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CBO: Alexander-Murray Bill Would Trim Deficit, Keep Americans Insured

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Is the Senate’s bipartisan compromise a workable fix or a ‘futile’ stopgap?

The bipartisan Alexander-Murray bill aimed at propping up the Affordable Care Act long enough for more substantial changes to be made is receiving a mixed response from lobbying groups and legislators, with some saying the bill only extends the life of a system that should be allowed to die.

Supporters say the bill would stabilize a volatile healthcare insurance market and preserve coverage for millions of Americans by continuing the cost sharing reduction (CSR) payments that health plans say are essential to helping them survive the ACA.

The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) released an assessment Wednesday of the measure, finding that the deal would reduce the deficit by $3.8 billion over the next decade “without substantially changing the number of people with health insurance coverage, on net.” By contrast, earlier proposals to overhaul the ACA lost steam this year after CBO scores indicated that they would likely drive down the number of insured Americans by tens of millions.

“This nonpartisan analysis shows that our bill provides savings and ensures that funding two years of cost-sharing payments will benefit taxpayers and low-income Americans, not insurance companies,” Sen. Lamar Alexander (R-TN) and Sen. Patty Murray (D-WA) said Wednesday in a joint statement.

The CSR payments are intended to compensate insurers for providing coverage to lower-income consumers at below cost, and many say losing those payments will drive premiums higher and force some insurers to leave certain markets.

The compromise

Alexander and Murray developed the compromise bill in a bid to maintain the CSR subsidies that the Trump administration announced October 12 it would halt. The White House argues the CSRs were never authorized by Congress.

California is leading the charge in a legal challenge of President Trump’s stated intention to stop the payments, and the American Hospital Association, along with several other groups representing hospitals and other healthcare organizations, has filed a brief in support of the CSRs. But a federal judge in California sided Wednesday with the White House, ruling that the government doesn’t have to continue making the payments while states challenge the move in court, Reuters reported.

A bipartisan coalition of 24 senators—12 Republicans and 12 Democrats—have signed on to the healthcare legislation as cosponsors. Preserving the CSRs was a major priority of the Democrats, who compromised by agreeing to the Republican push to allow states to seek waivers of ACA requirements in their own states.

Ending the subsidies is expected to result in healthcare plans raising premiums even higher than otherwise planned. But the Alexander-Murray bill would authorize the CSR payments for two years and tie them to the changes in the ACA that give states more flexibility to seek waivers from the law’s requirements.

The proposed legislation also would allow insurance companies to sell less comprehensive plans to all consumers. Republican leaders say the allowance would make more affordable plans available, which, in turn, would encourage more people to buy coverage and help the insurers remain profitable.

“This is a first step: Improve it, and pass it sooner rather than later. Our purpose is to stabilize and then lower the cost of premiums in the individual insurance market for the year 2018 and 2019,” Alexander said.

Bill opposition

The Association of American Physicians and Surgeons (AAPS) opposes the bill, saying it seeks to stabilize the insurance marketplace by forcing taxpayers to pay insurers to lower out-of-pocket costs for certain plan members.

Jane M. Orient, MD, executive director of AAPS, says the ACA actually makes insurance unaffordable.

“The deceitfully named Affordable Care Act did not just destabilize the individual insurance market; it destroyed it by outlawing genuine, voluntary insurance,” Orient says. “ACA-compliant plans are not true insurance, but coercive prepayment schemes for a federally dictated package that might be rejected by most subscribers.”

Orient says the bill being considered should be seen as an inappropriate form of legislative life support.

“Resuscitating Obamacare with Alexander-Murray would only prolong its dying process, but at great expense,” Orient says.

“Instead of running a futile Code Blue on Obamacare, we should be attending to American medicine and the American economy,” she adds.

Bill ‘provides critical stability’

American College of Emergency Physicians (ACEP) President Becky Parker, MD, FACEP, disagrees.

She says ACEP supports the Alexander-Murray legislation because it will provide critical stability for the individual health insurance marketplace, ensuring that millions of Americans have continued access to the health coverage they need and deserve.

“This legislation is a good-faith bipartisan effort that will help limit increases in health insurance premiums and preserve important consumer protections, such as the Essential Health Benefits package that includes emergency services, while also providing additional flexibility for states to implement innovative approaches to coverage,” Parker says.

