What to Know About the House GOP s Repeal and Replace Plan

Transcription

1 Health Care Advisory Board What to Know About the House GOP s Repeal and Replace Plan research technology consulting

2 6 Today s Panel Eric Cragun Senior Director, Health Policy Russell Davis Executive Director, Research Rob Lazerow Managing Director, Health Care Advisory Board

3 Road Map GOP Moving Toward ACA Repeal and Replace 3 Key Details of American Health Care Act Next Steps for Providers 33602A

4 8 Has It Really Only Been Two Months? Timeline of ACA- and AHCA-Related Developments January 12-13, 2017 Senate and House voted to begin budget reconciliation process January 27, 2017 Non-binding deadline for congressional committees to develop proposals March 6, 2017 GOP introduced American Health Care Act (AHCA) March 9, 2017 House W&M 1 and E&C 2 Committees approve AHCA January 20, 2017 President Trump signed executive order directing agencies to review ACA February 10, 2017 Senate confirms Tom Price as HHS Secretary February 15, 2017 HHS releases market stabilization proposed rule 1) Ways and Means. 2) Energy and Commerce. Source: Health Care Advisory Board analysis.

5 9 Introducing the American Health Care Act (AHCA) With Proposed Reconciliation Bill, GOP One Step Closer to ACA Repeal Key Elements of the American Health Care Act Repeals ACA Taxes Reforms Individual Market Reforms Medicaid Financing Beginning in 2018, eliminates ACA taxes on health insurers, medications, HSAs, medical device manufacturers, tanning services, investment income, etc. Delays implementation of the Cadillac Tax until 2025 Eliminates individual mandate retroactive to Dec. 31, 2015 Requires insurers to penalize individuals who do not maintain continuous coverage In 2020, replaces subsidies with refundable tax credits adjusted for age and income Retains expansion for individuals who are enrolled by the end of 2019 Reverses DSH cuts 1, provides additional funding for FQHCs, safety net providers Adopts per capita caps on federal funding starting in 2020 American Health Care Act Proposed reconciliation bill released by House Republicans on March 6, 2017 Would repeal, replace, or adjust some components of the ACA, while leaving many others intact 1) Restores funding in 2018 in non-expansion states and 2020 in expansion states. Source: House Ways and Means Committee, available at: House Energy and Commerce Committee, available at: Health Care Advisory Board interviews and analysis.

6 10 CBO Estimates Big Drops in Coverage, Funding Medicaid Reductions Would be Particularly Problematic for Providers CBO Projections of AHCA Impact Relative to Current Law 25% Reduction in federal funding for Medicaid by 2026; total federal spending on Medicaid is projected to be $880 billion lower than under current law across the next 10 years 14M Increase in the number of uninsured in 2018 alone; by 2026, the number of uninsured would be 24 million higher than under current law 65% Projected average actuarial value of nongroup coverage in 2026, a significant drop in projected actuarial value relative to current law 7M Reduction in the number of individuals covered on employer-sponsored plans by 2026 relative to under current law, as some employees shift to nongroup market, Medicaid or have no insurance Source: CBO, American Health Care Act, released March 13, 2017; Advisory Board research and analysis.

7 Assessing the AHCA s Likely Challenges for Providers 11 Not Worse Case Does not impact Medicare payment reforms or disrupt Medicare coverage through transition to premium support Bolsters safety net through restoration of DSH payments, new funding for FQHCs and safety net hospitals Seeks to maintain some coverage expansion gains in individual market and Medicaid Caps on Medicaid spending will grow at CPI-M, as opposed to a more aggressive target like CPI-U But Impact Likely Significantly Negative 1 Reimbursement Cuts Remain, Likely to Intensify Except for DSH cuts, proposal does not reverse ACA s payment cuts Reductions in Medicaid funding likely to cause states to reduce provider reimbursement 2 Potential Reductions to Coverage Still Loom Medicaid per-enrollee spending growth already low, states may be forced to cut eligibility and benefits Proposed tax credits less generous than ACA subsidies for vast majority, could lead to attrition from individual market Source: Health Care Advisory Board interviews and analysis.

