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Administration’s Ending Of Cost-Sharing Reduction Payments Likely To Roil Individual Markets

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http://healthaffairs.org/blog/2017/10/13/administrations-ending-of-cost-sharing-reduction-payments-likely-to-roil-individual-markets/

Yesterday, October 12, 2017, the White House press office announced that the administration will no longer be reimbursing insurers for the cost-sharing reductions they are legally required to make for low-income individuals. The Affordable Care Act requires insurers to reduce cost sharing for individuals who enroll in silver plans and have household incomes not exceeding 250 percent of the federal poverty level. These provisions reduce the out-of-pocket limit for these enrollees—particularly for those with incomes below 200 percent of poverty—and sharply reduce deductibles, coinsurance, and copayments. The reductions cost insurers around $7 billion a year currently.

The press secretary’s statement said:

Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments. The United States House of Representatives sued the previous administration in Federal court for making these payments without such an appropriation, and the court agreed that the payments were not lawful. The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.

Acting HHS Secretary Hargan and CMS Administrator Verma issued a similar statement:

It has been clear for many years that Obamacare is bad policy. It is also bad law. The Obama Administration unfortunately went ahead and made CSR payments to insurance companies after requesting—but never ultimately receiving—an appropriation from Congress as required by law. In 2014, the House of Representatives was forced to sue the previous Administration to stop this unconstitutional executive action. In 2016, a federal court ruled that the Administration had circumvented the appropriations process, and was unlawfully using unappropriated money to fund reimbursements due to insurers. After a thorough legal review by HHS, Treasury, OMB, and an opinion from the Attorney General, we believe that the last Administration overstepped the legal boundaries drawn by our Constitution. Congress has not appropriated money for CSRs, and we will discontinue these payments immediately.

The Legal Background

In fact, the ACA requires the federal government to reimburse insurers for these reductions. This is not a bailout. It is rather a statutory obligation of the federal government to pay insurers for services they have provided as required by law. In 2014, the House of Representatives sued the Obama administration in House v. Burwell (now House v. Price) claiming that the cost-sharing reduction (CSR) payments to insurers had never been appropriated by Congress and were thus illegal. A district court judge accepted this argument in the spring of 2016 and enjoined their payment, as President Trump’s statement says, but stayed her order pending appeal. The Obama administration appealed, arguing that there was in fact an appropriation. Until yesterday, the Trump administration had not taken a position on whether there was an appropriation or not.

The appeal is still pending, with the House and the Trump administration having agreed to stay the appeal several times. At the end of August, the D.C. Circuit Court of Appeals allowed 19 state attorneys general to intervene to protect their citizens. For more on the CSR backstory see here and here; for more on the intervention, see here; and for Health Affairs Blog posts on cost-sharing reduction payments, see here.

The Consequences Of Ending The CSR Payments

The effect of terminating the payments has been well analyzed, including a report from the Congressional Budget Office. It will drive up premiums as insurers attempt to cover the cost of the reductions. As premiums go up, so will premium tax credits. Indeed, the government will probably pay more in premium tax credits than it saves in cost-sharing reduction payments. Individuals who earn too much to receive tax credits will be particularly hard hit by the premium increases. Some of these could decide to pursue new forms of coverage that might be made available under the measures announced in President Trump’s October 12 executive order.

Ending the CSR payments could also drive some insurers out of the exchanges. Under their contract with the federal exchange, insurers may terminate participation if cost sharing reduction payments are terminated, but they are still subject to state laws on market withdrawal, which limit their ability to do so. They may not terminate their exchange enrollees unless they fail to pay their premiums, which many likely would do once an insurer left the exchange and premium tax credits were no longer available.

The effect of CSR payment termination, however, will depend heavily on how insurers deal with the change. In several states, including California, insurers have anticipated the termination and have already loaded the lost payments into their on-exchange silver plans. In other states, however, insurers have to date been instructed to assume that the payments will be made, or have been given no instructions whatsoever. In these states, the change is likely to cause considerable confusion. Insurers will have to refile their rates and will likely not be able to do so before open enrollment begins in three weeks. For more on the different responses insurers may have take, see here.

What Might Happen Now

It is possible that the states that have intervened in the House v. Price appeal will seek to block the withdrawal of the funds. It is also very possible that the state attorneys general or a consumer or insurer will sue to block the CSR withdrawal. New York Attorney General Eric Schneiderman issued a press release yesterday threatening legal action if President Trump withdraws the payments, and the California Attorney General has also threatened suit.

It is also possible that Congress will adopt a specific appropriation to fund the CSRs, putting to rest the question of whether such an appropriation exists. The Senate Health, Education, Labor, and Pension Committee held hearings on bipartisan solutions to health reform problems in September and virtually every witness, including insurance commissioners and governors supported removing the uncertainty around the payments and making it clear that they would continue. Support for continuing CSR funding has come from insurers, consumers, the National Association of Insurance Commissioners, and virtually all other stakeholders. The President’s statement, and the likely consequent chaos in the individual marketplaces, may be enough to finally prompt action.

In any event, ending the CSR payments is another sign that President Trump is doing what he can to undermine the stability of the individual market under the ACA. This action will have a much more immediate impact than the measures Trump announced in yesterday’s executive order.

President Moves to Weaken Health Care Law

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http://www.aarp.org/politics-society/advocacy/info-2017/trump-sign-order-eliminating-aca-rules-fd.html

President Executive order Moves to Weaken Affordable Care Act

Two new decisions would lead to higher health costs for older and sicker Americans.

A new executive order and a subsequent announcement on health care subsidies will shake up the insurance market.

President Trump has delivered a one-two punch to the Affordable Care Act (ACA). Late Thursday he announced the elimination of the subsidy payments to insurers that help lower-income Americans afford health care. That move came just hours after he signed an executive order that he says will promote more competition in the health insurance market.

The payments to insurers help fund subsidies that assist lower-income Americans in paying for deductibles, copays and other out-of-pocket health care expenses. The president had been threatening to cut off the subsidy payments for months.

