ACA Deathwatch: Where are we today?

The net – we’re further away from repeal and replace than we were even a week ago.

The details

There’s been a good deal of understandable confusion about the fate of ACA; first it was going to be repealed on Day One of the new Administration, then January 27 was the day, now it’s either sometime late this year or early next. Or perhaps, not.

What’s indisputable is this;  undoing ACA and “replacing” it with legislation that will reduce costs, increase coverage options, and not leave anyone with coverage today uninsured is not possible – unless drastic cost-reduction measures are implemented, measures that are anathema to free-market Republicans.

Republicans sought to use the budget reconciliation process to undo much of ACA, figuring that would allow them to kill components such as the mandate that are particularly offensive to the GOP, while working on a replacement bill that might or might not be passed with a final “repeal” bill.  As reconciliation bills can’t be filibustered, the initial step in the repeal process passed easily.

But here’s the problem – the proverbial clock is ticking, and the longer this drags on, the less likely it is a Repeal/Replace bill will happen.  

First, insurers MUST have some idea what will happen in 2018 before they can come up with rates for coverage in the Exchanges. And they need to know this by May 3 – at the very latest.

Second, Governors need to know what’s going to happen with Medicaid. Seniors need to know what their Medicare Advantage costs will be.  Hospitals need to know what they will get paid for Medicare, Medicaid, and in DSH and other payments before they can set prices.

As has been well-documented here, there’s little consensus among Congressional Republicans on what a replacement would look like. And there are a bunch of other high-priority bills that are must-pass; tax reform, budget, spending and the like, all of which will take a lot of time off the legislative calendar.

And there’s this – Once a budget resolution for 2018 is passed, the current ACA reconciliation bill is null and void. While it’s possible Republicans delay the Fiscal Year 2018 resolution as they try to cobble together a replacement bill, this will greatly complicate the legislative process, likely hinder another key priority – tax reform, and as of today there’s no consensus even among Republicans on what “replacement” would look like.

While it’s theoretically possible Republicans pass another reconciliation bill for the FY 2018 budget year to further kick the ACA can down the road, it’s highly unlikely.

Lots more detail on this here.

What does this mean for you?

Yes, it’s certainly possible ACA will be repealed and replaced. Just a little less possible with each passing day.

 

ACA Deathwatch: Healthcare and Snow storms

Happy Monday!  Up here in the northeast we’re still digging out from a major snowstorm that’s a long way from being over.

I’ll make a lousy analogy; that’s pretty much what’s happening in DC.  For local governments, getting the snow off the streets is the political test that ensures mayors another term, or ends their political career.

Healthcare is the national equivalent, with a rather important difference.  Unlike snow removal, healthcare is devilishly complicated.  It’s not just coordination of more plows, salt, drivers, and tow trucks.

Premium subsidies are one example.  About $9 billion goes towards helping poorer folks pay their deductibles, copays, and other costs.  Back when Republicans were in the opposition, they sued the Obama Administration to block those payments. If the suit were to succeed today, insurers would suddenly find themselves forced to:

  • come up with the $9 billion out of their own pockets or
  • terminate coverage for millions of members.

Not surprisingly, Republicans have apparently decided to keep paying the premium subsidies for the time being.

Kicking-the-can-down-the-road doesn’t do anything other than prolong the inevitable, which, stated simply, is this: Congressional Republicans are stuck.  It’s not possible to ensure poorer folks keep their coverage while reducing costs and de-regulating the health insurance markets.

Pre-election promises that voters can “Have their cake, Eat it too, and Not get fat” are coming up against the hard reality that healthcare is really complicated; and insurance companies, pharma, doctors, and healthcare systems are in business to make profits.

For insurers to be profitable, they have to:

  • enroll lots of people by charging premiums low enough to
  • get enough healthy people to join so they can pay for sick peoples’ care, yet
  • set premiums high enough to pay pharma and healthcare providers so those industries make a profit;

Without premium subsidies, lots of lower-income people can’t afford insurance, insurance companies can’t afford to insure those people, and more and more healthy people will drop coverage. Republicans’ apparent decision to maintain premium support will keep things calm for now.  The individual market looks pretty stable – rate increases have stabilized and enrollment, despite Republicans’ efforts to hinder sign-ups, is adequate.

Eventually the healthcare “snow” is going to pile up deep enough that Congress is going to have to start plowing.

Either that, or this…

What does this mean for you?