8 12 Far From a Done Deal GOP Leadership Will Need to Solidify Support from Key GOP Factions White House Support Lends Weight to Repeal Effort Today, [March 6th], marks an important step toward restoring health care choices and affordability back to the American people. President Trump looks forward to working with both Chambers of Congress to repeal and replace Obamacare." Sean Spicer, White House Press Secretary But Republican Rank and File Raising Concerns This is a Republican welfare entitlement. Writing checks to individuals to purchase insurance is, in principle, Obamacare. Republican Study Committee We will not support a plan that does not include stability for Medicaid expansion populations or flexibility for states. Senators Portman (R-OH), Capito (R-WV), Gardner (R-CO) and Murkowski (R-AK) Source: New York Times, House Republicans Unveil Plan to Replace Health Law, March 6, 2017; RSC Policy Memo, available at: March 6, 2017; Letter to Honorable Mitch McConnell, available at: March 6, 2017; Health Care Advisory Board interviews and analysis.

9 Image: 13 GOP Must Still Reckon with Reconciliation in Senate Even if House Passes Bill, Parliamentarian s Ruling Could Alter Provisions The Basics of Budget Reconciliation May only be used for provisions that impact spending, revenues, or the federal debt limit Senate debate is limited to 20 hours Because of the limits set on debate time, no Senate filibuster is permitted Bills may pass in the Senate with a simple majority of 51 votes 20 Bills passed through reconciliation that became law since 1980 Meet the Senate Parliamentarian Currently Elizabeth MacDonough, a lawyer who has been in the role since 2012 She is the sixth person to hold the role since it was established in 1935 The Parliamentarian helps Senate leaders determine process based on historical precedent In budget reconciliation, the Parliamentarian determines which provisions meet rules of reconciliation Source: Peterson K, Chief Senate Parliamentarian Will Play Crucial Role in Health Care Legislation, 16 Jan 2017, available at: Advisory Board research and analysis.

10 14 AHCA Only the First Step in Republicans Plan GOP Laying Out Three Phases to Health Care Reform A Three-Pronged Approach to Repeal and Replace the ACA 1 Budget Reconciliation Administrative Action 2 3 Additional Legislation Process: Requires simple majority in House and Senate Process: Federal agencies issue regulation through rulemaking Process: Requires simple majority in House, super-majority in Senate Proposed Target Areas: Repeal ACA taxes, employer and individual mandates Replace insurance subsidies with refundable tax credits Reform Medicaid financing Increase contribution limit of health savings accounts Allocate funds for state innovations Require continuous coverage insurance incentive Likely Target Areas: Shorten individual market enrollment period and limit special enrollment Loosen restrictions on actuarial value of individual market plans Enable state flexibility through waiver process Approve state Medicaid eligibility changes (e.g. work requirements, premiums) Likely Target Areas: Allow insurance to be sold across state lines Expand use of HSAs Allow formation of Association Health Plans Remove essential benefits requirements Reform malpractice regulation Streamline FDA processes Expand flexibility of state use of federal dollars Source: The White House, Three-Pronged Approach to Repeal and Replace Obamacare, March 13, 2017; Health Care Advisory Board interviews and analysis.

11 Road Map GOP Moving Toward ACA Repeal and Replace 3 Key Details of American Health Care Act Next Steps for Providers 33602A

12 Private Insurance Changes 16 Individual Market Topping Reform Agenda Mechanics Fundamentally Changed in GOP Replacement Repeals Alters Establishes Individual and Employer Mandate Eliminates the penalty on individuals and employers for not gaining or not offering insurance coverage ACA Insurance Premium and Cost-Sharing Subsidies Removes ACA tax credits based on income and tied to the growth of the regional silver plan premiums, as well as cost-sharing subsidies Actuarial Value Standards Eliminates the requirement that plans meet actuarial value minimums standardized by metal tier (Bronze, Silver, etc.) Updated Age-Rating Ratio Allows age-based premium differential for individual plans to change from 3:1 to 5:1 Expansion of Health Savings Accounts Increase in the breadth of services that may be paid for using HSAs and the total amount of money that can be contributed to them Patient and State Stability Fund Grants flexible federal funding for states to support insurance markets (e.g. by creating high-risk pool or assisting with out-of-pocket costs) Continuous Coverage Incentive Requires insurers to penalize individuals who have had a twomonth coverage gap in previous 12 months with a 30% surcharge Individual, Refundable Tax Credits Provides tax credits for individual insurance purchase to those not offered employer-sponsored plans; credits are based on age and income and tied to CPI-U growth Source: Health Care Advisory Board interviews and analysis.

