The provision is codified at IRC Section 4980I. The tax is scheduled to
take effect in 2018. It will be imposed at a 40% rate on the aggregate cost of employer-sponsored
health coverage that exceeds a specified dollar limit.
Provision
Section 209 of the Senate bill would repeal IRC Section 4980I; the repeal would be effective
taxable years beginning after December 31, 2017.

30 For more information on Medicaid benefit coverage, see CRS Report R43357, Medicaid: An Overview, coordinated
by Alison Mitchell.
31 For more information about Medicaid DSH allotment reductions, see CRS Report R42865, Medicaid
Disproportionate Share Hospital Payments, by Alison Mitchell.
32 For more information, see CRS Report R44147, Excise Tax on High-Cost Employer-Sponsored Health Coverage: In
Brief, by Annie L. Mach.
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Section 210: Repeal of Tax on Over-the-Counter Medications
Background
Under the IRC, taxpayers may use several different types of tax-advantaged health accounts to
pay or be reimbursed for qualified medical expenses: health flexible spending accounts (health
FSAs), health reimbursement accounts (HRAs), Archer medical savings accounts (Archer
MSAs), and health savings accounts (HSAs).33 Section 9003 of the ACA amends the relevant IRC
provisions (IRC Sections 106, 220, and 223) to provide that, for each of these accounts, amounts
paid for medicine or drugs are qualified expenses only in the case of prescribed drugs and insulin.
Provision
Section 210 of the Senate bill would repeal the language in IRC Sections 106, 220, and 223
stipulating that a medicine or drug must be a prescribed drug or insulin to be considered a
qualified expense in terms of spending from a tax-advantaged health account. The provision
would be generally effective beginning tax year 2016.
Section 211: Repeal of Tax on Health Savings Accounts
Background
Section 9004 of the ACA imposes a 20% tax on distributions from Archer MSAs and HSAs that
are used for purposes other than paying for qualified medical expenses. Prior to the ACA, IRC
Section 220 applied a 15% rate on such distributions if made from an Archer MSA and IRC
Section 223 applied a 10% rate on such distributions if made from an HSA.
Provision
Section 211 of the Senate bill would amend IRC Sections 220 and 223 to reduce the applicable
rate to 15% and 10% for Archer MSAs and HSAs, respectively. The lower rates would apply to
distributions made after December 31, 2015.
Section 212: Repeal of Limitations on Contributions to Flexible Spending Accounts
Background
IRC Section 125 allows employers to establish cafeteria plans, benefit plans under which
employees may choose between receiving cash (typically additional take-home pay) and certain
normally nontaxable benefits (such as employer-paid health insurance) without being taxed on the
value of the benefits if they select the latter. (A general rule of taxation is that when given a
choice between taxable and nontaxable benefits, taxpayers will be taxed on whichever they
choose because they are deemed to be in constructive receipt of the cash.)
Section 9005 of the ACA amends IRC Section 125(i) to provide that a health FSA is not treated as
a qualified benefit unless the cafeteria plan provides that an employee may not elect for any
taxable year to have a salary reduction contribution in excess of $2,500 made to such