Don’t expect much REAL progress on healthcare legislation in the next month or two.  Or maybe even longer.

Got your shovel ready?

 

ACA Deathwatch: Whoa, there, cowboy!

The news from the White House is the “replacement” isn’t going to appear until the end of this year – or perhaps sometime in 2018.

That’s a very good thing.

For those that have been following our ACA Deathwatch, that is no surprise.  In fact it’s a good thing, as the plans proffered by Ryan, HHS-Secretary-designee Price, and various other Republicans are short on details, conflict with Republican Governors’ wishes, and would result in major disruption to health insurance markets and imperil the Medicare Trust Fund.

There is no consensus among Republicans around key aspects of a replacement plan or the timing thereof. The White House’ latest announcement is at odds both with previous statements that the replacement bill would be released right after Tom Price’s confirmation as HHS Secretary, Speaker Ryan’s commitment to introduce a bill in March and Majority Leader McConnell’s promised timetable.

Here are the key problems facing the Repeal-and-Replace crowd.

  • ACA is NOT a bunch of totally separate and stand-alone laws, regulations, fees, taxes, policy requirements, and standards. The fees, taxes, and reimbursement changes provide funding for Medicaid expansion, Seniors’ drug costs, premium support, technology, guideline development, and hundreds of other initiatives, many close to the heart of really powerful constituencies.
    Republican leaders who once hooted at the length and complexity of the ACA bill are now learning that fixing healthcare is, shockingly, really complicated.
  • Republican Governors are quite concerned that a replacement will drastically cut funding they rely on for Medicaid, community health centers, public health, and other budget-critical programs. They expanded Medicaid based on a promise that the Feds would pay almost all of that cost; none of the plans currently under discussion live up to that promise.
  • AARP is marshalling its very large and very vocal membership to complain about higher premiums for the 50-64 year old group that would result from changing age bands and reductions to Medicaid that would hurt dual-eligibles.
  • Budget hawks are stuck because repealing ACA – or even just the taxes that are part of ACA – would lead to Medicare insolvency as early as this year.
  • Most troubling of all – loss aversion.  Now that people have coverage, they will be furious if Republicans don’t deliver on their oft-stated promises to reduce costs, preserve coverage, and expand choice.  And no, the attempts by politicians to wordsmith their way out of this commitment by talking about “healthcare access” and “access to insurance” will NOT placate voters who lose coverage.

This last is the key.

The political cost to Republicans of failing to deliver on an impossible campaign promise will be high indeed.  For now, they are going to push the deadline out as far as possible, perhaps pass a repeal-in-name-only bill, then wait till after the mid-term elections – or even the next presidential election – before doing anything serious.

What does this mean for you?

Republicans won’t pass and sign a true repeal bill for months.

 

 

 

ACA Deathwatch – quick update

After a few days of wonderful California weather and Golden State hospitality its back to work.

There’s been so much coming out of DC on all manner of topics healthcare has been somewhat under-covered.  No worries – I got this.

Quick take is Senate Republicans are no closer to a repeal today than they were a month ago. In fact, the “repeal clock” has moved backwards over that time as key Senate Rs have realized repeal is fraught with political landmines.

This bubbled up publicly when Sen Alexander, Chair of Senate HELP Committee and Sen Hatch got into a disagreement over Hatch’s push to repeal the tax provisions of ACA now, then work on a replacement later.

Hatch’s move would have effectively forced many insurers to drop their insureds’ coverage this year, as without premium support low-income insureds would have no funds to cover their share of the premiums deductibles, etc. Insurers would be faced with the need to either a) come up with the money themselves or b) drop out of coverage leaving insureds without coverage.

Alexander’s position was strengthened yesterday by multiple announcements from big insurers about likely withdrawals from the individual markets, as well as news that both the Senate and the House have scaled back plans to do a big bill to repeal and replace ACA.

What does this mean for you?

ACA Repeal is NOT a done deal.

ACA Deathwatch: the GOP’s “repeal”

If you are confused and frustrated with the Republicans’ moves to repeal and replace ACA, rest assured they are way more frustrated – and more than a little concerned – than you are.

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Here’s what’s going on.

There are two main issues.