13 60-year old 27-year old 17 Subsidies Would Drop for Low-Income Individuals Impact Would be Particularly Dramatic for Older, Low-Income Individuals Projected Premium Tax Credit Available in Individual Market in 2020 Individual with $20,000 in Income (160% FPL) $4,522 $2,899 $3,225 $2,000 $2,000 $2,000 Reno, NV US Average Mobile, AL $13,235 Individual with $75,000 in Income (600% FPL) $2,000 $2,000 $2,000 $0 $0 $0 Reno, NV US Average Mobile, AL $9,030 $9,874 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $0 $0 $0 Reno, NV US Average Mobile, AL ACA AHCA Reno, NV US Average Mobile, AL ACA AHCA Source: Kaiser Family Foundation, How Affordable Care Act Repeal and Replace Plans Might Shift Health Insurance Tax Credits, available at: kff.org; Advisory Board analysis.

14 18 Many Elements of Nongroup Market Untouched But Republicans Planning to Pursue Additional Changes Beyond AHCA ACA Provisions Republicans Have Pledged to Keep Guaranteed issue Coverage for dependents under age 26 Ban on lifetime limits ACA-created insurance exchanges 1 ACA Provisions That GOP Might Try to Change Later Essential Health Benefit requirements in nongroup market Caps on out-of-pocket spending for enrollees New Policies Not Included in AHCA Allowing insurers to sell plans across state lines Enabling creation of association health plans Expanding definition of qualified expenses for HSA funds 1) Although Republicans have pointed to problems with the exchanges in the past, the AHCA relies partly on the exchange infrastructure to distribute tax credits. Source: Advisory Board research and analysis.

15 Millions 19 Number with Private Insurance Likely to be Lower Premiums May Be Higher in the Short-Term, but Lower Long-Term CBO Projected Change in Individuals Covered By Source of Insurance; Relative to Current Law Baseline Nongroup Employment-based 2 million fewer nongroup enrollees 7 million fewer employersponsored enrollees CBO Expects Stable Market, But Demographics May Shift In CBO and JCT s assessment, the nongroup market would probably be stable in most areas under either current law or the legislation. In 2018 and 2019 average premiums would be 15 to 20 percent higher than under current law, mainly because fewer comparatively healthy people [would] sign up. By 2026, average premiums would be roughly 10 percent lower than under current law due to stabilization funds, elimination of actuarial value requirements, and a younger mix of enrollees. Source: CBO, American Health Care Act, released March 13, 2017; Advisory Board research and analysis.

16 20 AHCA Would Raise HSA Contribution Limits Impact for Providers Likely Limited HSA Contribution Limits $13,100 $6,550 $6,750 $3,400 Individual Family 2017, Current Law 2018, AHCA Proposed Most HSA-Eligible Individuals Don t Make Max Contributions 59% of HSAs received contributions in 2015 $1,267 average total contributions to HSAs in 2015 $1,844 average balance in HSAs at end of % of adults with private insurance were eligible for HSA but had not opened one at end of 2015 Source: EBRI, Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2015: Estimates from the EBRI HSA Database, available at: Advisory Board analysis.

17 Medicaid Changes 21 AHCA Would End Expansion, Cap Federal Spend Cuts Would be Only Partially Offset by Restoring DSH Payments 1 Sunset Medicaid Expansion The plan would end the enhanced federal match for new expansioneligible enrollees beginning in 2020; those already enrolled would continue at enhanced match rate as they remained enrolled Cap Per Capita Federal Spend Federal funding for Medicaid would be capped on a per enrollee basis using 2016 spending levels inflated at the medical component of CPI-U Increase Safety Net Funding The AHCA would restore DSH payments to pre-aca levels, provide $10B in funds over five years for safety net providers in non-expansion states, and boost 2017 funding for FQHCs Restrict Enrollment Flexibility The plan would reduce providers ability to enroll patients under presumptive eligibility and would limit the retroactive coverage period to just one month 4 1) Consumer Price Index for urban consumers. Source: Advisory Board research and analysis.