33 For more information about these accounts, see CRS Report RS21573, Tax-Advantaged Accounts for Health Care
Expenses: Side-by-Side Comparison, 2013, by Carol Rapaport.
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arrangement. Also, the $2,500 limit is indexed for cost-of-living adjustments for plan years
beginning after December 31, 2013.
Provision
Section 212 of the Senate bill would repeal IRC Section 125(i), the $2,500 contribution limit to
health FSAs, effective beginning tax year 2016.
Section 213: Repeal of Tax on Prescription Medications
Background
Section 9008 of the ACA imposes an annual fee on covered entities engaged in the business of
manufacturing or importing branded prescription drugs. In general, the fee is imposed on covered
manufacturers and importers with aggregated branded prescription drug sales of more than $5
million to specified government programs or pursuant to coverage under these programs.
Provision
Section 213 of the Senate bill would repeal the fee imposed under ACA Section 9008, effective
beginning calendar year 2016.
Section 214: Repeal of Medical Device Excise Tax
Background
Section 1405 of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-
152) creates a new excise tax that is imposed on the sale of certain medical devices.34 The tax is
equal to 2.3% of the device’s sales price and generally is imposed on the manufacturer or
importer of the device. The tax is codified in Subchapter E of IRC Chapter 32.
Provision
Section 214 of the Senate bill would repeal the medical device excise tax (Subchapter E of IRC
Chapter 32), effective for sales in calendar quarters beginning after December 31, 2015.
Section 215: Repeal of Health Insurance Tax
Background
Section 9010 of the ACA imposes an annual fee on certain health insurers beginning in 2014. The
ACA fee is based on net health care premiums written by covered issuers during the year prior to
the year that payment is due. The aggregate ACA fee is set at $8.0 billion in 2014, $11.3 billion in
2015-2016, $13.9 billion in 2017, and $14.3 billion in 2018. After 2018, the fee is indexed to the
annual rate of U.S. premium growth. Each year, the IRS apportions the fee among affected
insurers based on (1) their net premiums written in the previous calendar year as a share of total