  1. Repeal without replacement is a budgetary and political minefield.
  2. Congressional Republicans aren’t even close to agreeing on what a replacement bill would look like

Republicans are working to finalize a bill that would defund major parts of ACA. There is NO consensus among Republicans on the details of this bill – and won’t be until at least January 27 (don’t be surprised if the replacement bill isn’t ready till well after January 27…). This won’t require any Democratic support as it is a budget bill. The GOP will own the bill – and the bill’s repercussions.

Earlier this week the CBO gave us a taste of what a repeal without credible replacement would look like, and that taste was bitter indeed.

  • 18 million would lose health insurance within twelve months
  • Premiums would jump by 20 percent to 25 percent immediately

BTW the CBO’s Director was appointed by Republicans in 2015.

If the GOP moves forward with repeal without a replacement bill – which looks highly likely – it will get hammered by Democrats in what will be reminiscent of the Tea Party’s assault on Democrats during ACA’s passage. Dems will turn the tables on Republicans, and with voters primed to fear losing coverage, the message will resonate.

The GOP’s problem is simple – ACA funding is very complex and cutting funding (which is how Republicans are “repealing” ACA);

  • decreases the number of people with insurance and/or
  • increases state government budget deficits and/or
  • increases the federal deficit and/or
  • hurts Medicare, and/or
  • hurts hospitals, and/or
  • hurts insurers.

There’s intense lobbying going on as device manufacturers, hospitals, governors, insurance companies, the very wealthy and other special interests seek to protect themselves.

While Republicans do have “plans” to replace ACA, they do NOT have consensus on “A plan”.  There’s a plan from HHS Secretary nominee Tom Price, another from Speaker Ryan, other plans based on prior GOP bills, plus lots of ideas from GOP-affiliated think tanks and lobbying groups. Make no mistake, there’s a lot of ideological division among Congressional Republicans.

When the GOP does write a replacement bill, it will be scored by the CBO.  A part of that scoring has to do with the definition of health insurance. Up till now, CBO used the ACA’s definition; now that ACA is going away, it will revert to the previous definition.  Not to get too deep in the weeds here, but that’s NOT good news for the GOP.

The dilemma facing Republicans is simple; there’s no way they can deliver on their promises to ensure people don’t lose coverage, reduce costs, and improve access.

Republicans are about to pull a Wile E Coyote, running full speed off the cliff. Given Democrats’ amazing ability to turn certain victory into crushing defeat by losing the messaging battle, the GOP may make it to the other side unscathed.

What does this mean for you?

The CBO is the key.

ACA Deathwatch – The Impact on Workers’ Comp

With Republicans getting closer to repealing ACA, it’s time to consider how this would impact workers’ compensation.

I’ve discussed the possible impact of ACA here; net is the big increase in the insured/employed population may be at least partially responsible for the flat-to-declining work comp medical costs we’ve seen over the last two years.

There’s also this.  A colleague alerted me to a 2014 RAND study that assessed the potential impact of ACA on liability insurance, including workers’ comp in 2016.

RAND’s main takeaway:

“the ACA is expected to reduce auto and workers’ compensation insurer costs and increase medical professional liability insurer costs by a few percentage points as of 2016.”

The report is fairly complex (a summary is here); here’s what it had to say in bullet points.

  1. RAND estimated work comp costs would be $930 million lower due to ACA.
  2. This reduction is driven by lower fees and other insurance coverage for workers.

“Lower fees” derive from lower fee schedules (we’ve seen this in imaging in CA and FL and facility and surgery in other states) and lower prices due to providers less concerned about indigent care and associated bad debt.

“Other insurance coverage” refers to group health or Medicaid coverage for non-occ conditions, as well as substituting for workers’ comp in some instances.

If ACA is repealed without a simultaneous and credible replacement, we may well see a rise in the number of workers without health insurance. The key issue to track is a cutoff of funding for Medicaid expansion – ACA added about 13 million more employed people to the insured rolls; if they lose coverage they’ll need a different payer to cover their injuries. Bad news for workers’ comp.

There are other issues, but Medicaid is the big one.

What does this mean for you?

Be careful what you wish for.  And be even more careful of hasty and simple solutions to very complex problems.

Friday catch-up

2017 is starting off to be the most interesting/bizarre/entertaining/terrifying year in memory.

As one who tracks the goings-on internationally and in DC with some diligence, it’s been impossible to keep up with the craziness. Here’s my attempt to summarize the week that was.

The one thing you missed – and why you shouldn’t have

Trying out a new mini-post on the most important thing may have missed this week. Today’s it’s UnitedHealthcare’s acquisition of a big outpatient surgical clinic company.