18 22 Significant Changes to Medicaid Funding Model AHCA Intended to Limit Spending, HHS May Give States Flexibility AHCA s Proposals to Reform Medicaid Financing Per Capita Allotment Cap on amount of federal contribution to each state per enrollee category States spending over the cap would see reduced payment for the subsequent year Spending targets would be based on 2016 spending and trended forwarded using CPI-M growth rate The [Trump] Administration will act to maximize flexibility for States in administering Medicaid, to enable States to experiment with innovative methods to deliver healthcare to our low-income citizens Presidential Transition Health Policy Outline Source: Health Care Advisory Board interviews and analysis

19 23 Impact Hinges on Growth Rate of Spending Target AHCA Strikes Middle Ground in Proposed Growth Rate of CPI-M Growth Factor Actual Average Annual Growth Rate Projected Average Annual Growth Rate Urban Consumer Price Index (CPI-U) CPI-U + population growth Medical Care Inflation (CPI-M) Gross Domestic Product (GDP) 2.45% 2.6% 3.4% 3.5% 3.9% 4.2% 3.8% 5.0% Proposed in AHCA CPI-M + 1 percentage point 4.9% 5.2% National Per Capita Health Expenditures Average National Medicaid Spending Growth Per- Enrollee 6.3% 4.8% 3.8% 4.3% 1) From CMS 2016 Medicaid Actuarial Report and CMS NHE Projects, Source: CMS, National Health Expenditures Fact Sheet, available at: CMS, National Health Expenditures Projections , available at: CMS, 2016 Actuarial Report on the Financial Outlook for Medicaid, available at: Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf; Health Care Advisory Board interviews and analysis.

20 24 Impact of Medicaid Reform Would Vary by State Average Annual Growth in Medicaid Spending Per-Enrollee Fiscal Year % Spending Growth Fell Below CPI-M Spending Growth Fell Above CPI-M 5.1% 3.3% 4.0% 3.5% 2.1% 3.1% 3.4% 1.0% 1.5% 2.1% 1.8% 6.6% 1.7% 2.9% 8.1% 1.2% 7.1% 2.5% 2.1% 5.5% 1.2% 6.5% 6.6% 0.9% 2.8% 4.0% 4.0% 3.2% 5.7% 3.7% 4.8% 4.3% 3.2% NH: 1.8% VT: 6.9% MA: 5.8% RI: 4.9% CT: -0.5% NJ: 2.9% DE: 3.7% 6.6% 5.0% 4.8% 4.3% 2.6% 2.8% DC: 5.0% MD: 5.9% National Average: 3.8% 4.2% 5.6% Source: Kaiser Family Foundation, Data Note: Variation in Per Enrollee Medicaid Spending Across States, Feb. 2017; Health Care Advisory Board interviews and analysis.

21 Millions 25 Federal Medicaid Spend Projected to be 25% Lower Reduction Result of Funding Caps, Eligibility Cuts, and End of Mandate CBO Projected Change in Medicaid Enrollment Relative to Current Law Baseline million fewer Medicaid enrollees CBO Projects Medicaid Funding Would be Dramatically Lower CBO estimates that several major provisions affecting Medicaid would decrease direct spending by $880 billion over the period. By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law. On the basis of historical data, CBO projects that fewer than one-third of those enrolled [in Medicaid] as of December 31, 2019, would have maintained continuous eligibility two years later. Source: CBO, American Health Care Act, released March 13, 2017; Advisory Board research and analysis.

22 26 Not a Rosy Picture for Providers Regardless of State Response, Spending Cuts Would Impact Hospitals Potential State Options Options Potential Impact ACA Boost to Medicaid Funding Positively Impacted Hospital Finances Pull back on eligibility Move to Medicaid managed care Spike in uninsured rate Lower rates through health plan contracting Medicaid admissions increased 21% for investor-owned hospitals in expansion states Self-pay admissions decreased by 47% for investor-owned hospitals in expansion states Keep existing fee-for-service payment model Lower payment rates Uncompensated care costs reduced by $5 billion in expansion states in 2014 Source: Health Care Advisory Board interviews and analysis.