The nonpartisan Congressional Budget Office had earlier estimated that if subsidy payments were withheld, premiums for individuals who buy the most popular health plans on the ACA health insurance marketplace would soar by 20 percent next year and 25 percent by 2020.

The president’s moves come just two weeks before the start of marketplace open enrollment. Insurers had threatened to abandon the marketplace if the subsidies were cut off. Some states have already signaled plans to challenge that action in court.

Congress has tried repeatedly over the past few months to repeal and replace the ACA. Thursday’s announcements are part of the president’s latest strategy to continue those attempts in the absence of congressional action. AARP has strongly opposed any repeal of the health care law.

The executive order directs the secretary of labor to consider expanding the ability of small businesses to form so-called association health plans. These plans may be able to avoid many state and federal insurance regulations. They could, for example, be exempt from the ACA rules that protect older Americans and people with preexisting health conditions from being charged far higher premiums as well as the ACA requirement to provide essential health benefits — such as emergency room care and mental health services.

The impact of these changes would potentially sting millions of older and sicker Americans. That’s because the new insurance options would likely attract low-risk individuals — who are generally healthier — leaving older, sicker people in the current individual market. Since those plans would be so heavily weighted with sick people, policyholders would pay significantly higher premiums.

“The order aims to create loosely regulated insurance plans that could provide skimpier benefits and cheaper premiums to young and healthy people, but that would make coverage more expensive for older people and those with preexisting conditions,” said Larry Levitt, senior vice president for special initiatives at the nonpartisan Henry J. Kaiser Family Foundation. “However, there are still a lot of unanswered questions about how this would all work and how much legal authority the administration really has.”

The order also paves the way for broader use of short-term policies that are not required to include essential health benefits nor cover people with preexisting medical conditions. Such short-term plans often serve as a bridge for people between jobs. Under the previous administration, individuals could buy the plans for only three months. The order would expand their duration to nearly a year.

And the president is asking the secretaries of labor, treasury, and health and human services to allow more businesses to use health reimbursement arrangements. Under the arrangements, businesses could use pretax dollars to reimburse employees for out-of-pocket medical costs and premiums.

Insurance premiums already are in place for 2018, and most insurers had anticipated the loss of the subsidy payments and set rates considerably higher to take that into account. Those that haven’t may ask state insurance commissioners to allow them to increase premiums.

Trump to cut off key ObamaCare payments

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http://thehill.com/policy/healthcare/355258-trump-to-cut-off-key-obamacare-payments-report?rnd=1507863218

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President Trump will end key payments to insurers selling ObamaCare plans, the White House announced late Thursday, marking Trump’s most aggressive move yet to dismantle the law after multiple GOP efforts to repeal and replace it failed this year.

The Trump administration has continued making the the disbursements to insurers, known as cost-sharing reduction payments, on a monthly basis. But Trump had consistently threatened to end the payments, which are worth an estimated $7 billion this year.

“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments,” the White House said in a statement late Thursday night.

The payments were created as part of the Affordable Care Act but were then the subject of a lawsuit by House Republicans during the Obama administration. A federal court ruled the payments were being made illegally, but the Obama administration appealed.

Congress could still decide to appropriate the payments, and there is bipartisan agreement that they should be made. But no action has been taken, and some Republicans are hesitant to vote for what they see as a bailout of ObamaCare.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people,” White House press secretary Sarah Huckabee Sanders said.

The administration’s decision is likely to lead to lawsuits. It also puts enormous pressure on lawmakers to reach a deal on funding the payments, adding yet another partisan battle to an already full calendar.

Senate Minority Leader Charles Schumer (D-N.Y.) and House Minority Leader Nancy Pelosi (D-Calif.) issued a joint statement calling the decision a “spiteful act of vast, pointless sabotage … now, millions of hard-working American families will suffer just because President Trump wants them to.”

Meanwhile, Speaker Paul Ryan (R-Wis.) praised the decision to end the Obama administration’s appeal of the subsidies.

“Today’s decision … preserves a monumental affirmation of Congress’s authority and the separation of powers,” Ryan said in a statement. “Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with the Trump administration to provide the American people a better system.”

Cutting off the subsidies could throw the ObamaCare marketplace into chaos.

The Congressional Budget Office (CBO) said in August that about 1 million additional people would be uninsured in 2018 and insurance companies would raise premium prices by about 20 percent for ObamaCare plans if the payments were cut off.

The CBO also said halting the payments would increase the federal deficit by $194 billion through 2026, largely because federal assistance to buy ObamaCare plans rises when premiums do.

The payments help low-income people afford co-pays, deductibles and other out-of-pocket costs associated with health insurance policies. Insurers have called the payments critical, saying that without them, they would have to massively increase premiums or exit the individual market.

Many insurers have already priced their plans for the coming open enrollment period, which begins Nov. 1.

The leaders of Senate Health Committee have been working toward a bipartisan deal to fund the payments for two years in order to stabilize the markets in the short term.

But progress was halted when lawmakers tried to pass a last-ditch ObamaCare repeal bill from Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.) last month, and the sides have still not reached an agreement.

The decision on the payments comes after Trump on Thursday signed an executive order aimed at loosening ObamaCare restrictions on insurance plans, which also could help destabilize the law.

Trump administration ends cost-sharing reduction payments under ACA

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Insurers have said the move will destabilize the individual market and increase premiums by at least 20 percent.

In a move insurers have long said would destabilize the individual market and increase premiums by at least 20 percent, the Department of Health and Human Services late Thursday ended cost-sharing reduction payments.

At least one state attorney general, AG Eric Schneiderman of New York, has said he would sue the decision. The court granted a request to continue funding for the subsidies, Schneiderman said.

California may also sue the administration over the decision.

“I am prepared to sue the #Trump Administration to protect #health subsidies, just as when we successfully intervened in #HousevPrice!” California AG Xavier Becerra tweeted Thursday night.

In May, Schneiderman and Becerra led a coalition of 18 attorneys general in intervening in House v. Price over the cost-sharing reduction payments.