This is important because the giant ($175 billion) healthcare company is investing more in care delivery – likely to better control its “cost of goods sold”.  As vertically integrated healthcare systems (think Kaiser, UPMC) get better at insurance, insurers have to get better at care delivery.

ACA Deathwatch

The reports of ACA’s death appear to have been greatly exaggerated. 

Yes, the Senate passed a bill that is the first step in a repeal process.  But it is ONLY a first step. Without diving too deep into the nerdy details, the bill just instructs Senate Committees to begin drafting a repeal bill and lays out general principles.  But there’s no consensus on when the repeal would take effect, what a replacement would look like, or even how it would be funded.

Things are going to get pretty complicated, especially in the Senate. There’s a lot of concern among Republicans in key leadership positions that quick movement on a bill would lead to a considerable backlash – and major political damage.

For freemarketers and Libertarians, there’s this:

“We did have the government out of the individual market up until 2014 [when most of the ACA provisions went into effect], and we know exactly what happened: There were millions of people who couldn’t get coverage,” Field said.

The ACA created a market that did not exist before — one that insures sick people. Field says it’s a market failure that the industry on its own will not cover the highest-risk customers. “If you want to cover everyone, the government has to do something.”

Town said pushing the government out of the equation will leave many citizens without access to health care.

“If you want to live in that world, so be it,” he said. “But I think we as a society have made the joint decision that having a vast part of a population uninsured and having limited access to health care is not a route that we want to go. Getting rid of the ACA is not going to get rid of the government’s role in health care.” [emphasis added]

Here’s a good summary of some of the issues the Republicans face – and why they are treading carefully…key quote:

The real reason health care premiums and deductibles are so high is that medical care is very expensive in the United Statesfar more costly than it is anywhere else in the world. The United States pays very high prices to doctors and hospitals and drug and device makers, and Americans use a lot of that expensive medical care. [emphasis added]

And here’s why keeping only the popular parts of ACA won’t work.  Alas.

Work comp

The M&A activity level has dropped off considerably – if not precipitously. The WLDI sale – a relatively small transaction – is one of the very few recent deals. Don’t expect activity to ramp up as the industry is:

  • pretty consolidated already, so there are fewer companies available to buy;
  • work comp is a declining industry with negative growth – not very attractive to investors;
  • prices were really high for a long time, and company owners still expect to get paid a lot. Sellers still expect to get those high prices, but…
  • buyers are much more cautious due in large part to the “OneCall Effect” (financial returns haven’t met expectations).

Don’t miss the Rx Drug Abuse Summit – April 17-20 in Atlanta.  It’s the most comprehensive and focused event on the biggest issue in workers’ comp.

Nothing is more important to work comp than the overall economy.  Read this – when you have time – for a solid grounding on what to watch for in 2017.  Spoiler alert – economic growth, which has trended up significantly over 2016, is likely to moderate over the next two years. And watch out for inflation.

 

Finally, for management wonks, here’s a great piece on execution from Harvard Business Review.

ACA Deathwatch: What “repeal” means to you

Here are questions you may want to ask about what a “repeal” and “replacement” will do.

  1. What will happen to your premiums?
    If more young people sign up, premiums for us older folks go down. If there is no mandate to buy insurance (and the continuous coverage requirement is far weaker than a mandate), insurance premiums for the 50+ crowd are going to go up – a lot. That’s because healthy seniors will decide the premiums are too high, so the only folks that will buy insurance will be the sick ones.  Insurers know this, so they will either a) exit the market; b) raise premiums to the moon; c) drastically limit coverage for specific medical conditions like heart disease or cancer; or d) go bankrupt.
  2. Is your medical condition still covered?
    ACA requires almost all insurance plans cover all physical and mental health conditions under the essential health benefits requirement. Replacement plans under consideration have no such requirements, allowing insurance companies to exclude specific types of treatment, specific conditions, types of providers, etc.
  3. Is addiction treatment covered?
    Currently mental health coverage is required for most employee and individual plans. Given the huge problems we face with opioid and crystal meth addiction, will a replacement plan require coverage for those seeking to end their addiction? Before ACA, about a third of individual insurance plans didn’t cover addiction treatment. And you can bet your house “replacement” insurance plans wouldn’t offer coverage…
  4. Can insurers limit coverage for medical diagnoses or conditions?
    Under ACA, there are NO lifetime or annual caps for specific medical conditions. The “replacement” plans allow insurers to set arbitrary caps for any diagnosis – cancer, heart disease, orthopedic injuries, or any other category they define.
  5. What happens if you lose your job and can’t afford to pay for individual health insurance while you are looking for work?
    Under the replacement plans, if you have a “gap in coverage” where you don’t have health insurance, when you apply for new coverage your insurer doesn’t have to cover your pre-existing medical conditions, and/or they can charge you higher rates.
  6. Who pays for emergency care for those without health insurance?
    Before ACA family insurance premiums included about $1000 for the additional cost of indigent care due to cost-shifting.  If the number of uninsureds grows – as it most certainly will – they will get care at hospital emergency rooms (hospitals are required to care for anyone presenting with emergent needs regardless of insurance status). So, this “hidden tax” will almost certainly increase your premiums.
  7. Will you be able to buy cheaper insurance from out-of-state health insurers?
    No.  There are three states that allow that today – and NO out-of-state insurers are selling across state lines.