Bipartisan Bill to Stabilize the ACA Marketplaces Estimated to Save $3.8 Billion and Protect Coverage

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http://www.commonwealthfund.org/publications/blog/2017/oct/bipartisan-bill-to-stabilize-the-aca-marketplaces?omnicid=EALERT1300653&mid=henrykotula@yahoo.com

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Yesterday, the Congressional Budget Office (CBO) released its estimate of the effects of a bipartisan health care bill drafted by Senators Lamar Alexander (R–Tenn.) and Patty Murray (D–Wash.) to help stabilize the Affordable Care Act (ACA) marketplaces. CBO projects that the Bipartisan Health Care Stabilization Act would save the federal government $3.8 billion by 2027. In contrast to this year’s Republican-led repeal-and-replace bills, which were estimated to lead to as many as 32 million people losing insurance, the bill would preserve coverage gains made under the ACA. But the bill is limited in scope and is not expected to substantially increase coverage, either.

Making Good on an IOU…

One of the most important provisions in the bill would appropriate the money to pay for so-called cost-sharing reductions (CSRs). These federal payments reimburse insurance companies for lowering deductibles and copayments for lower-income people with marketplace plans. The Trump administration ended those payments two weeks ago, calling them a bailout for insurers. But because insurers are required to offer the discounts to consumers and the federal government is required to pay for them, in its analysis, CBO assumed the payments were already an obligation of the federal government. This means the bill’s formal appropriation for the money won’t increase the deficit; it simply makes good on an IOU.

Since most insurers have already increased their premiums for the coming year to compensate for the anticipated lack of CSR payments, the Alexander–Murray bill won’t affect 2018 rates. Rate-setting for the 2018 plan year was fraught for states and insurers given the uncertainty about whether cost-sharing payments would be made. But if passed, the bill would reassure insurers who are already planning for 2019 and encourage more stability.

…But No Double-Dipping by Insurers in 2018

Because most insurers built the cost of the cost-sharing reductions into their 2018 premiums, there is thus a risk that if the Alexander–Murray Bill becomes law, these insurers would receive double payments — once in the form of higher premiums and a second time from the federal government. The proposed law requires states to ensure that insurers rebate any such windfall to the federal government. CBO estimates that most insurers would likely owe a rebate under the policy, totaling about $3.1 billion over 2018–2027.

New Source of Outreach and Enrollment Funds

To promote enrollment, the bill directs the federal government to spend $105.8 million to help people who are eligible for ACA coverage sign up in 2018 and 2019. It also requires the U.S. Department of Health and Human Services (HHS) to report on its marketplace outreach activities. (By contrast, the Trump administration cut $90 million, or 90 percent, of the HHS budget for advertising.) Since the bill draws its outreach dollars from existing ACA funds, this provision does not increase the deficit. While the boosted outreach funding might be expected to lead to enrollment gains, CBO states that it could not predict the effect on coverage. However, Commonwealth Fund survey data has found that 40 percent of currently uninsured adults are not aware of the marketplaces, suggesting a strong need for ongoing advertising and outreach — and the possibility that the bill could lead to some coverage gains.

Allowing People of All Ages to Buy Catastrophic Plans Could Lower Premiums in Other Plans

In an effort to offer lower-cost plans for people who are not eligible for premium tax credits, the bill opens up to everyone the ACA’s catastrophic health plans, which had previously been limited to young adults and older people who could not find affordable plans. Few people have enrolled in these plans, and the CBO doesn’t expect that to change. But the bill requires the plans’ enrollees to be pooled with the rest of an insurer’s health plans’ individual market enrollees. The presence of the healthy people who tend to buy catastrophic health plans in the broader pool could lower premiums for everyone, as well as tax credits paid by the federal government. CBO projects this would result in $1.1 billion in subsidy savings to the federal government over 2019–2027.

Looking Forward

Until the emergence of the Bipartisan Health Care Stabilization Act, “bipartisan” and “agreement” rarely appeared in the same sentence in the coverage of this year’s health care saga. Yesterday’s CBO score indicates that congressional work through the regular legislative process can result in sound policy that benefits consumers and taxpayers — and that is agreeable to policymakers on both sides of the aisle.

The hospital divestiture trend is heating up, and not going away anytime soon

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http://www.healthcaredive.com/news/the-hospital-divestiture-trend-is-heating-up-and-not-going-away-anytime-so/505566/

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Not long ago, health systems gobbled up hospitals with the overriding goal of growth, expanded footprints and market share. Some major health systems are now regretting those buys as they have become saddled with community hospitals that are losing money and struggling with large debt and capital needs.

Two major health systems facing this issue are Community Health Systems (CHS) and Tenet Healthcare, who are both looking to shed facilities.

“The strategy that CHS, Tenet and many others had was to really build around scale without really thinking about the regional economics of how these hospitals work together,” Gregory Hagood, senior managing director at SOLIC Capital Advisors, which works with hospitals on mergers and acquisitions, told Healthcare Dive.

Health systems like CHS and Tenet grew their systems with large purchases, but they’ve learned from their experiences and are now looking at divestiture options as a way to shed unprofitable hospitals and billions of debt. No longer are major systems and investors interested in buying struggling hospitals, which CHS did when it purchased the struggling Florida system Health Management Associates for $7.5 billion in 2014.