34 For more information about the medical device tax, see CRS Report R43342, The Medical Device Excise Tax:
Economic Analysis, by Jane G. Gravelle and Sean Lowry, and CRS Report R42971, The Medical Device Excise Tax: A
Legal Overview, by Andrew Nolan.
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net premiums written by all covered insurers and (2) their dollar value of business. Covered
insurers are not subject to the fee on their first $25 million of net premiums written. The fee is
imposed on 50% of net premiums above $25 million and up to $50 million, and it is imposed on
100% of net premiums in excess of $50 million.
Certain types of health insurers or insurance arrangements are not subject to the fee, including
self-insured plans; voluntary employees’ beneficiary associations; and federal, state, or other
governmental entities, including Indian tribal governments and nonprofit entities incorporated
under state law that receive more than 80% of their gross revenues from government programs
that target low-income, elderly, or disabled populations. In addition, only 50% of net premiums
written by tax-exempt entities are included in determining an entity’s market share.
Section 9010(j) of the ACA made these provisions effective for calendar years beginning after
December 31, 2013.
Provision
Section 215 of the Senate bill would amend ACA Section 9010(j) to repeal the annual fee on
certain health insurance providers, effective beginning calendar year 2016.
Section 216: Repeal of Elimination of Deduction for Expenses Allocable to
Medicare Part D Subsidy
Background
Employers that provide Medicare-eligible retirees with prescription drug coverage that meets or
exceeds set federal standards are eligible for federal subsidy payments. The subsidies are equal to
28% of plans’ actual spending for prescription drug costs in excess of $360 and not to exceed
$7,400 (for 2015). The subsidies were created as part of the Medicare Part D prescription drug
program (Medicare Modernization Act of 2003; P.L. 108-173) to provide employers with an
incentive to maintain drug coverage for their retirees.
Employers are allowed to exclude qualified retiree prescription drug plan subsidies from gross
income for the purposes of corporate income tax. Prior to implementation of the ACA, employers
also were allowed to claim a business deduction for their qualified retiree prescription drug
expenses, even though they also received the federal subsidy to cover a portion of those expenses.
Section 9012 of the ACA amended IRC Section 139A, beginning in 2013, to require employers to
coordinate the subsidy and the deduction for retiree prescription drug coverage. The amount
allowable as a deduction for retiree prescription drug coverage is reduced by the amount of the
federal subsidy received.
Provision
Section 216 of the Senate bill would repeal the ACA change and reinstate business-expense
deductions for retiree prescription drug costs without reduction by the amount of any federal
subsidy. The change would be effective for taxable years beginning after December 31, 2015.
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Section 217: Repeal of Chronic Care Tax
Background
Under IRC Section 213, taxpayers who itemize their deductions may deduct qualifying medical
expenses. The medical-expense deduction may be claimed only for expenses that exceed 10% of
the taxpayer’s adjusted gross income (AGI), which is reduced for taxable years ending before
January 1, 2017, to 7.5% if the taxpayer or spouse is aged 65 or older. The 10% threshold was
imposed by ACA Section 9013. Prior to the ACA, the AGI threshold was 7.5% for all taxpayers.
Provision
Section 217 of the Senate bill would amend IRC Section 213(a) to reduce the AGI threshold to
7.5% for all taxpayers, effective beginning tax year 2016.
Section 218: Repeal of Medicare Tax Increase
Background
Sections 9015 and 10906 of the ACA impose a Medicare Hospital Insurance (HI) surtax at a rate
equal to 0.9% of an employee’s wages or a self-employed individual’s self-employment income.
The surtax, which is found in IRC Sections 1401 and 3101, applies only to taxpayers with taxable
income in excess of $250,000 if married filing jointly; $125,000 if married filing separately; and
$200,000 for all other taxpayers. The tax is in addition to the regular Federal Insurance
Contributions Act (FICA) and Self-Employment Contributions Act (SECA) taxes that generally
apply (i.e., Social Security and Medicare taxes).
Provision
Section 218 of the Senate bill would amend IRC Sections 1401(b) and 3101(b) to repeal the 0.9%
Medicare surtax, effective beginning tax year 2016.
Section 219: Repeal of Tanning Tax
Background
Section 10907 of the ACA creates a new excise tax on indoor tanning services. The tax is equal to
10% of the amount paid for such services. The provision is codified in Chapter 49 of the IRC.
Provision
Section 219 of the Senate bill would repeal the tax on indoor tanning services (IRC Chapter 49),
effective for services performed on or after December 31, 2015.
Section 220: Repeal of Net Investment Tax
Background
Section 1402 of the HCERA imposes a net investment tax on high-income taxpayers. The tax,
which is codified in Chapter 2A of Subtitle A of the IRC, applies at a rate of 3.8% to certain net
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investment income of individuals, estates, and trusts with income above amounts specified in the
statute.
Provision
Section 220 of the Senate bill would repeal the net investment tax (Chapter 2A of IRC Subtitle
A), effective beginning tax year 2016.
Section 221: Remuneration
Background
Generally, employers may deduct the remuneration paid to employees as “ordinary and
necessary” business expenses under IRC Section 162, subject to any statutory limitations. ACA
Section 9014(b) adds a statutory limitation for certain health insurance providers. Under the
provision, which is codified at IRC Section 162(m)(6), covered health insurance providers may
not deduct the remuneration paid to an officer, director, or employee in excess of $500,000.
Provision
Section 221 of the Senate bill would terminate IRC Section 162(m)(6), effective beginning tax
year 2016.
Section 222: Economic Substance Doctrine
Background
The economic substance doctrine is a common law doctrine that is applied by the IRS and courts
to disallow transactions that technically comply with the IRC but lack economic substance.
HCERA Section 1409 codified the doctrine by adding Section 7701(o) to the IRC. Under IRC
Section 7701(o), in those circumstances in which the doctrine is relevant, a transaction will have
economic substance only if it changes the taxpayer’s economic position in a “meaningful way”
(apart from any federal tax effects) and the taxpayer has a “substantial purpose” (other than a
federal tax purpose) for entering into it.
HCERA Section 1409 also imposes a penalty on any tax underpayment attributable to a
transaction lacking economic substance (IRC Section 6662(b)(6)) and an increased penalty on
nondisclosed transactions lacking economic substance (IRC Sec. 6662(i)). HCERA Section 1409
further provides that the reasonable cause exceptions in IRC Section 6664 to the penalties
imposed on tax underpayments and reportable transaction understatements do not apply to
noneconomic substance transactions. HCERA Section 1409 also affects the application of IRC
Section 6676, which imposes a penalty on any claim for an income tax refund or credit that is for
an excessive amount unless the claim has a reasonable basis, by providing that a noneconomic
substance transaction does not have a reasonable basis.
Provision
Section 222 of the Senate bill would repeal IRC Section 7701(o), as well as the penalty
provisions in IRC Sections 6662(b)(6) and 6662(i). The provision would also repeal the
provisions in IRC Section 6664 and IRC 6676 that provide that noneconomic substance
transactions do not meet the reasonable cause and basis standards. The provision would apply to
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transactions entered into (and to underpayments, understatements, or refunds and credits
attributable to transactions entered into) after December 31, 2015.
Section 223: Budgetary Savings for Extending Medicare Solvency
Background
Medicare Part A, which covers inpatient hospital services, skilled nursing care, hospice care, and
some home health services, is financed through the Hospital Insurance (HI) trust fund. The HI
trust fund is funded primarily by a dedicated payroll tax of 2.9% of earnings, shared equally
between employers and workers. Beginning in 2013, the ACA has imposed an additional tax of
0.9% on high-income workers with wages over $200,000 for single tax filers and over $250,000
for joint filers. (Section 218 of the Senate bill would repeal this high-income tax.) Other sources
of income to the HI trust fund include premiums paid by voluntary enrollees who are not entitled
to premium-free Medicare Part A, a portion of the federal income taxes paid on Social Security
benefits, and interest on federal securities held by the trust fund. The Medicare Trustees estimate
that in 2015 the HI trust fund will bring in about $278 billion in revenues and spend about $276
billion on Medicare Part A benefits and administration.35 At the end of 2015, the trust fund is
expected to have an asset balance of about $200 billion.
As long as the HI trust fund has a balance, the Department of the Treasury is authorized to make
payments for Medicare Part A services. However, if the HI trust fund is not able to pay all current
expenses out of current income and accumulated trust fund assets, it is considered to be insolvent.
The Medicare Trustees estimate that the HI trust fund will become insolvent in 2030, at which
time it will only have sufficient income to cover 86% of Part A expenditures.
Provision
Section 223 of the Senate bill states that the full amount of on-budget savings during the fiscal
years 2016 through 2025 resulting from this act would be $379.3 billion. Section 223 would
transfer this amount from the Treasury to the HI trust fund.