 

ACA Deathwatch – The GOP repeal bill is out

Late Friday the Republican Study Committee released its ACA Repeal Bill.

No word on a replacement plan as of this writing.

Key points

  • A tax credit of $7,500 (individuals) or $20,500 (families) which will apply to income and payroll taxes, and will be indexed for inflation at the same rate as CPI-U. The credit does NOT vary by a person’s income level, so folks making $10,000 a year get the same amount as multi-millionnaires.
  • Fund high-risk pools at $2.5 billion a year for 10 years for those people who can’t get insurance on the open market (note high risk pools have historically not worked over the long term due to state budget limits and increasing costs due to adverse selection)
  • Requirement that individuals MUST stay continuously insured to avoid pre-existing condition limits. Lots of problems with this…
  • Allow sale of insurance across state lines – an initiative that is already in place in three states – and no insurer has EVER done this because it doesn’t work.

For several reasons outlined succinctly in a piece in Health Affairs last week, repeal without replace is problematic. Best guess is the final repeal legislation will call for a replacement within 3 years.

Finally, there is still no consensus among Republicans on a strategy re replacement, much less what a replacement bill would involve.

 

ACA Deathwatch UPDATE: Three problems for the GOP

Republicans have three problems with their promise to “repeal and replace” ACA.

The net – Republicans’ risk – and it is a very real one – is their efforts may blow up the entire healthcare system as it tries to address one narrow slice of the insurance market.

The first problem is internal division.  

Republican Representatives and Senators have committed to “repeal” ACA, but haven’t reached any consensus, agreement, or framework about what the “replacement” is going to be. And there is no indication they are making any progress.

As the Democrats found when constructing ACA six years ago, reaching consensus about healthcare is incredibly difficult as each “wing” in the party wants its own version to prevail. The GOP is learning once again it is MUCH easier to tear down than to build.

UPDATE – Politico reported this today...

disagreements spilled over Wednesday at a closed-door meeting with Vice President-elect Mike Pence that had been intended to unify the Senate GOP. Instead, multiple senators stood up to express concern that the party’s plans to repeal and replace the law could blow massive holes in the budget ... Newly ascendant Republicans are reckoning with the reality that dismantling a nearly seven-year-old law that reshaped a $3 trillion health sector and covers millions of Americans is more daunting than simply campaigning against it.” [emphasis added]

Especially when the “problem” the GOP publicly committed to fix – the individual insurance market – is a relatively small part of the healthcare market – and ACA itself.

Second, without a credible replacement, those individual insurance markets will implode as carriers leave the market. Cost shifting to privately insured patients from hospitals that a) agreed to lower Medicare payments and b) have more uncompensated care will increase dramatically.

Any major problems in the insurance or healthcare provider markets that come after a repeal are going to cost the GOP dearly.  There is no question those people who lose coverage – and there will be millions under ANY of the scenarios now under consideration – will be really, really angry. (Pre-ex is just one issue the GOP has no real solution for)

Third, a repeal and replacement is going to cost hundreds of billions of dollars.

Under the best case scenario, repealing ACA increases the deficit by $350 billion over ten years.  That’s causing major heartburn among GOP deficit hawks, and is a big reason there’s no consensus on what to do. (thanks Brandon Miller for correcting my mistake!)

What’s the net?

Republicans’ pledge to immediately repeal ACA was a winning campaign promise. It may well be a loser in the next election.