The cost-sharing reductions payments will be discontinued immediately based on a legal opinion from Attorney General Jeff Sessions, said Acting HHS Secretary Eric Hargan and Centers for Medicare and Medicaid Services Administrator Seema Verma.

“It has been clear for many years that Obamacare is bad policy.  It is also bad law,” HHS said. “The Obama Administration, unfortunately, went ahead and made CSR payments to insurance companies after requesting – but never ultimately receiving – an appropriation from Congress as required by law. In 2014, the House of Representatives was forced to sue the previous Administration to stop this unconstitutional executive action. In 2016, a federal court ruled that the Administration had circumvented the appropriations process, and was unlawfully using unappropriated money to fund reimbursements due to insurers.  After a thorough legal review by HHS, Treasury, OMB, and an opinion from the Attorney General, we believe that the last Administration overstepped the legal boundaries drawn by our Constitution.  Congress has not appropriated money for CSRs, and we will discontinue these payments immediately.”

Trump tweeted this morning, “The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!”

Insurers reached and America’s Health Insurance Plans did not have an immediate comment on the ending of the subsidies.

The move to end CSRs comes weeks before the start of open enrollment on Nov. 1, but many insurers had submitted rates reflecting the end of the subsidies that allowed them to offer lower-income consumers lower deductibles and out-of-pocket costs.

America’s Essential Hospitals said it was alarmed by news of administration decisions that could create turmoil across insurance markets and threaten healthcare coverage for millions.

“This decision could leave many individuals and families with no options at all for affordable coverage,” said Bruce Siegel, MD, CEO of America’s Essential Hospitals. “We call on Congress to immediately shore up the ACA marketplace and to work in bipartisan fashion, with hospitals and other stakeholders, toward long-term and sustainable ways to give all people access to affordable, comprehensive care.”

Today’s CSR decision follows yesterday’s executive order from President Trump to allow for association health plans that could circumvent Affordable Care Actmandates on coverage. The executive order must go through the federal rulemaking process and may also face legal challenges.

AHIP was swift to react to Trump’s order.

“Health plans remain committed to certain principles. We believe that all Americans should have access to affordable coverage and care, including those with pre-existing conditions. We believe that reforms must stabilize the individual market for lower costs, higher consumer satisfaction, and better health outcomes for everyone. And we believe that we cannot jeopardize the stability of other markets that provide coverage for hundreds of millions of Americans,” said spokeswoman Kristine Grow. “We will follow these principles – competition, choice, patient protections and market stability – as we evaluate the potential impact of this executive order and the rules that will follow. We look forward to engaging in the rulemaking process to help lower premiums and improve access for all Americans.”

The American Academy of Family Physicians and five other medical associations representing more than 560,000 doctors have expressed serious concerns over the effect of President Trump’s executive order directing federal agencies to write regulations allowing small employers to buy low-cost insurance that provides minimal benefits.

In a joint statement, the AAFP, the American Academy of Pediatrics, the American College of Physicians, the American Congress of Obstetricians and Gynecologists, the American Osteopathic Association and the American Psychiatric Association strongly rejected the order they said would allow insurers to discriminate against patients based on their health status, age or gender.

Republicans tried to repeal and replace the ACA, and since that failed are trying to end consumer protections under the law, according to U.S. Representative Bill Pascrell Jr., a Democrat from New Jersey and a member of the Ways and Means Committee.

“Republicans have been on the warpath trying to end important consumer protections that the ACA affords, including protections for people with pre-existing conditions and required coverage for services that people actually need, like mental health care,” Pascrell said. “Now that they’ve failed in that endeavor, the Trump Administration is trying to use the back-door with this executive order.”

A Congressional Budget Office analysis released in August said the CSRs, which cost an estimated $7 billion a year, could end up costing the federal government $194 billion over a decade.

Polling Spotlight: A silver lining for the GOP on Obamacare repeal

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https://www.brookings.edu/blog/fixgov/2017/09/27/polling-spotlight-a-silver-lining-for-the-gop-on-obamacare-repeal/

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There is good reason to question the assumption that by failing once again to pass legislation repealing and replacing the Affordable Care Act, Republicans have shot themselves in the foot. Although the CBO (Congressional Budget Office) could not analyze in its usual detail the consequences of Graham-Cassidy, it was able to determine that the legislation would cut federal funding for Medicaid by more than $1 trillion over the next decade, throwing millions of low-income Americans off the rolls.

This outcome would have generated a huge political problem for Republicans. A Public Religion Research Institute poll released Monday found 69 percent of Americans opposed to cuts in Medicaid, with only 28 percent in favor. The opposition included 78 percent of Democrats, 69 percent of Independents—and 55 percent of Republicans. In a related finding, nearly 45 percent of Americans are worried that they or a member of their family will lose health coverage in the coming year.

No doubt, failing to act on Obamacare will anger a portion of the Republican base, adding fuel to the insurrection against the Republican establishment and depressing turnout in states and districts where Republican incumbents who support the party’s leadership are running for reelection. But in the long run, it would have been more politically damaging to deprive low-income Americans, including millions of Trump supporters in red states, of the Medicaid coverage they would otherwise have enjoyed.

As behavioral economists have shown, the fear of loss is more acute than the hope of gain. Health policy perfectly illustrates this proposition. Whoever moves to change the status quo must convince people that they will not lose what they already have. The larger the share of people who are satisfied with the status quo, the tougher the task. This is why President Obama put his personal credibility on the line to assure Americans that if they liked their current insurance policy, they could keep it under his proposed reform. When this turned out not to be entirely true, he and his party suffered.

But now, after almost eight years of public disapproval, Obamacare has become the new status quo, the baseline from which most people assess gains and losses. While opposition to Obamacare still exists writ larger, individual provisions—some of which have been under threat from Republican alternatives—are wildly popular among Americans. By threatening to take Medicaid away from millions of people, the Republicans poked a hornets’ nest. Whatever they did after this, they would have been hurt. But by running away, they at least minimized the number of stings. Their legislative failure was a blessing, very effectively disguised.