CHS and Tenet look to cut facilities, debt

CHS, a for-profit system with 137 hospitals in 21 states, is looking to divest at least 30 hospitals this year. They have already announced more than 20 hospital sales this year. CHS’ divestitures come after the health system lost $1.7 billion last year and accumulated about $15 billion in debt. Given their financial situation, Moody’s Investors Service recently downgraded CHS’ corporate family rating, probability of default rating and senior unsecured notes.

Meanwhile, Tenet Healthcare, the third largest investor-owned U.S. health system, is looking into strategic business options that may include a sale. The Wall Street Journal estimated Tenet has a market value of $1.6 billion, which is a far cry from what it owes. Fitch Ratings reported that Tenet had about $15.4 billion of debt at the end of June.

Tenet recently announced it’s selling eight U.S. hospitals and all of its nine U.K. facilities, which CEO Trevor Fetter said will yield between $900 million and $1 billion.

In addition to the sales, the company is dealing with executive and board shake-ups. Fetter recently announced his impending departure and two board members left the board because of “irreconcilable differences regarding significant matters impacting Tenet and its stakeholders.”

CHS and Tenet might be the most high-profile systems looking to shed debt and facilities, but they’re far from the only ones. A recent report by Kaufman Hall found that hospital and health systems mergers and acquisitions increased 15% in Q2. Big players are especially active. There were six transactions of health systems with nearly $1 billion or more in revenues announced in the first half of 2017. There were only four such deals in all of 2016.

Though hospital M&A activity remains high, healthcare financial experts say the days of health systems swallowing small, unprofitable hospitals as part of larger deals to solely build a system’s footprint are gone. Those days have been replaced by more strategic decisions as to what is right for the organizations, Richard Gundling, senior vice president of healthcare financial practices at the Healthcare Financial Management Association, told Healthcare Dive.

Health systems are now taking a strategic view of hospitals to see if they fit into their culture. They are also ignoring small, community hospitals with debt or buying them for much less than they may be worth.

The systems that are selling unprofitable hospitals are also faced with a market in which investors aren’t interested in paying top dollar for struggling hospitals with heavy debt. Instead, Hagood said, investors are more interested in post-acute care services like rehab and long-term care and ambulatory care initiatives. They don’t typically see hospitals as a wise investment.

“Smaller systems that have huge debt loads or pent-up capital demands have received a lukewarm reception at best,” Patrick Allen, managing director with Kaufman Hall’s mergers and acquisitions practice, told Healthcare Dive.

Why are health systems divesting?

Health systems, especially ones that have built up debt, are having trouble making up lost revenues. Hospitals could once cover a struggling type of care through a different, more profitable service. That’s no longer the case as payers and the CMS have squeezed hospital margins.

Sagging reimbursements and payer policies that move patients from hospitals to outpatient care and freestanding facilities are hurting hospital finances. There’s also a CMS proposal to allow hip and knee replacement surgeries for Medicare patients on an outpatient basis. Those kinds of surgeries are often the most profitable for hospitals, which means they may soon lose another revenue driver.

Beyond those direct payer impacts, health systems are looking to protect themselves against a changing industry in which market share isn’t as important as flexibility and efficiency.  “As all of these changes are occurring, the systems are strategically moving and gathering their assets to be able to deal with expected changes,” Gundling said.

Gundling said another issue facing large systems that may lead to divestiture is cultural mismatch. A large system may have swooped in and bought a 100- or 150-bed community hospital as part of a larger purchase. The hospital’s community may have bristled at the idea of a large out-of-state corporate entity buying a mainstay of their community. Plus, physicians may dislike a new system’s clinical protocols.

“There might be times when you say it might not be the right fit for us after all … That can lead to a divestiture decision,” Gundling said.

How are health systems handling divestitures?

Health systems are taking different avenues to deal with possible divestitures. Some systems want to completely rid themselves of certain hospitals. Others look to repurpose small hospitals for outpatient, skilled nursing facilities, labs or imaging while maintaining a large regional hospital. Still others forge partnerships, so they don’t completely sell the properties.

Allen said many health systems see their small community hospitals aren’t bringing in enough revenue and can’t be competitive in every service line and business. So, instead, they are dropping unprofitable services and sticking with what works for them.

Gundling compared health systems’ decisions about divestiture to an individual creating the right investment balance. For health systems, divestitures are not about selling properties, but strategically managing risk. “They aren’t just selling off to sell off. All have different strategies,” said Gundling.

Allen said divestitures are a balancing act for systems. They can shed debt and assets, but that comes with revenue loss. “The balance is always what is the right sale price for the exchange of cash flow when it becomes less than profitable. Balancing those two are always tough,” said Allen.

