What to Know About the House GOP’s Repeal and Replace Plan€¦ · House GOP’s Repeal and...

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What to Know About the

House GOP’s Repeal and

Replace Plan

Health Care

Advisory Board

©2017 Advisory Board • All Rights Reserved • advisory.com

6 6

Today’s Panel

Eric Cragun

Senior Director,

Health Policy

Russell Davis

Executive Director,

Research

Rob Lazerow

Managing Director,

Health Care Advisory Board

7

2

3

1

Road Map

©2017 Advisory Board • All Rights Reserved • advisory.com • 33602A

GOP Moving Toward ACA “Repeal and Replace”

Key Details of American Health Care Act

Next Steps for Providers


8 8

Has It Really Only Been Two Months?

Source: Health Care Advisory Board analysis.

1) Ways and Means.

2) Energy and Commerce.

Timeline of ACA- and AHCA-Related Developments

January 12-13, 2017

Senate and House voted

to begin budget

reconciliation process

January 20, 2017

President Trump signed

executive order directing

agencies to review ACA

January 27, 2017

Non-binding deadline for

congressional committees

to develop proposals

February 10, 2017

Senate confirms

Tom Price as HHS

Secretary

March 6, 2017

GOP introduced

American Health

Care Act (AHCA)

February 15, 2017

HHS releases market

stabilization proposed

rule

March 9, 2017

House W&M1 and

E&C2 Committees

approve AHCA


9 9

Introducing the American Health Care Act (AHCA)

With Proposed Reconciliation Bill, GOP One Step Closer to ACA Repeal

Source: House Ways and Means Committee, available at: https://waysandmeans.house.gov/american-health-care-act/; House

Energy and Commerce Committee, available at: https://energycommerce.house.gov/news-center/press-releases/energy-and-

commerce-republicans-release-legislation-repeal-and-replace; Health Care Advisory Board interviews and analysis.

1) Restores funding in 2018 in non-expansion states and 2020 in expansion states.

Key Elements of the American Health Care Act

Repeals ACA Taxes Reforms Individual Market Reforms Medicaid Financing

• Retains expansion for

individuals who are enrolled by

the end of 2019

• Reverses DSH cuts1, provides

additional funding for FQHCs,

safety net providers

• Adopts per capita caps on

federal funding starting in 2020

• 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

• 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

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


10 10

CBO Estimates Big Drops in Coverage, Funding

Medicaid Reductions Would be Particularly Problematic for Providers

Source: CBO, “American Health Care Act,” released March 13, 2017;

Advisory Board research and analysis.

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

CBO Projections of AHCA Impact Relative to Current Law


11 11

Assessing the AHCA’s Likely Challenges for Providers

Source: Health Care Advisory Board interviews and analysis.

Not Worse Case… …But Impact Likely Significantly Negative

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

Reimbursement Cuts Remain, Likely to Intensify

1

• Except for DSH cuts, proposal does not reverse

ACA’s payment cuts

• Reductions in Medicaid funding likely to cause

states to reduce provider reimbursement

Potential Reductions to Coverage Still Loom

2

• 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


12 12

Far From a Done Deal

GOP Leadership Will Need to Solidify Support from Key GOP Factions

Source: New York Times, “House Republicans Unveil Plan to Replace Health Law,” March 6, 2017; RSC Policy Memo,

available at: http://www.politico.com/f/?id=0000015a-a684-d464-adfe-f69721ce0002, March 6, 2017; Letter to Honorable

Mitch McConnell, available at: http://www.portman.senate.gov/public/index.cfm?p=press-releases&id=c6d96a68-a891-

4ba1-8ad2-1ce166e0f8eb, March 6, 2017; Health Care Advisory Board interviews and analysis .

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

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

“…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)


13 13

GOP Must Still Reckon with Reconciliation in Senate

Even if House Passes Bill, Parliamentarian’s Ruling Could Alter Provisions

Source: Peterson K, “Chief Senate Parliamentarian Will Play Crucial

Role in Health Care Legislation,” 16 Jan 2017, available at:

www.wsj.com; Advisory Board research and analysis.

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 Im

age:

ww

w.s

enate

.gov

http://www.wsj.com/


14 14

AHCA Only the First Step in Republicans’ Plan

GOP Laying Out Three Phases to Health Care Reform

Source: The White House, “Three-Pronged Approach to Repeal and Replace

Obamacare,” March 13, 2017; Health Care Advisory Board interviews and analysis.

Administrative

Action

Additional

Legislation

Budget

Reconciliation 1

A Three-Pronged Approach to Repeal and Replace the ACA

2 3

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

Process: Requires simple

majority in House and Senate

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)

Process: Federal agencies issue

regulation through rulemaking

Process: Requires simple majority

in House, super-majority in Senate

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

15

2

3

1

Road Map






16 16

Individual Market Topping Reform Agenda

Mechanics Fundamentally Changed in GOP Replacement

Private Insurance Changes


“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)

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

Updated Age-Rating Ratio

Allows age-based premium

differential for individual plans

to change from 3:1 to 5:1

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

Repeals Alters Establishes

Continuous Coverage Incentive

Requires insurers to penalize

individuals who have had a two-

month coverage gap in previous 12

months with a 30% surcharge

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.)