What’s Past Is Prologue: CBO’s Score for the House-Passed AHCA Reminds Us Why Insurance Markets Need Regulation

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http://www.commonwealthfund.org/publications/blog/2017/jun/why-insurance-markets-need-regulation

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The Trump administration has been arguing for months that the insurance market reforms of the Affordable Care Act (ACA) are not working and are even harming consumers. But four years of accumulated data on Americans’ experiences in a reformed individual market provides considerable evidence to the contrary. Americans’ ability to buy comprehensive health plans on their own has improved significantly since the reforms went into effect in 2014. Most people with marketplace plans are satisfied with them and have used their plans to get health care they couldn’t have obtained in the past. A majority of those eligible for subsidies have premiums and deductibles similar to those in employer plans. And while policy fixes are needed to improve affordability, as well competition in some areas of the country, the marketplaces were looking increasingly stable for both consumers and insurers at the beginning of this year.

It is actually the lack of certainty about the administration’s actions regarding the enforcement of the market reforms, rather than the reforms themselves, that are the primary source of the marketplace’s current problems. The importance of the ACA’s insurance market reforms were underscored last week in the Congressional Budget Office’s (CBO) analysis of the House-passed American Health Care Act (AHCA), the Republican’s ACA repeal-and-replace bill. The report included an assessment of an amendment that would allow states to undo some of the reforms. That assessment is a powerful illustration of why these reforms were needed in the first place.

The MacArthur Amendment Relaxes ACA Individual Market Reforms

In the week before the House vote in May, Representative Tom MacArthur sponsored an amendment to the AHCA that provided waivers for states that wanted to relax two major sets of ACA reforms:

  • The requirement that insurance companies sell policies that cover a standard set of health benefits similar to those in employer-based coverage
  • The ban that prevents insurance companies from charging people more based on their health.

Under the first waiver, states could let insurers eliminate coverage for many services, significantly driving up out-of-pocket costs for people who need these services. Under the second waiver, states could allow insurers to price, or underwrite, people’s insurance based on their health if they applied for a plan and had a gap in their insurance of 63 days or more. States with the waivers would be required to establish high-risk pools or reinsurance programs to make coverage affordable for people who had higher premiums as a result. They could draw funds from the AHCA’s Patient and State Stability Fund, a pool of $10–$15 billion a year over 2018–2026 that was supplemented for various purposes through amendments.1

CBO Estimated About Half the U.S. Population Lives in States That Would Request Waivers

If there were doubts about whether any states would apply for the waivers, the CBO had some news: half the U.S. population could live in states that would use these waivers to begin deregulating their individual insurance markets. The basis for their estimate? In part, they considered state approaches to their individual markets prior to the ACA. States that had previously allowed insurers the freest rein in consumer coverage denials, rating on health, and flexibility in what services they would cover were expected to loosen the reins again.

CBO also expected that states that sought the waivers would implement them in different ways. Some states might modestly deregulate their markets while others might make more dramatic changes. For example, some states might require insurers to cover a core set of benefits but allow them to exclude maternity or mental health services. Using 2014 data, RAND researchers have estimated that this could increase the costs to families of having a baby by $6,900 to $9,300 and the annual costs of mental health care by $1,300 to over $12,000. Other states might go a step further and let insurers determine the entire content of their benefit packages as they did in many states prior to the ACA, leaving many people with preexisting conditions stuck with the full cost of their care.

Likewise, CBO assumed that some states would take different approaches to reintroducing individual underwriting in their markets. Because healthy people would face lower premiums if they were rated on the basis of their health, they would have little incentive to maintain continuous coverage, since they would prefer the lower rate they would receive if carriers rated them on health. In order to keep healthy people in the community-rated risk pool (the one with both healthy and unhealthy enrollees), a state might only allow underwriting of people with health problems.

Other states might go whole hog and allow underwriting on health for everyone who had a coverage gap, regardless of their health status. These markets over time would begin to look like those of the pre-ACA past: markets segmented into pools where people in good health could find affordable plans and those with health problems were priced out of the market. The CBO concluded that the funds set aside for state high-risk pools for people with health problems were inadequate to make coverage affordable for people with preexisting conditions in these states.

What’s Past Is Prologue

Decades of experience with the individual market in the United States has shown that without considerable regulation the market simply cannot function for all those who rely on it. Allowing insurers in the past to price each individual’s policy according to their health penalized those who were the sickest and rewarded those who were the healthiest. The 35 states that tried to patch high-risk pools onto their individually rated markets and the ACA’s own transitional Preexisting Conditions Insurance Plan program left robust evidence that high-risk pools were expensive for states and the people who enrolled in them, left millions uninsured, and were ultimately unsustainable. States that had attempted to ban pricing based on health status (like New York and New Jersey) also experienced instabilitybecause the lack of premium subsidies and an individual mandate left their markets lopsided: too many people in poorer health without the balance provided by those in better health.  As a result, premiums soared.

In contrast, four years of experience with the ACA’s insurance market reforms demonstrates that it is possible for this market to offer affordable, comprehensive insurance to people with diverse health needs. In 2010, 60 percent of adults who tried to buy a plan in the individual market said that they found it very difficult or impossible to find one they could afford. By 2016, that number had fallen by nearly half, to 34 percent. While this rate leaves plenty of room for improvement, the substantial decline suggests that the U.S. has been headed in the right direction if private markets are the nation’s preferred path to universal coverage. But any future movement along this path will require the full commitment of the Trump administration and Congress to enforcing and improving the ACA’s reforms of our complex private health insurance markets.

Little-known ACA provision could have big impact on hospitals’ bottom lines

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Investors should keep a close eye on healthcare, as a little-known element of the Affordable Care Act could leave some hospitals strapped for cash.

The ACA allows Medicare to adjust reimbursements based on workers’ productivity, meaning reimbursement rates decrease as productivity grows in the economy, according to an article from The Wall Street Journal.

The Congressional Budget Office projected (PDF) that this piece of the law would cause reimbursement rates to grow at 2.2% each year between 2012 and 2025, a decrease from 3% growth.