23 Tax Changes 27 AHCA Repeals Almost All ACA-Imposed Taxes Potential Benefits for Pharma, Payers, and Device Manufacturers ACA Taxes Repealed Under the AHCA Industry Taxes Tax on medical devices Tax on over-the-counter medications Tax on prescription medications Tax on health insurers Excise tax on high-cost health insurance ( Cadillac Tax ) delayed to 2025 Taxes on High Earners Individuals Medicare surtax Capital gains surtax Increased tax on nonqualified HSA distributions Source: Advisory Board research and analysis.

24 What Didn t Change? 28 AHCA Would Retain Medicare IPPS Cuts No Intent to Begin Raising Provider Payments Anytime Soon Productivity Adjustments and Other Cuts ($4B) ($14B) ($24B) ($29B) ACA IPPS 1 Update Adjustments ACA DSH 2 Payment Cuts MACRA 3 IPPS Update Adjustments ($38B) ($54B) ($67B) ($76B) ($86B) ($94B) 1) Inpatient Prospective Payment System. 2) Disproportionate Share Hospital. 3) Medicare Access and CHIP Reauthorization Act. Source: CBO, Letter to the Honorable John Boehner Providing an Estimate for H.R. 6079, The Repeal of Obamacare Act, July 24, 2012; CBO, Cost Estimate and Supplemental Analyses for H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015; The Daily Briefing, How to Understand Last Week s Big Budget Deal, November 2, 2015; Budget of the United States Government (Proposed) FY 2016; Health Care Advisory Board interviews and analysis.

25 29 A More Limited Scope Than Previous Proposals Notable Components of Past Proposals Left Out of Current Bill Noteworthy Absences from AHCA Proposed Bill Does Not Target: Insurance Market Protections Payment Reform Medicare Employer Health Benefits Drug Spending Guaranteed issue Dependent eligibility until 26 Essential health benefits in individual market Center for Medicare & Medicaid Innovation (i.e. no impact to funding) Medicare Shared Savings Program MACRA Medicare payment (i.e. no repeal of ACA payment cuts) Medicare coverage (i.e. no shift to premium support) Tax exclusions for employersponsored insurance Medicare Part D (i.e. no move to Medicare bidding system) Restrictions on drug importation Source: Health Care Advisory Board interviews and analysis.

26 Road Map GOP Moving Toward ACA Repeal and Replace Key Details of American Health Care Act 3 Next Steps for Providers 33602A

27 31 The Next Era of Health Care Reform Four Key Principles Guiding GOP Reform Efforts Reduce Federal 1 2 Entitlement Spending Focus more aggressively on reducing federal health care spending Devolve Health Policy Control to States Reduce federal role in health care; provide states more autonomy to make decisions, cut spending Embrace Free Markets and 3 4 Consumer Choice Use free-markets to promote private sector competition in payer, provider markets Promote Transparency of Cost and Quality Mandate greater consumer choice and shopping at the point-of-care and point-of-coverage through improved transparency Source: Health Care Advisory Board interviews and analysis.

28 32 Path Forward Not Dependent on Politics No-Regrets Priorities for Next Era of Health Care Reform Accessibility Multi-channel navigation platform, including search, price estimation, and triage/scheduling helps streamline transactions Development of diverse network of access points (e.g. urgent care, retail, enhanced access to specialty care, primary care) to meet varied consumer access demands Reliability Organization-wide commitment and investment in service delivery and quality improvement drives broad engagement in delivering superior outcomes High-reliability approach to both service delivery and clinical quality ensures baseline of performance Affordability Willingness to partner with lower-cost providers offers patients affordable options, helps prevent markets from becoming overbuilt When markets are already overbuilt, commitment to scale back excess capacity ensures affordability in the long-term Source: Health Care Advisory Board interviews and analysis.

29 33 Adapting Provider Strategy to New Market Realities Four Key Steps to Succeed In the Next Era of Health Care Reform 1 2 Radically Reduce Cost Structure Reduce cost structure to enable pricing flexibility 3 4 Build a Consumer Loyalty Platform Prioritize consumer loyalty strategy to build durable patient relationships Establish a Sustainable Medicare Risk Strategy Carefully pace transition to Medicare risk to capture returns from care management Elevate Physician Network Performance Restructure physician network to meet twin mandates of population health and consumerism Health Care Advisory Board National Meeting To learn more, attend the Health Care Advisory Board National Meeting; members can register here or at Source: Health Care Advisory Board interviews and analysis.

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