On Monday, March 6, 2017, House Republicans released their proposed legislation to replace the Affordable Care Act (ACA). The GOP bill repeals or significantly changes major portions of the ACA involving the individual and employer mandates, subsidies, and Medicaid expansion, among others. The bill, which is already facing political headwinds, has not yet been scored by the Congressional Budget Office, so the economic effect and the potential change to the number of people covered by health insurance have not been officially quantified. However, the bill’s overall goals are clear, and it signals areas of concern for providers. Following are prominent features of the bill, potential concerns for providers, and likely next steps.
What the Bill Would Change
If passed, the bill would repeal the individual mandate to obtain health insurance and the employer mandate to provide health insurance. To stem loss of healthy individuals from the risk pool, the bill includes a one-year, 30 percent surcharge on monthly premiums for people who have a gap in insurance coverage for more than one month. The surcharge applies to all, regardless of health status.
Currently the government provides tax credits on a sliding scale based on income to ease the cost of health insurance premiums and deductibles. The GOP bill replaces that with tax credits based largely on age, ranging from $2,000 for people under 30 to $4,000 for people over 60. While providing higher subsidies for older Americans than younger ones, the bill also allows insurance companies to charge older Americans five times more than younger Americans for similar plans; states are given the flexibility to set their own ratio.
The current sliding scale is replaced by a phasing out of subsidies for individuals earning $75,000 or more or families earning $150,000 or more. Unlike the ACA, the bill does not consider local healthcare costs in setting the level of subsidy.
The bill eliminates taxes on investment income and wages that affect individuals making $200,000 or more and couples making $250,000 or more, which have been used to fund the ACA.
The bill calls for Medicaid expansion to end in 2020. Until that time, Medicaid expansion is optional for states, and federal funding will continue as under the ACA. Starting in 2020, federal funding for Medicaid would be on a per capita basis, with each state’s allotment determined by spending in a base year by different enrollee categories. Also starting in 2020, the bill eliminates the requirement that state Medicaid plans provide the same essential health benefits required by plans on the exchanges. The bill also requires that states with Medicaid expansion populations confirm expansion enrollees’ eligibility every six months.
In addition, the bill establishes a Patient and State Stability Fund, which is intended to support state efforts to:
- Provide coverage to high-risk individuals who do not have access to employer-based health insurance
- Stabilize premiums in the state’s individual market
- Promote access to preventive services
- Help reduce out-of-pocket costs
The bill appropriates approximately $15 billion annually for this fund in 2018 and 2019. That amount is reduced to $10 billion starting in 2020, at which time a state match is phased in.
Public Health Programs
Beginning in FY2019, the GOP bill would repeal funding for the Prevention and Public Health Fund established under the ACA to support prevention, wellness, and public health initiatives. It would expand funding in 2017 for Federally Qualified Health Centers. The bill would impose a one-year freeze on funding to organizations deemed a “prohibited entity,” defined as “an essential community health provider primarily engaged in family planning and reproductive health services,” that “provides abortions in cases that do not meet the Hyde amendment exception for federal payment,” and that “received over $350 million in federal and state Medicaid dollars in fiscal year 2014.”
What the Bill Would Keep
The GOP bill would retain several popular features of the ACA pertaining to insurance coverage and costs:
- Coverage of dependents on their parents’ health insurance policies until age 26
- Ban on insurance companies denying coverage based on pre-existing conditions or charging more based on health history
- Prohibition on insurance companies setting annual or lifetime limits on payments for a person’s health benefits
Implications for Providers
Until the bill is scored by the Congressional Budget Office, it is unknown exactly how these policies might affect the number of people with insurance coverage or how expensive it will be to implement. However, several preliminary studies suggest there are elements of the bill that could concern healthcare providers.
Lower Subsidies to Purchase Insurance for Those in Need
In general, the shift in approach to subsidies would mean less support for those who are older, have lower incomes, or live in regions that have higher premium costs, while providing more support for people who are younger, have higher incomes, or live in areas with lower healthcare premiums, according to a new Kaiser Family Foundation analysis and interactive map showing the potential effect of the GOP bill.
Potential Loss of Insurance for Those Covered under Medicaid Expansion
A Commonwealth Fund study suggests that millions of people currently covered under Medicaid could lose coverage due to common events in people’s lives, such as changing jobs, doing seasonal work, or getting a raise. Such changes could result in income temporarily rising above the eligibility threshold, which would result in a loss of coverage that, under the House GOP bill, they may not be able to recover even if their income drops back below the threshold. The analysis points out that this sort of “churn” is common: In 2016, 31 million adults reported a gap in coverage, about one-quarter of whom had been enrolled in Medicaid before that gap. Among those, roughly 3.4 million people reported losing their Medicaid coverage within the past 12 months.
Potential Reduction in Benefits and Payment
Converting federal Medicaid support to a per capita approach would very likely reduce the level of federal funding for Medicaid, leaving states with no good options to maintain services at current levels. States do not have the luxury of increasing their contribution to Medicaid without cutting other necessary programs. Medicaid programs are unlikely to be able to make up federal reductions through enhanced operational efficiency. The remaining options are to reduce eligibility, benefits, and provider payment. The most vulnerable populations and providers in this scenario are “poor children, the elderly and individuals with disabilities, nursing home and community-based long-term care providers, and safety-net hospitals and clinics,” according to an analysis on federal Medicaid funding by the Kaiser Family Foundation.
The GOP bill represents a compromise among various perspectives within the Republican Party, but still faces headwinds. Some object to the bill’s retaining much of the ACA’s basic structure. Some object to the end of Medicaid expansion and potential disruption in coverage. Some object to the fact that the bill eliminates selected taxes on the wealthy.
Given this diversity of opinion, even within the Republican Party and President Trump’s constituency, the bill faces a long climb. The coming days and weeks will see review of the bill by House committees and the Congressional Budget Office, with the possibility of a House vote in early April before it moves to the Senate.
Even the passage of federal legislation would hardly be the end of the story. The additional flexibility at the state level would mean that the effects on individuals and providers will depend to a large extent on state funding and policy. Regional differences in demographics, health status, and healthcare costs will also have a major influence.
Despite the inevitable twists and turns of the legislative process, and local dynamics, the House bill indicates the basic direction of health policy and contains significant elements for providers to monitor. A possible increase in the number of uninsured and underinsured people, and a reduction in access to preventive services, could result in providers treating more patients who are sicker, along with an increase in uncompensated care and bad debt. Reductions in federal funding for Medicaid may well lead states to reduce payments to providers.