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The AHCA is the first attempt to replace the ACA. In the weeks ahead, we will hear a significant amount of discussion surrounding a new health care policy.

Navigating health reform

American Health Care Act Will Continue to Evolve

  • Rob Schile
  • 3/14/2017

Republicans in the House of Representatives unveiled their first attempt at “repealing and replacing” the Affordable Care Act (ACA) by releasing the American Health Care Act (AHCA). At this point, the only thing official about the AHCA is that it signifies the start of what will undoubtedly be a long process. Over the coming weeks, if not months, we are sure to hear intense discussions on the pros and cons of the bill.

The process going forward will be complex, with a series of significant ups and downs that will most likely result in something that is very different from what was released. But what is interesting about the bill is that it provides some key themes from which health care providers can begin to get a glimpse of what is meant by repealing and replacing the ACA.

Disagreement on the AHCA

There is not only disagreement between Republicans and Democrats on the future of health care, but the Republican Party itself is divided. The conservative faction of the party has voiced concerns that the AHCA is nothing more than “ObamaCare Lite,” does not go far enough in making change, and in the end won’t do enough to curb the rising cost of health care. Although it is uncertain that Republicans could gather enough votes to pass the legislation in the House, House Speaker Paul Ryan has released statements indicating he feels confident there will be enough votes to pass it.

President Trump has released a statement indicating he supports the bill, and Tom Price, the new U.S. Secretary of Health and Human Services, backs it as well. But everyone should remember that this is only the start of the process. How this bill changes remains to be seen, but Democrats have already expressed concerns that the Medicaid expansion and individual market coverage will be eroded by the bill. Coverage expansion was a cornerstone of the ACA, and proposed changes that are perceived to weaken it will not be accepted by Democrats.

We can expect to hear plenty over the course of the next several days, weeks and potentially months as the bill, and any modifications to it, are intensely debated between and within the respective parties.

Coverage expansion is a key battle ground

Two key issues in the bill are drawing intense scrutiny. The first is that expansion of Medicaid under the ACA would be phased out beginning in 2020. Specifically, the enhanced federal funding that was part of the ACA would be changed to a “per capita cap” for each state. Proponents of the bill believe a “per capita” allocation will put greater control in the hands of the individual states, allowing them to better manage their health care spending.

In addition, cuts to Medicaid Disproportionate Share (DSH) would be reversed to pre-ACA levels, along with some additional funding for safety net hospitals. The primary concerns over the proposed Medicaid changes are that federal support will not keep pace with increasing costs, and ultimately will leave states no options other than limiting enrollment and modifying benefits in an effort to manage the program.

The second issue is related to the current subsidies provided to individuals who purchase insurance on the open market. These subsidies would be eliminated and replaced by tax credits. The expected net impact of the transition to tax credits is a net reduction in support for individuals who purchase insurance through the open market.

The bill proposes to eliminate the individual mandate that requires everyone to carry insurance coverage, but there is a new “stick” that allows a surcharge or penalty of thirty percent (30 percent) of the monthly premium if coverage is allowed to lapse. Early concerns expressed about the coverage provisions pointed out that the combination of reduced subsidies or tax credits, coupled with the elimination of the individual mandate, will reduce the number of Americans carrying insurance coverage, and the 30-percent penalty will encourage them to stay away.

The upside of the bill is that there are no proposed changes to the guarantee issue of policies without regard to health status, that children can remain on their parent policies until age 26, and the ban on lifetime limits will remain intact. The Trump administration has already stated that these are critical elements that must be carried forward, and at this point the bill is following that directive.

Payment transformation will move forward

There are no proposed changes to any of the payment regulations that have been introduced as part of the ACA. So, for those hoping MACRA, bundled payments, Medicare Shared Savings, etc., was a bad dream that would go away — no such luck.

Transforming the payment system to more closely tie reimbursement to better quality at lower costs has been the one unique consideration that has united Republicans and Democrats, and it would be a significant surprise if there was anything introduced that would alter this.

How we can help health care providers

The AHCA is the Republicans’ first attempt at keeping the promise they and President Trump made to repeal and replace the ACA, and it is far from being finalized. The one thing we can all count on in the weeks ahead is we will hear a significant amount of discussion of health care policy. The debate about what is “good” and what is “bad” for Americans and our health care system will hopefully lead to something that is new and improved and will work for more Americans and escalate the value proposition of health care.

In the interim, there will be periods of uncertainty, which will make planning for the future difficult. CliftonLarsonAllen (CLA) will be monitoring these changes. We have the insights and ability to assist you by bringing clarity to the range of potential impacts from the changes being discussed, so you, in turn, can continue to move your health care organization forward.

  • Rob Schile
  • Managing Principal of Industry
  • CLA Minneapolis