These changes could hurt the bottom line for hospitals. Although the consumer-price index for medical care has been slowing, it has grown by an average of 2.9% over the past five years, according to WSJ. A lengthy window of costs rising faster than reimbursement would widen the gap between revenue and cost.

In general, Medicare already pays less in reimbursement than commercial insurers. The CBO report suggests that if the reimbursement changes stick, the number of hospitals unable to turn a profit could reach 60% by 2025.

WSJ’s analysis did note, however, that this grim outlook did not take into account increased cost efficiency at hospitals. It also noted that the political climate, as the GOP continues to push for a repeal of the ACA, leaves plenty up in the air.

“The good news for investors is that most hospitals aren’t for-profit and few have publicly traded shares,” according to the article. “But the impact of financial pressure still could be significant.”

Also worth considering is the impact that the industry’s ongoing consolidation can have; Tenet Healthcare, for instance, is looking to divest its hospital portfolio.

Last-Ditch Effort By Republicans To Replace ACA: What You Need To Know

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http://khn.org/news/last-ditch-gop-effort-to-replace-aca-5-things-you-need-to-know/

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Republican efforts in Congress to “repeal and replace” the federal Affordable Care Act are back from the dead. Again.

While the chances for this last-ditch measure appear iffy, many GOP senators are rallying around a proposal by Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.), along with Sens. Dean Heller (R-Nev.) and Ron Johnson (R-Wis.)

They are racing the clock to round up the needed 50 votes — and there are 52 Senate Republicans.

An earlier attempt to replace the ACA this summer fell just one vote short when Sens. Susan Collins (R-Maine), Lisa Murkowski (R-Alaska) and John McCain (R-Ariz.) voted against it. The latest push is setting off a massive guessing game on Capitol Hill about where the GOP can pick up the needed vote.

After Sept. 30, the end of the current fiscal year, Republicans would need 60 votes ­— which means eight Democrats — to pass any such legislation because special budget rules allowing approval with a simple majority will expire.

Unlike previous GOP repeal-and-replace packages that passed the House and nearly passed the Senate, the Graham-Cassidy proposal would leave in place most of the ACA taxes that generated funding to expand coverage for millions of Americans. The plan would simply give those funds as lump sums to each state. States could do almost whatever they please with them. And the Congressional Budget Office has yet to weigh in on the potential impact of the bill, although earlier estimates of similar provisions suggest premiums would go up and coverage down.

“If you believe repealing and replacing Obamacare is a good idea, this is your best and only chance to make it happen, because everything else has failed,” said Graham in unveiling the bill last week.

Here are five things to know about the latest GOP bill: 

1. It would repeal most of the structure of the ACA.

The Graham-Cassidy proposal would eliminate the federal insurance exchange, healthcare.gov, along with the subsidies and tax credits that help people with low and moderate incomes — and small businesses — pay for health insurance and associated health costs. It would eliminate penalties for individuals who fail to obtain health insurance and employers who fail to provide it.

It would eliminate the tax on medical devices. 

2. It would eliminate many of the popular insurance protections, including those for people with preexisting conditions, in the health law.

Under the proposal, states could “waive” rules in the law requiring insurers to provide a list of specific “essential health benefits” and mandating that premiums be the same for people regardless of their health status. That would once again expose people with preexisting health conditions to unaffordable or unavailable coverage. Republicans have consistently said they wanted to maintain these protections, which polls have shown to be popular among voters.

3. It would fundamentally restructure the Medicaid program.

Medicaid, the joint-federal health program for low-income people, currently covers more than 70 million Americans. The Graham-Cassidy proposal would end the program’s expansion under the ACA and cap funding overall, and it would redistribute the funds that had provided coverage for millions of new Medicaid enrollees. It seeks to equalize payments among states. States that did not expand Medicaid and were getting fewer federal dollars for the program would receive more money and states that did expand would see large cuts, according to the bill’s own sponsors. For example, Oklahoma would see an 88 percent increase from 2020 to 2026, while Massachusetts would see a 10 percent cut.

The proposal would also bar Planned Parenthood from getting any Medicaid funding for family planning and other reproductive health services for one year, the maximum allowed under budget rules governing this bill. 

4. It’s getting mixed reviews from the states.

Sponsors of the proposal hoped for significant support from the nation’s governors as a way to help push the bill through. But, so far, the governors who are publicly supporting the measure, including Scott Walker (R-Wis.) and Doug Ducey (R-Ariz.), are being offset by opponents including Chris Sununu (R-N.H.), John Kasich (R-Ohio) and Bill Walker (I-Alaska).

On Tuesday 10 governors — five Democrats, four Republicans and Walker — sent a letterto Senate leaders urging them to pursue a more bipartisan approach. “Only open, bipartisan approaches can achieve true, lasting reforms,” said the letter.

Bill sponsor Cassidy was even taken to task publicly by his own state’s health secretary. Dr. Rebekah Gee, who was appointed by Louisiana’s Democratic governor, wrote that the bill “uniquely and disproportionately hurts Louisiana due to our recent [Medicaid] expansion and high burden of extreme poverty.”

5. The measure would come to the Senate floor with the most truncated process imaginable.

The Senate is working on its Republican-only plans under a process called “budget reconciliation,” which limits floor debate to 20 hours and prohibits a filibuster. In fact, all the time for floor debate was used up in July, when Republicans failed to advance any of several proposed overhaul plans. Senate Majority Leader Mitch McConnell (R-Ky.) could bring the bill back up anytime, but senators would immediately proceed to votes. Specifically, the next order of business would be a process called “vote-a-rama,” where votes on the bill and amendments can continue, in theory, as long as senators can stay awake to call for them.

Several senators, most notably John McCain, who cast the deciding vote to stop the process in July, have called for “regular order,” in which the bill would first be considered in the relevant committee before coming to the floor. The Senate Finance Committee, which Democrats used to write most of the ACA, has scheduled a hearing for next week. But there is not enough time for full committee consideration and a vote before the end of next week.

