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Transform Care November 16, 2016

Previous Efforts to Repeal ACA Shed Light on How Providers May Be Affected

Partner and CMO, Health and Life Sciences, Oliver Wyman
Key Takeaway
ACA rollback = little immediate impact on providers, but shifts in insurance and payment reform will have dramatic longer-term impact

Although candidate Trump vowed to completely repeal “Obamacare”, just two days after winning the election President-elect Trump said he would consider keeping parts of it.

While we don’t yet know what aspects of the ACA will be preserved and which might be scrapped, we can gain some insights based on campaign-trail statements and a review of the previous legislative activity to repeal the law.

Further, we also can project both the short-term and long-term impact of a rollback on the provider community. In brief: The near-term impacts for providers appear likely to be minimal. Rather, it is the longer-term impact of shifts in insurance and payment reform that are likely to have the greater impact.

Short-term impact

HR Bill 3762 is the bill passed repeatedly by the US House of Representatives to repeal the ACA. It cancels many of the insurance sections of the ACA, including the individual and employer mandates, and many of the taxes (including those on devices, drugs, HSAs, increased Medicare tax) required to support expanded Medicaid coverage.

Given the President-elect’s campaign focus on the individual and employer mandates, it is likely that these insurance-related provisions from HR 3762 will either be eliminated or greatly reduced. If this were to happen, this direction would bring about dramatic increases in insurance premiums, perhaps even worse than those announced during the latter stages of the campaign.

While the Republican Congress and president-elect have made their views on the insurance-related provisions quite clear, there has been almost no mention of provider-related sections. In fact, only four areas in the repeal bill impact providers and only one directly impacts hospitals. Provider-focused provisions include:

  • Restrictions on funding for Planned Parenthood and similar organizations
  • Increased support for Community Health Centers
  • Establishment of a two-year allocation fund to support states in responding to “Substance Abuse Public Health Crisis and Urgent Mental Health Needs”
  • Repeal of the Disproportionate Share Hospital (DSH) allotment reductions

During the initial discussions around the passage of the ACA, the Congressional Budget Office scored the provider changes as the only section of the Act that would reduce costs. This analysis included the Center for Medicare and Medicaid Innovation and the implementation of the sections on value-based purchasing, reductions in readmissions, and reductions in hospital-acquired conditions.

Studies over the past two years have demonstrated that the hospital-related and numerous pilot projects in the provider sections (such as Patient Centered Medical Homes and the Medicare Shared Savings Program) have, in fact, reduced costs, and either maintained or improved quality.

HR Bill 3762 actually ends by recognizing the cost savings obtained from the provider-oriented programs, and suggesting that the $379 billion in savings (“which recognizes the full amount of on-budget savings during the fiscal years 2016 through 2025”) be transferred to the Federal Hospital Insurance Trust Fund to extend Medicare solvency.

Longer-term impact

While immediate impact may be minimal, the longer-term impact of changes to the insurance provisions could be dramatic. Unraveling the ACA insurance provisions would almost certainly lead to an increase in uninsured patients and a reversion to ER utilization for non-traumatic care. This, in turn, would undoubtedly stress already thin operating margins for safety net hospitals and many others.

At the same time, a block-grant approach to federal funding of Medicaid without a requirement for state matching funds could reduce total funding, and the elimination of federally mandated thresholds for Medicaid enrollment could potentially further increase the number of uninsured.

If both the individual mandate for insurance and the state exchanges are eliminated, it’s reasonable to believe that virtually all commercial insurers would exit this line of business. It would also be expected, then, that the insurance industry will argue for elimination of the restrictions on underwriting parameters, and at least some change in the “pre-existing condition exclusion.” For example, insurers could seek a waiting period for coverage of high-cost conditions after enrollment to reduce the number of high-cost individuals waiting to enroll until they become ill.

For those states in which Medicaid has been completely transitioned to managed care, the impact of block grants may alleviate the impact for insurers while maintaining cost pressures on providers.

Provider action items

  • Prepare for the possibility of higher uninsured rates and uncompensated care; these could potentially retreat toward pre-ACA levels
  • Consider carefully the impacts of decreased funding for Medicaid expansion and the potential for Medicaid to once again become a solely state-based issue
  • Take into account the current financial condition of your state and its commitment to Medicaid

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