American Health Care Act Update Review

March 21, 2017 Phil C. Solomon

American Health Care ActThe House proposal to “repeal and replace” the Affordable Care Act (ACA), the landmark and controversial legislation that is a signature of President Barack Obama’s administration, indicates that the nation’s healthcare system could be heading for yet another upheaval.  March 21, 2017 marked the seventh anniversary of the ACA.  Although there is still a high degree of uncertainty regarding what the final repeal-and-replace legislation will look like, or when it will appear, any changes to the ACA will have important implications for hospitals, health systems, healthcare professionals and patients.

It is too early to know how the American Health Care Act (AHCA)—the proposed legislation adopted by the two House Committees of jurisdiction on March 9, 2017 and passed out of the Budget Committee on March 16th—will impact healthcare organizations.  (The ACA certainly had its own share of controversies before it became law.)  We provide the following summary of the proposal’s major provisions and responses from organized medicine, healthcare policy experts and the hospital industry primarily to keep you informed, and we will continue to provide updates as new developments arise.

The Hard Numbers

A report by the nonpartisan Congressional Budget Office (CBO) released on March 13, 2017 offers an independent analysis of how the legislation would affect health insurance coverage and access to healthcare for millions of Americans.

The CBO and the Joint Committee on Taxation together estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate.  Some of those currently covered would choose not to have insurance because they choose to carry coverage under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.  According to the CBO, by 2026, the replacement bill would reduce the federal budget deficit by $337 billion, but leave 24 million Americans uninsured.

“The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance,” the report stated.  The savings would be even greater if it were not for the AHCA’s increasing spending in other areas:  “The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance.”

In a statement, Tom Price, MD, recently appointed secretary of Health and Human Services, questioned the assumptions used in the CBO analysis—including the CBO’s estimates of how many Americans would drop insurance coverage if the individual mandate were repealed.  Secretary Price argued the AHCA would give patients “meaningful access to care” by enabling market forces to lower the cost of care and reduce premiums and deductibles. These market forces would ultimately give patients the coverage and access they need and that their doctors recommend, he said. President Donald Trump said “more competition and less regulation will finally bring down the cost of care, and bring it down significantly.  Unfortunately, it takes a while to get there because you have to let that marketplace kick in.”

The CBO acknowledged the uncertainty, without going so far as to assume that healthcare prices to consumers would be forced downward, and qualified its estimates by noting that:  “The ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain.  But CBO and [the Joint Committee on Taxation] have endeavored to develop estimates that are in the middle of the distribution of potential outcomes.”

In a response to the CBO report, House Speaker Paul Ryan stressed that the plan “is not about forcing people to buy expensive, one-size-fits-all coverage.  It is about giving people more choices and better access to a plan they want and can afford.  When people have more choices, costs go down.  That’s what this report shows.  And, as we have long said, there will be a stable transition so that no one has the rug pulled out from under them.”

Key Provisions

In brief, the American Health Care Act (AHCA), as the bill is called, proposes to:

  • Eliminate the individual mandate requiring people who can afford it to purchase health insurance. The individual mandate, a cornerstone of the ACA, was designed to keep health insurance costs lower for sicker and older individuals by creating the broadest possible risk pools.  Under the Republican bill, people who choose not to purchase insurance would not pay a penalty.  However, the plan would provide an incentive to purchase and maintain coverage by imposing a penalty, payable to the insurer, for lapses.
  • Repeal the employer mandate of the ACA, which requires businesses with 50 or more full-time equivalent employees to provide health insurance to at least 95 percent of their full-time employees and dependents up to the age of 26, or pay a penalty.
  • Repeal subsidies provided under the ACA to help lower-income patients cover the cost of deductibles and co-payments.
  • Retain the ACA’s expanded Medicaid coverage (which raised the eligibility cutoff to 138 percent of the poverty level) in 30 states until 2020.
  • Cap federal Medicaid funding per enrollee beginning in 2020, based on state Medicaid expenditures in 2016.
  • Distribute tax credits to offset the cost of premiums and deductibles using age, rather than income, to calculate how much people receive.  Individuals earning less than $75,000 per year and households earning less than $150,000 per year would receive tax credits.  These credits would be $2,000 for an individual under the age of 30 and twice that for individuals over the age of 60. Unlike subsidies, they would be payable in the year following the year of coverage.  These numbers contrast with the ACA provisions, which provide upfront subsidies to enable households earning up to 138 percent of the poverty level to purchase insurance on the health exchanges.  The bill would also expand the health plans that qualify for subsidies.  An analysis by the Kaiser Family Foundation indicates that these changes could have significant implications for different populations.
  • Promote the use of health savings accounts as a means of paying for the costs of medical care by increasing annual limits to $6,550 for individuals and $13,100 for families starting in 2018 (an increase from the ACA limits for 2017 of $3,400 for individuals and $6,750 for families).
  • Increase the amount that insurers can charge older Americans.  The bill allows insurers to charge older Americans five times as much as younger ones, compared with ACA’s provision, which allows insurers to charge older Americans only three times that of younger beneficiaries.
  • Retain the following provisions of the ACA: prohibitions on annual and lifetime limits; dependent coverage until the age of 26; coverage for pre-existing conditions; and provision of 10 essential health benefits, including maternity care and preventive services.
  • Eliminate the Prevention and Public Health Fund.
  • Repeal taxes on drug manufacturers, insurers, medical device manufacturers and high-income households.  The Congressional Joint Committee on Taxation estimates the repeal of these taxes would result in revenue losses for the federal government over 10 years of approximately $25 billion, $145 billion, $20 billion and $270 billion, respectively.