Meanwhile, the Congressional Budget Office said in a statement Tuesday that it could come up with an analysis by next week that would determine whether the proposal meets the requirements to be considered under the reconciliation process. But it said that more complicated questions like how many people would lose insurance under the proposal or what would happen to insurance premiums could not be answered “for at least several weeks.”

That has outraged Democrats, who are united in opposition to the measure.

“I don’t know how any senator could go home to their constituents and explain why they voted for a major bill with major consequences to so many of their people without having specific answers about how it would impact their state,” said Senate Minority Leader Chuck Schumer (D-N.Y.) on the Senate floor Tuesday.

In Senate Health Care Bill, A Few Hidden Surprises

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http://healthaffairs.org/blog/2017/07/13/in-senate-health-care-bill-a-few-hidden-surprises/

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A low-income person, eligible for Medicaid but not enrolled, is hit by a car or a bullet. Gravely injured, she arrives at the hospital unconscious. Thanks to expert, intensive care that lasts for days or weeks, she gradually recovers. Eventually, her health improves to the point where she can complete the paperwork needed to apply for Medicaid.

Such a hospital can be paid today, thanks to Medicaid’s “retroactive eligibility.” Even if the combination of medical problems and bureaucratic delays prevents an application from being filed and completed for several months, Medicaid will cover the care if the patient was eligible when services were provided.

The newest version of the Senate health bill—the Better Care and Reconciliation Act, or BCRA—would end this longstanding feature of the Medicaid program for beneficiaries who are neither elderly nor people with disabilities. If services are received in one calendar month and the application is completed the following month, the hospital would be denied all payment, even if the patient was eligible and the services were both essential and costly.

It does not matter if the state is led by a governor who understands the devastating impact of this change on hospital infrastructure, especially in rural areas where many hospitals are hanging on by a thread. Today, states have the flexibility to seek waivers that limit retroactive eligibility. Under the BCRA, that flexibility would disappear, as states are forced to end retroactive coverage, whether they like it or not.

Almost certainly, this provision would come as a surprise to most senators who are being asked to support the BCRA. It is only one of many unpleasant surprises lurking largely undiscovered throughout the bill. Following are other selected examples.

A Massive Expansion In Federal Power Over State Budgets

The BCRA grants the federal government startling new power over state Medicaid programs and state budgets. Federal dollars per person would be capped, based on state data about prior spending. But in setting the initial cap for each state, the secretary of Health and Human Services (HHS) could change the amount to rectify what the secretary views as problems in the “quality” of state data. In later years, many states could have their caps adjusted up or down by as much as 2 percent per year. That may sound like a small number, but when applied to billions of federal Medicaid dollars going to a state, it could make or break a state’s entire budget. Medicaid costs triggered by a public health emergency are exempt from the cap, but only if “the Secretary determines that such an exemption would be appropriate.” No statutory limits bound the Secretary’s use of this decision-making authority, which can have an extraordinary fiscal impact on states experiencing an epidemic or other public health crisis.

These provisions would give HHS remarkable new leverage over states, which current or future administrations could use to compel state policy changes in any desired direction. The aggressive use of available leverage has been an unfortunate feature of past administrations’ relationships to state Medicaid programs, but it could become substantially more pronounced with the increased federal authority granted by the Senate bill.

Adding To Uncertainties Surrounding State Expenditures

One recurring theme in Medicaid’s history involves state efforts to claim federal matching funds without spending the requisite state dollars. The Senate bill appears to increase this risk. Under Section 207 in the Senate bill, new opportunities emerge for states desperate to counteract the loss of billions of federal dollars. The bill authorizes unprecedented waivers involving federal funding for tax credits that help consumers buy private health insurance. So long as officials complete a form explaining how the waiver’s replacement of federal safeguards would provide an “alternative means” of increasing “access to comprehensive coverage, reducing average premiums, and increasing enrollment,” a state arguably could convert some or all of this federal money into so-called “pass-through” funds that can be used for purposes unrelated to health care. Unlike the Senate bill’s new public health emergency provisions, which require federal audits of state expenditures, states’ use of pass-through dollars has no statutory audit requirement. A state could convert subsidies meant for health insurance to other uses, or simply use the money to close a budget shortfall. As the Congressional Budget Office (CBO) explained about the virtually identical prior version of this section, the Senate health care bill would “substantially reduce the number of people insured” if states “reduced subsidies, received pass-through funds, and used those funds for purposes other than health insurance coverage.”

Medicaid Treatment For Mental Health And Substance Use Disorders

The bill repeals the current requirement that Medicaid programs must cover all “essential health benefits,” including treatment of mental health and substance use disorders. CBO found that, as the per capita limits in the Senate bill grow progressively tighter, federal Medicaid funding would eventually decline by more than a third, compared to current law. States facing such an enormous drop in federal support may see themselves as having no alternative but to cut services classified as optional, which the Senate bill redefines to include mental health and substance abuse treatment.

A Disordered Process

These problems could have been averted had the legislative process followed regular order, with hearings, legislative staff explaining the bill’s provisions, expert testimony, a public markup, and opportunities to address policy and drafting anomalies. Embedded in a measure with underlying policy goals that the authors of this blog post find fundamentally questionable, the picture that emerges is extraordinarily troubling—a legislative effort to divert more than a trillion dollars away from health care for people who are sicker, poorer, older, and indigent, while leaving states with such massive funding deficits and federal leverage that some states may attempt to stem their losses in ways that harm their vulnerable residents even more.

Even people sympathetic to the bill’s core aims, however, have good reason to oppose the Senate making such consequential decisions without taking the elementary legislative steps needed to detect and avoid terrible mistakes. Continuing to shun all the protections of regular order, the Senate appears poised to act on a bill that almost certainly includes additional unpleasant surprises going beyond those discussed here. With legislation that governs one-sixth of the US economy and that directly affects the health and economic security of millions of constituents, Senators are being asked to vote largely in the dark.