17 17

Subsidies Would Drop for Low-Income Individuals

Impact Would be Particularly Dramatic for Older, Low-Income Individuals

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.

Projected Premium Tax Credit Available in Individual Market in 2020

Individual with $20,000 in Income (160% FPL)

$0 $0 $0

$2,000 $2,000 $2,000

Reno, NV US Average Mobile, AL

$2,899 $3,225

$4,522

$2,000 $2,000 $2,000


$9,030 $9,874

$13,235

$4,000 $4,000 $4,000


ACA AHCA

$0 $0 $0

$4,000 $4,000 $4,000


ACA AHCA

Individual with $75,000 in Income (600% FPL)

27-y

ear

old

60-y

ear

old


18 18

Many Elements of Nongroup Market Untouched

But Republicans Planning to Pursue Additional Changes Beyond AHCA

Source: Advisory Board research and analysis.

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.

ACA Provisions Republicans

Have Pledged to Keep

ACA Provisions That GOP

Might Try to Change Later

New Policies Not

Included in AHCA

1 2 3

• Guaranteed issue

• Coverage for dependents

under age 26

• Ban on lifetime limits

• ACA-created insurance

exchanges1

• Essential Health Benefit

requirements in nongroup

market

• Caps on out-of-pocket

spending for enrollees

• Allowing insurers to sell

plans across state lines

• Enabling creation of

association health plans

• Expanding definition of

qualified expenses for

HSA funds


19 19

CBO Expects Stable Market, But

Demographics May Shift

Number with Private Insurance Likely to be Lower

Premiums May Be Higher in the Short-Term, but Lower Long-Term



-10

-8

-6

-4

-2

0

2017 2020 2023 2026

Nongroup Employment-based

CBO Projected Change in Individuals Covered

By Source of Insurance;

Relative to Current Law Baseline

Mill

ion

s

2 million

fewer

nongroup

enrollees

7 million

fewer

employer-

sponsored

enrollees

“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.”


20 20

AHCA Would Raise HSA Contribution Limits

Impact for Providers Likely Limited

Source: EBRI, “Health Savings Account Balances, Contributions, Distributions, and Other Vital

Statistics, 2015: Estimates from the EBRI HSA Database,” available at: www.ebri.org; Advisory

Board analysis.

$3,400

$6,750 $6,550

$13,100

Individual Family

2017, Current Law 2018, AHCA Proposed

HSA Contribution Limits

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 2015

• 5.6% of adults with private insurance

were eligible for HSA but had not

opened one at end of 2015

http://www.ebri.org/


21 21

AHCA Would End Expansion, Cap Federal Spend

Cuts Would be Only Partially Offset by Restoring DSH Payments

Medicaid Changes


1) Consumer Price Index for urban consumers.

Sunset Medicaid Expansion

The plan would end the enhanced

federal match for new expansion-

eligible 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-U1

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

1 2

3 4


22 22

Significant Changes to Medicaid Funding Model

AHCA Intended to Limit Spending, HHS May Give States Flexibility

Source: Health Care Advisory Board interviews and analysis

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

AHCA’s Proposals to Reform Medicaid Financing


23

Impact Hinges on Growth Rate of Spending Target

AHCA Strikes Middle Ground in Proposed Growth Rate of CPI-M

Source: CMS, National Health Expenditures Fact Sheet, available at: www.cms.gov/research-statistics-data-

and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html; CMS, National Health

Expenditures Projections 2016-2025, available at: https://www.cms.gov/research-statistics-data-and-

systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountsprojected.html; CMS,

2016 Actuarial Report on the Financial Outlook for Medicaid, available at: https://www.cms.gov/Research-

Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf; Health Care

Advisory Board interviews and analysis.

1) From CMS 2016 Medicaid Actuarial Report and CMS

NHE Projects, 2015-2025.

Growth Factor Actual Average Annual

Growth Rate 2000-2011

Projected Average Annual

Growth Rate 2017-20251

Urban Consumer Price

Index (CPI-U) 2.45% 2.6%

CPI-U +

population growth 3.4% 3.5%

Medical Care Inflation

(CPI-M) 3.9% 4.2%

Gross Domestic Product

(GDP) 3.8% 5.0%

CPI-M + 1 percentage point 4.9% 5.2%

National Per Capita Health

Expenditures 6.3% 4.8%

Average National Medicaid

Spending Growth Per-

Enrollee

3.8% 4.3%

Proposed

in AHCA


24 24

Impact of Medicaid Reform Would Vary by State

Source: Kaiser Family Foundation, “Data Note: Variation in Per Enrollee Medicaid

Spending Across States,” Feb. 2017; Health Care Advisory Board interviews and analysis.