Strong Opposition

The AHCA has drawn widespread concern and criticism from multiple quarters.  Conservative groups, including Heritage Action, the Cato Institute, Americans for Prosperity, FreedomWorks and the Tea Party Patriots all oppose the bill on the grounds that only complete repeal of the ACA will suffice, without replacement.  The medical and healthcare communities, which have zeroed in on the large number of Americans who, the CBO analysis indicates, would become uninsured, are resolute in their opposition, at least for now.  Many believe the proposal would benefit the wealthy at the expense of the poor, and that these disparities would create an enormous burden for hospitals and healthcare providers.  Proponents feel ongoing improvements in the U.S. economy and higher employment rates would offset these potential problems.

Criticisms revolve primarily around the bill’s reduced tax credits for individuals purchasing private plans and the proposed per-capita limit on federal contributions to state Medicaid programs, which could stretch state resources and reduce or eliminate healthcare services for many low-income and unemployed Americans.  Many provider organizations have gone public with their concerns.  The bill “would dramatically reverse progress we’ve made in controlling healthcare costs and assuring quality care, and it would gut patient protections, investments in prevention and access to care for the most vulnerable Americans,” George C. Benjamin, MD, executive director of the American Public Health Association, said in a statement.  The American Nurses Association also strongly opposed the proposal.

In a letter to Congressional leaders, James L. Madara, MD, executive vice president and CEO of the American Medical Association, acknowledged problems with the ACA, but said those problems must be addressed.  “We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm it would cause to vulnerable patient populations,” he stated.

A letter from Rick Pollack, president and CEO of the American Hospital Association echoed the AMA’s concerns.  “It appears that the effort to restructure the Medicaid program will have the effect of making significant reductions in a program that provides services to our most vulnerable populations, and already pays providers significantly less than the cost of providing care,” he said.  The AHA suggested the expanded use of Medicaid waiver programs to help states expand coverage and develop innovative models of care to improve services.  (Medicaid waiver programs allow patients who would otherwise be in an institution, nursing home or hospital to receive long-term care in the community.)

AARP®, which represents 38 million Americans over the age of 50, also came out against the bill, citing a report showing that the Medicare Part A Trust fund is solvent until 2028 largely due to the ACA, and that the current bill, which would remove these provisions, would increase costs and reduce benefits for many older Americans.  The organization estimates the bill’s tax credit changes and age rating could increase premiums by as much as $3,600 for a 55-year-old earning $25,000, $7,000 for a 64-year-old earning $25,000 and $8,400 for a 64-year-old earning $15,000 annually.

A January article on the Health Affairs blog warned that the large increase in uninsured Americans would remove coverage for substance abuse treatment and prevention from millions, creating a gap in services that could worsen the opioid epidemic.  “In the three states with the highest drug overdose deaths—Kentucky, New Hampshire and West Virginia—a repeal would about triple the uninsured rate,” noted Lisa Clemans-Cope.

Clearly, the AHCA has reopened an intense national debate about whether healthcare should be a right or a choice.  Based on the analyses we’ve seen thus far, providers could potentially find themselves caring for a larger number of uninsured and under-insured patients.  The CBO analysis points to two populations that could fuel this trend: young, healthy individuals who opt not to purchase health insurance and an increase in uninsured low-income patients.

You will find this post and other communications on the MiraMed website. Please note that this post is for your information and education only and does not represent a position either for or against the proposal.

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Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at philcsolomon@gmail.com

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