H.R. 1628, Better Care Reconciliation Act of 2017

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https://www.cbo.gov/publication/52849

Click to access 52849-hr1628senate.pdf

The Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) have completed an estimate of the direct spending and revenue effects of the Better Care Reconciliation Act of 2017, a Senate amendment in the nature of a substitute to H.R. 1628. CBO and JCT estimate that enacting this legislation would reduce the cumulative federal deficit over the 2017-2026 period by $321 billion. That amount is $202 billion more than the estimated net savings for the version of H.R. 1628 that was passed by the House of Representatives.

The Senate bill would increase the number of people who are uninsured by 22 million in 2026 relative to the number under current law, slightly fewer than the increase in the number of uninsured estimated for the House-passed legislation. By 2026, an estimated 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.

Following the overview, this document provides details about the major provisions of this legislation, the estimated costs to the federal government, the basis for the estimate, and other related information, including a comparison with CBO’s estimate for the House-passed act.

Effects on the Federal Budget

CBO and JCT estimate that, over the 2017-2026 period, enacting this legislation would reduce direct spending by $1,022 billion and reduce revenues by $701 billion, for a net reduction of $321 billion in the deficit over that period (see Table 1, at the end of this document):

  • The largest savings would come from reductions in outlays for Medicaid—spending on the program would decline in 2026 by 26 percent in comparison with what CBO projects under current law—and from changes to the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance (see Figure 1). Those savings would be partially offset by the effects of other changes to the ACA’s provisions dealing with insurance coverage: additional spending designed to reduce premiums and a reduction in revenues from repealing penalties on employers who do not offer insurance and on people who do not purchase insurance.
  • The largest increases in deficits would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage, including repealing a surtax on net investment income and repealing annual fees imposed on health insurers.

Pay-as-you-go procedures apply because enacting this legislation would affect direct spending and revenues. CBO and JCT estimate that enactment would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027. The agencies expect that savings, particularly from Medicaid, would continue to grow, while the costs would be smaller because a rescinded tax on employees’ health insurance premiums and health plan benefits would be reinstated in 2026. CBO has not completed an estimate of the potential impact of this legislation on discretionary spending, which would be subject to future appropriation action.

Effects on Health Insurance Coverage

CBO and JCT estimate that, in 2018, 15 million more people would be uninsured under this legislation than under current law—primarily because the penalty for not having insurance would be eliminated. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 22 million in 2026. In later years, other changes in the legislation—lower spending on Medicaid and substantially smaller average subsidies for coverage in the nongroup market—would also lead to increases in the number of people without health insurance. By 2026, among people under age 65, enrollment in Medicaid would fall by about 16 percent and an estimated 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.

Stability of the Health Insurance Market

Decisions about offering and purchasing health insurance depend on the stability of the health insurance market—that is, on the proportion of people living in areas with participating insurers and on the likelihood of premiums’ not rising in an unsustainable spiral. The market for insurance purchased individually with premiums not based on one’s health status would be unstable if, for example, the people who wanted to buy coverage at any offered price would have average health care expenditures so high that offering the insurance would be unprofitable.

Under Current Law. Although premiums have been rising under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference between that percentage and the premiums for a reference plan (which is the second-lowest-cost plan in their area providing specified benefits). The subsidies to purchase coverage, combined with the effects of the individual mandate, which requires most individuals to obtain insurance or pay a penalty, are anticipated to cause sufficient demand for insurance by enough people, including people with low health care expenditures, for the market to be stable in most areas.

Nevertheless, a small number of people live in areas of the country that have limited participation by insurers in the nongroup market under current law. Several factors may lead insurers to withdraw from the market—including lack of profitability and substantial uncertainty about enforcement of the individual mandate and about future payments of the cost-sharing subsidies to reduce out-of-pocket payments for people who enroll in nongroup coverage through the marketplaces established by the ACA.

Under This Legislation. CBO and JCT anticipate that, under this legislation, nongroup insurance markets would continue to be stable in most parts of the country. Although substantial uncertainty about the effects of the new law could lead some insurers to withdraw from or not enter the nongroup market in some states, several factors would bring about market stability in most states before 2020. In the agencies’ view, those key factors include the following: subsidies to purchase insurance, which would maintain sufficient demand for insurance by people with low health care expenditures; the appropriation of funds for cost-sharing subsidies, which would provide certainty about the availability of those funds; and additional federal funding provided to states and insurers, which would lower premiums by reducing the costs to insurers of people with high health care expenditures.

The agencies expect that the nongroup market in most areas of the country would continue to be stable in 2020 and later years as well, including in some states that obtain waivers that would not have otherwise done so. (Under current law and this legislation, states can apply for Section 1332 waivers to change the structure of subsidies for nongroup coverage; the specifications for essential health benefits [EHBs], which set the minimum standards for the benefits that insurance in the nongroup and small-group markets must cover; and other related provisions of law.) Substantial federal funding to directly reduce premiums would be available through 2021. Premium tax credits would continue to provide insulation from changes in premiums through 2021 and in later years. Those factors would help attract enough relatively healthy people for the market in most areas of the country to be stable, CBO and JCT anticipate. That stability in most areas would occur even though the premium tax credits would be smaller in most cases than under current law and subsidies to reduce cost sharing—the amount that consumers are required to pay out of pocket when they use health care services—would be eliminated starting in 2020.

In the agencies’ assessment, a small fraction of the population resides in areas in which—because of this legislation, at least for some of the years after 2019—no insurers would participate in the nongroup market or insurance would be offered only with very high premiums. Some sparsely populated areas might have no nongroup insurance offered because the reductions in subsidies would lead fewer people to decide to purchase insurance—and markets with few purchasers are less profitable for insurers. Insurance covering certain services would become more expensive—in some cases, extremely expensive—in some areas because the scope of the EHBs would be narrowed through waivers affecting close to half the population, CBO and JCT expect. In addition, the agencies anticipate that all insurance in the nongroup market would become very expensive for at least a short period of time for a small fraction of the population residing in areas in which states’ implementation of waivers with major changes caused market disruption.