When deciding on whether to divest, merge or partner with other facilities, Allen said systems need to figure out the community’s needs, the area’s business climate, what the facility wants to be and potential partnership opportunities. Allen, whose company works mostly with nonprofit systems, said many are repurposing underutilized facilities into other uses like rehab, skilled nursing facilities, labs and imaging.

“Once you have a handle on what the market needs and what the market provides, then you can make strategies to get you there,” he said.

Another issue facing health systems is infrastructure. Many smaller hospitals don’t meet today’s care delivery system. “A lot of hospitals don’t lend themselves very efficiently to quality care based on their 30- and 40-year old design,” said Hagood. “That factor can accelerate their repurposing.”

The results and future of the divestiture trend

Allen said divestitures have resulted in systems being able to reallocate capital and move forward with less debt. However, Hagood said one major reason health systems have for divestitures — shedding debt — hasn’t completely worked. Part of the problem is that the new investors aren’t paying top dollar for a struggling community hospital with debt.

“The biggest challenge so far is that they have struggled to get value for those assets to effectively repay that debt,” he said.

Gundling said health systems that have shed debt have followed the divestitures by focusing on cost efficiencies, supply chain management and revenue cycle management.

The hospital divestiture trend has led to sales, mergers and partnerships, with repurposed or downsized facilities, but it hasn’t closed many facilities. That may be coming soon, though.

Hagood said pending mergers, including the Mountain States Health Alliance and Wellmont Health System deal in Tennessee and Virginia, will likely lead to facility closures. There aren’t enough healthcare dollars to support the number of facilities in some of the Appalachian communities involved, he said.

Most of the large divestiture action has been centered around for-profit systems, but Hagood said to watch for more nonprofit action, including Catholic Health Initiatives (CHI), which recently reported a $585.2 million operating loss for fiscal year 2017 after losing $371.4 million in 2016.

Earlier this year, Moody’s Investor Service downgraded CHI’s rating on long-term debt and variable rate demand bonds because of poor operating performance since 2012 and a relatively low level of liquid assets. Moody’s warned that further downgrades could occur unless CHI improves its operating performance.

CHI divested its KentuckyOne facilities earlier this year, a move expected to bring in $534.9 million. Given the company’s finances and healthcare environment, Hagood said there could be more divestitures.

“Nonprofits are going to move slower, but I think you’re going to see them (divest) as economics continue to shift,” he said.

Experts agree the divestiture trend is just heating up as health systems deal with the greater emphasis on outpatient care and freestanding centers. Hagood predicted 24-7 inpatient facilities with full emergency rooms and surgical facilities will continue to dwindle in the coming years as systems repurpose facilities.

“There are 5,000-plus hospitals today. I think you’re going to see that consolidate down,” he said.

 

HHS loses abortion lawsuit

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The D.C. Circuit Court of Appeals yesterday rebuffed the Trump administration’s effort to stop an undocumented teenager from getting an abortion, likely bringing an end to one of the stranger legal sagas of the Trump administration so far.

The D.C. Circuit ordered the Health and Human Services Department to let the woman visit an abortion provider immediately, saying the department had violated her constitutional right to obtain an abortion by refusing to let her leave the detention facility where she’s being held.

Go deeper: Read the court’s 6-3 decision.

What’s next: HHS can leave it here, or appeal to the Supreme Court.

Be smart: File this case as potential fodder for future Supreme Court confirmation hearings. Because the ruling came from the full D.C. Circuit, it involves several judges who could be future Supreme Court nominees. The majority included Judges Sri Srinivasan and Patricia Millett, both of whom are seen as potential SCOTUS contenders under a Democratic president.

Insurance and device taxes back on the chopping block

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It’s time once again for the insurance and medical device industries to ramp up their lobbying against the ACA’s taxes on their products. Congress has frozen both taxes, but both are set to kick in again next year.

  • A trio of Senate Democrats — Heidi Heitkamp, Jeanne Shaheen and Joe Donnelly — introduced a bill last week to delay the insurance tax for another two years. House Republicans are also hoping to find some bipartisan support for a similar measure, though they also still need to finalize the policy details.
  • Opposition to the device tax is also bipartisan, and heating up. More than 175 House members, including 43 Republicans, signed on to a letter yesterday urging Speaker Paul Ryan to bring up a bill fully repealing the device tax.

Reality check: Both industries, but especially insurers, are more likely to win another delay than see their taxes repealed.

And though there will be public pushes here and there for stand-alone bills, or for inclusion in tax reform, getting onto Congress’ massive end-of-year package is their best bet. Measures to delay the insurance or device taxes could be added to Alexander-Murray, if it comes up, as a way to win more Republican votes without losing Democrats.