5.1%

2.8% 1.7%

6.6%

3.2%

1.2%

4.0%

5.6%

DE: 3.7%

DC: 5.0%

MD: 5.9%

3.4%

5.7%

1.2%

3.2%

RI: 4.9%

CT: -0.5%

4.8%

6.6%

MA: 5.8%

NJ: 2.9%

VT: 6.9%

National Average:

3.8%

2.8%

2.9%

7.1% 5.5%

6.6%

5.0% 4.8%

4.3%

4.2%

3.3%

1.5%

4.0%

1.0%

2.1%

3.2%

2.6% 4.3%

0.9%

4.0%

3.7%

1.8%

6.5%

2.5%

2.1% 3.5%

NH: 1.8%

2.1%

8.1%

3.1%

Average Annual Growth in Medicaid Spending Per-Enrollee

Fiscal Year 2000-2011 Spending Growth

Fell Above CPI-M

Spending Growth

Fell Below CPI-M


25 25

CBO Projects Medicaid Funding

Would be Dramatically Lower

Federal Medicaid Spend Projected to be 25% Lower

Reduction Result of Funding Caps, Eligibility Cuts, and End of Mandate



-16

-14

-12

-10

-8

-6

-4

-2

0

2017 2020 2023 2026

CBO Projected Change in Medicaid Enrollment

Relative to Current Law Baseline

Mill

ion

s

14 million

fewer

Medicaid

enrollees

“CBO estimates that several major

provisions affecting Medicaid would

decrease direct spending by $880

billion over the 2017-2026 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.”


26 26

Not a Rosy Picture for Providers

Regardless of State Response, Spending Cuts Would Impact Hospitals


ACA Boost to Medicaid Funding

Positively Impacted Hospital

Finances

Medicaid admissions increased

21% for investor-owned hospitals

in expansion states

Self-pay admissions decreased

by 47% for investor-owned

hospitals in expansion states

Uncompensated care costs

reduced by $5 billion in expansion

states in 2014

Potential State Options

Pull back on

eligibility

Move to

Medicaid

managed care

Keep existing

fee-for-service

payment model

Spike in uninsured rate

Lower rates through

health plan contracting

Lower payment rates

Options Potential Impact


27 27

• Medicare surtax

• Capital gains surtax

• Increased tax on non-

qualified HSA distributions

AHCA Repeals Almost All ACA-Imposed Taxes

Potential Benefits for Pharma, Payers, and Device Manufacturers

Tax Changes


ACA Taxes Repealed Under the AHCA

Taxes on High Earners

Individuals 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


28 28

AHCA Would Retain Medicare IPPS Cuts

No Intent to Begin Raising Provider Payments Anytime Soon

What Didn’t Change?

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.

1) Inpatient Prospective Payment System.

2) Disproportionate Share Hospital.

3) Medicare Access and CHIP Reauthorization Act.

“Productivity” Adjustments and Other Cuts

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

($4B)

($14B)

($24B) ($29B)

($38B)

($54B)

($67B)

($76B)

($86B) ($94B)

ACA IPPS1 Update

Adjustments

ACA DSH2 Payment Cuts

MACRA3 IPPS Update

Adjustments


29 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

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 employer-

sponsored

insurance

Medicare Part D

(i.e. no move to

Medicare bidding

system)

Restrictions on

drug importation

Medicare Employer

Health Benefits

Drug

Spending

Guaranteed

issue

Dependent

eligibility until 26

Essential health

benefits in

individual market

30

2

3

1

Road Map






31 31

Use free-markets to promote private

sector competition in payer, provider

markets

Focus more aggressively on

reducing federal health care

spending

Mandate greater consumer choice

and shopping at the point-of-care and

point-of-coverage through improved

transparency

Reduce federal role in health

care; provide states more

autonomy to make decisions, cut

spending

The Next Era of Health Care Reform

Four Key Principles Guiding GOP Reform Efforts

Reduce Federal

Entitlement Spending

Embrace Free Markets and

Consumer Choice

Promote Transparency of Cost

and Quality

Devolve Health Policy

Control to States 1 2

3 4



32 32

Path Forward Not Dependent on Politics

No-Regrets Priorities for Next Era of Health Care Reform

• 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

Accessibility

• 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

Reliability

• 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

Affordability



33 33

Adapting Provider Strategy to New Market Realities

Four Key Steps to Succeed In the Next Era of Health Care Reform


Radically Reduce

Cost Structure

Establish a Sustainable

Medicare Risk Strategy

Build a Consumer

Loyalty Platform

Elevate Physician

Network Performance

1 2

3 4

Reduce cost structure to enable

pricing flexibility

Prioritize consumer loyalty

strategy to build durable patient

relationships

Carefully pace transition to

Medicare risk to capture returns

from care management

Restructure physician network to

meet twin mandates of population

health and consumerism

2016-2017 Health Care Advisory Board National Meeting

To learn more, attend the 2016-2017 Health Care Advisory Board National

Meeting; members can register here or at https://www.advisory.com/research

https://www.advisory.com/research/health-care-advisory-board/events/meetings/2016/2016-17-hcab-national-meeting

https://www.advisory.com/research


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