Effects on Premiums and Out-of-Pocket Payments

The legislation would increase average premiums in the nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law, CBO and JCT estimate. To arrive at those estimates, the agencies examined how the legislation would affect the premiums charged if people purchased a benchmark plan in the nongroup market.

In 2018 and 2019, under current law and under the legislation, the benchmark plan has an actuarial value of 70 percent—that is, the insurance pays about 70 percent of the total cost of covered benefits, on average. In the marketplaces, such coverage is known as a silver plan.

Under the Senate bill, average premiums for benchmark plans for single individuals would be about 20 percent higher in 2018 than under current law, mainly because the penalty for not having insurance would be eliminated, inducing fewer comparatively healthy people to sign up. Those premiums would be about 10 percent higher than under current law in 2019—less than in 2018 in part because funding provided by the bill to reduce premiums would affect pricing and because changes in the limits on how premiums can vary by age would result in a larger number of younger people paying lower premiums to purchase policies.

In 2020, average premiums for benchmark plans for single individuals would be about 30 percent lower than under current law. A combination of factors would lead to that decrease—most important, the smaller share of benefits paid for by the benchmark plans and federal funds provided to directly reduce premiums.

That share of services covered by insurance would be smaller because the benchmark plan under this legislation would have an actuarial value of 58 percent beginning in 2020. That value is slightly below the actuarial value of 60 percent for “bronze” plans currently offered in the marketplaces. Because of the ACA’s limits on out-of-pocket spending and prohibitions on annual and lifetime limits on payments for services within the EHBs, all plans must pay for most of the cost of high-cost services. To design a plan with an actuarial value of 60 percent or less and pay for those high-cost services, insurers must set high deductibles—that is, the amounts that people pay out of pocket for most types of health care services before insurance makes any contribution. Under current law for a single policyholder in 2017, the average deductible (for medical and drug expenses combined) is about $6,000 for a bronze plan and $3,600 for a silver plan. CBO and JCT expect that the benchmark plans under this legislation would have high deductibles similar to those for the bronze plans offered under current law. Premiums for a plan with an actuarial value of 58 percent are lower than they are for a plan with an actuarial value of 70 percent (the value for the reference plan under current law) largely because the insurance pays for a smaller average share of health care costs.

Although the average benchmark premium directly affects the amount of premium tax credits and is a key element in CBO’s analysis of the budgetary effects of the bill, it does not represent the effect of this legislation on the average premiums for all plans purchased. The differences in the actuarial value of plans purchased under this legislation and under current law would be greater starting in 2020—when, for example, under this bill, some people would pay more than the benchmark premium to purchase a silver plan, whereas, under current law, others would pay less than the benchmark premium to purchase a bronze plan.

Under this legislation, starting in 2020, the premium for a silver plan would typically be a relatively high percentage of income for low-income people. The deductible for a plan with an actuarial value of 58 percent would be a significantly higher percentage of income—also making such a plan unattractive, but for a different reason. As a result, despite being eligible for premium tax credits, few low-income people would purchase any plan, CBO and JCT estimate.

By 2026, average premiums for benchmark plans for single individuals in most of the country under this legislation would be about 20 percent lower than under current law, CBO and JCT estimate—a smaller decrease than in 2020 largely because federal funding to reduce premiums would have lessened. The estimates for both of those years encompass effects in different areas of the country that would be substantially higher and substantially lower than the average effect nationally, in part because of the effects of state waivers. Some small fraction of the population is not included in those estimates. CBO and JCT expect that those people would be in states using waivers in such a way that no benchmark plan would be defined. Hence, a comparison of benchmark premiums is not possible in such areas.

Some people enrolled in nongroup insurance would experience substantial increases in what they would spend on health care even though benchmark premiums would decline, on average, in 2020 and later years. Because nongroup insurance would pay for a smaller average share of benefits under this legislation, most people purchasing it would have higher out-of-pocket spending on health care than under current law. Out-of-pocket spending would also be affected for the people—close to half the population, CBO and JCT expect—living in states modifying the EHBs using waivers. People who used services or benefits no longer included in the EHBs would experience substantial increases in supplemental premiums or out-of-pocket spending on health care, or would choose to forgo the services. Moreover, the ACA’s ban on annual and lifetime limits on covered benefits would no longer apply to health benefits not defined as essential in a state. As a result, for some benefits that might be removed from a state’s definition of EHBs but that might not be excluded from insurance coverage altogether, some enrollees could see large increases in out-of-pocket spending because annual or lifetime limits would be allowed.

Uncertainty Surrounding the Estimates

CBO and JCT have endeavored to develop budgetary estimates that are in the middle of the distribution of potential outcomes. Such estimates are inherently inexact because the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by this legislation are all difficult to predict. In particular, predicting the overall effects of the myriad ways that states could implement waivers is especially difficult.

CBO and JCT’s projections under current law itself are also uncertain. For example, enrollment in the marketplaces under current law will probably be lower than was projected under the March 2016 baseline used in this analysis, which would tend to decrease the budgetary savings from this legislation. However, the average subsidy per enrollee under current law will probably be higher than was projected in March 2016, which would tend to increase the budgetary savings from this legislation. (For a related discussion, see the section on “Use of the March 2016 Baseline” on page 15.)

Despite the uncertainty, the direction of certain effects of this legislation is clear. For example, the amount of federal revenues collected and the amount of spending on Medicaid would almost surely both be lower than under current law. And the number of uninsured people under this legislation would almost surely be greater than under current law.

Intergovernmental and Private-Sector Mandates

CBO has reviewed the nontax provisions of the legislation and determined that they would impose intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) by preempting state laws. Although the preemptions would limit the application of state laws, they would impose no duty on states that would result in additional spending or a loss of revenues. JCT has determined that the tax provisions of the legislation contain no intergovernmental mandates.

JCT and CBO have determined that the legislation would impose private-sector mandates as defined in UMRA. On the basis of information from JCT, CBO estimates that the aggregate cost of the mandates would exceed the annual threshold established in UMRA for private-sector mandates ($156 million in 2017, adjusted annually for inflation).