35 Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2015
Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical
Insurance Trust Funds, July 22, 2015.

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Author Contact Information

Annie L. Mach, Coordinator
Sarah A. Lister
Analyst in Health Care Financing
Specialist in Public Health and Epidemiology
amach@crs.loc.gov, 7-7825
slister@crs.loc.gov, 7-7320
Erin Bagalman
Erika K. Lunder
Analyst in Health Policy
Legislative Attorney
ebagalman@crs.loc.gov, 7-5345
elunder@crs.loc.gov, 7-4538
Evelyne P. Baumrucker
Alison Mitchell
Specialist in Health Care Financing
Analyst in Health Care Financing
ebaumrucker@crs.loc.gov, 7-8913
amitchell@crs.loc.gov, 7-0152
Patricia A. Davis
Paulette C. Morgan
Specialist in Health Care Financing
Specialist in Health Care Financing
pdavis@crs.loc.gov, 7-7362
pcmorgan@crs.loc.gov, 7-7317
Bernadette Fernandez
James V. Saturno
Specialist in Health Care Financing
Specialist on Congress and the Legislative Process
bfernandez@crs.loc.gov, 7-0322
jsaturno@crs.loc.gov, 7-2381
Elayne J. Heisler
Namrata K. Uberoi
Specialist in Health Services
Analyst in Health Care Financing
eheisler@crs.loc.gov, 7-4453
nuberoi@crs.loc.gov, 7-0688
Suzanne M. Kirchhoff
Julie M. Whittaker
Analyst in Health Care Financing
Specialist in Income Security
skirchhoff@crs.loc.gov, 7-0658
jwhittaker@crs.loc.gov, 7-2587

Acknowledgments
Nick Elan, research assistant, helped with the preparation of material for this report.

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