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Summary and Reaction to American Health Care Act Bill

Note: iProtean, now part of Veralon’s newsletter/blog will not be published next week because of iProtean, now part of Veralon’s symposium


Last week, Republicans presented initial legislation as a redo of the Affordable Care Act (ACA), calling it the American Health Care Act (ACHA). A summary of the changes appears below, courtesy of the American Health Lawyers Association.


  • Phase out of Medicaid Expansion. Medicaid expansion would end December 31, 2019, including the state option to extend Medicaid coverage to adults above 133% of the federal poverty level, at which point federal Medicaid funding would transition to a “per capita cap” system that would give states a capped amount of Medicaid funds per enrollee.
  • Repeal of the individual mandate. The tax penalty imposed on individuals who fail to maintain minimum health insurance coverage would be repealed.
  • Premium surcharges for lapses in coverage. In lieu of the individual mandate, AHCA introduces a 30 percent penalty on premiums for lapses in insurance coverage in order to encourage continuous enrollment.
  • Repeal of the employer mandate. AHCA would also repeal the employer mandate—retroactively for 2016—the requirement that certain employers (generally those employing more than 50 FTEs) offer “minimum essential coverage” to employees.
  • Refundable tax credits in lieu of subsidies. ACA subsidies to assist qualifying individuals with the costs of insurance premiums would be replaced by a system of refundable tax credits based on age, which would phase out at certain income levels.
  • Repeal of various ACA taxes and fees. The bill would repeal certain ACA taxes and fees on health insurers, medical devices, branded prescription drugs (beginning in 2018) and tanning salons. ACA’s “Cadillac” tax on high-cost health insurance plans would remain, but be delayed until 2025.
  • Reversal of ACA’s cuts to DSH payments. AHCA would eliminate the ACA’s planned cuts to disproportionate share hospital (DSH) payments.
  • Defunding of certain organizations. The bill would bar certain nonprofit organizations that provide abortions from receiving Medicaid reimbursements.
  • Establishment of a “Patient and State Stability Fund.” The proposed $100 billion fund would go to states for providing financial assistance to high-risk individuals and stabilizing health insurance premiums in the individual market.
  • Increase in age variation in healthcare premium rates. AHCA would increase the permitted age band rating to a 5:1 ration from ACA’s current 3:1 ratio, allowing insurers to charge older patients five times as much as younger patients.


The bill retains the following:


  • Children can stay on parents’ health insurance until 26.
  • Insurance plans cannot deny coverage for pre-existing conditions.
  • Insurance exchanges will remain, although many of the changes may bring their continued viability into question.


Industry Reaction


The response from the healthcare/provider industry has been across-the-board opposition. Hospital advocacy organizations sent letters to Congress this week expressing concerns about “a range of adverse financial effects” from the bill.


The American Hospital Association (AHA), America’s Essential Hospitals (AEH), the Association of American Medical Colleges, the Catholic Health Association of the United States (CHA), the Children’s Hospital Association, the Federation of American Hospitals (FAH), and the National Association of Psychiatric Health noted in a March 8 letter to Congress the reasons for their opposition, including “tremendous instability for those seeking affordable coverage,” changes to Medicaid, and the proposed continuation of the ACA’s cuts to Medicare provider payments. (“Seven National Hospital Groups Oppose ACA Replacement Bill,” HFMA Weekly, March 10, 2017)


“As a result, we cannot support the American Health Care Act as currently written,” they wrote. For a link to this letter, click here.


These organizations generally backed the passage of the ACA.


Congressional Budget Office Weighs In


The Congressional Budget Office (CBO) reported earlier this week that AHCA “would drive up the number of uninsured Americans by 24 million over the next decade, largely because of the bill’s Medicaid changes . . . but would reduce the federal deficit by $337 billion over the coming decade by cutting Medicaid spending and eliminating the Affordable Care Act’s premium subsidies.” (“24 million would lose coverage under GOP’s Obamacare repeal plan,” Modern Healthcare, March 14, 2017)


As a result of changes to Medicaid eligibility, the CBO report said that “some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped.” The end result would be a big drop in enrollment and also a big drop in spending—$880 billion over ten years.


“By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law,” the report says.


The drop in spending on Medicaid partially explains why the CBO estimated that the GOP reform would reduce the deficit by $337 billion. However, the CBO added that Medicaid spending would decrease by $880 billion. So it’s difficult to explain the discrepancy. Some analysts noted the legislation would abolish the 3.8 percent Medicare tax on investment income and the 0.9 percent surtax on ordinary income that the ACA applied to people who make more than $250,000. The CBO report said that getting rid of these taxes and some annual fees that the ACA imposed on insurers would reduce revenues by $592 billion over 10 years.



iProtean, now part of Veralon subscribers, the advanced Mission & Strategy course, When the Dust Settles, featuring Marian Jennings and Dan Grauman, is in your library. Marian and Dan discuss the complexities of moving to a value-based healthcare organization, key features necessary to ensure the board and leadership stay ahead of the curve, the importance of thoughtful and thorough assessment of options available to the organization, the risks inherent in new investments and changes in board recruitment and development.




For a complete list of iProtean, now part of Veralon courses, click here.



For more information about iProtean, now part of Veralon, click here.