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ACA Deathwatch: Hospitals, bankruptcy, and chicken-killing dogs

For those wondering why the GOP appears to be walking back its promise to “rip out Obamacare root and branch”, here’s why this is a whole lot harder than one might think.

And why the political realities make this picture far too real for the incoming Congress.


The GOP has long prided itself as the party of fiscal responsibility; Speaker Ryan and Majority Leader McConnell have assailed ACA as unaffordable and a budget-breaker. However, among the myriad issues inherent in healthcare reform is this – repealing ACA would bankrupt Medicare’s hospital insurance fund next year.

(It would also alienate many who voted for Trump...but that’s another story.)

When ACA was passed, there were financial trade-offs put in place to address winners and loses in an attempt to make the law as budget neutral as possible.

Insurance companies, drug companies, device manufacturers, and hospitals paid higher taxes or got lower reimbursement because they were going to get a whole lot more business as millions more people got insurance. Specifically, hospitals’ Medicare reimbursement has been changed – in part to eliminate payment for medical mistakes and re-admissions, and in part by altering reimbursement mechanisms and formulas.

ACA also included a 0.9 percent payroll tax on the wealthy individuals earning more than $200k or couples making more than $250k.  This raised $63 billion, which went to fund Medicare’s Hospital Trust Fund.

The combination of lower total reimbursement and more revenue extended Medicare’s solvency by 11 years. Without ACA, the Trust Fund is bankrupt next year.

If the GOP repeals the ACA or eliminates the 0.9 percent tax on the very wealthy, Medicare Part A is technically bankrupt.

The incoming President, Congress, and HHS Secretary are facing the very same tradeoffs and complexities their predecessors faced in 2010 – health care is horrendously complex and inter-related.  There are no simple, easy answers.

What does the GOP do?

From here, it looks like they have a couple options.

  1. Repeal it, pass their own health care reform legislation that makes major changes, and claim success.  
    As noted above, and as we’ve seen over the last five years, changing the US healthcare system is brutally hard, there are way more unintended consequences than anyone could predict, and there are no simple answers. There is just no way they can cobble together legislation anytime soon that will address ACA’s issues and not result in a gigantic clustermess.
  2. Repeal ACA in two or three years, with the promise they’ll come up with a replacement in a year or two.
    Without a credible replacement, insurers and healthcare providers are going to panic. Expect insurers to exit the individual and small group health insurance markets in droves. Democrats will use Medicare’s pending insolvency to bludgeon Republicans in the mid-term elections.
  3. Rebrand ACA as TrumpCare, make a couple tweaks around the edges, declare victory, and go home.
    This gets my vote as most likely, primarily for the reasons noted above. Now that the GOP owns health reform and Medicare solvency, Democrats are going to tie the issue around their necks like a dead chicken.

For a more detailed discussion of the issue, here’s a good synopsis from Politico.

Later – Hospitals and Medicaid – it’s pretty scary. 

What does this mean for you?

Don’t be lazy. Healthcare reform is hugely complicated, and for those of us – that means you – invested in the industry, what’s about to happen is far too important for you to ignore it or pay it little heed.

7 thoughts on “ACA Deathwatch: Hospitals, bankruptcy, and chicken-killing dogs”

  1. Thanks Joe for your time in writing this. I appreciate your articles and insight.

    For me personally it is discouraging to hear about Obamacare not able to be repealed so easily. This is one of the main issues that drove me and many I know to vote for Trump. In less than 1.5 years my premiums jumped $428/month and I was dropped from my plan, while I watched millions of others obtain Healthcare for very cheap…if not for free. So yes, millions now have health insurance but at the cost of how many people like myself? I know the ACA can’t function without the mandated insurance which of course includes the yearly fine for not having insurance. However, forcing people to pay for others who don’t work or make much less is socialism at its best. Please don’t misunderatand me, I don’t have the answer to this problem. I just know socialism or socialized medicine isn’t the right answer.

    I do beleive there should be accountability for those who don’t properly take care of themselves thus leading to many preventable health issues. Where is the individual accountability? What is the right solution? The ACA has proven not to be…

    1. Hi Spencer – thanks for your thoughtful comment. Here’s my take on your situation.

      If ACA is repealed, your situation will not change – except you likely won’t get coverage for any pre-existing conditions. ACA’s exchanges is the mechanism where many buy individual health insurance; the deductibles, premiums, networks, and to some extent the benefit design is totally up to the insurance company. The reason your costs are high is because your insurer can’t control health care costs.

      In terms of who pays for Medicaid expansion, a number of fees, taxes, and spending reductions were used to cover that cost (some were listed in the post). In addition the follow-on economic effects in states that expanded Medicaid are generally positive; higher tax receipts being one effect from the additional dollars flowing into the state.

      Point being individual taxes aren’t the source of the Medicaid expansion funding.

      In Arizona, Medicaid was expanded, and the result has been far more people with insurance. I’d suggest that many of the fixes that were and are necessary for ACA were stonewalled in Congress, in addition to outright efforts to handicap the program. Rubio’s success in killing risk corridor payments were likely at least partly responsible for the lack of insurance options in your state. ACA is the only major legislation I’m aware of that did not receive legislative tweaks after passage. EVERY major program gets altered via legislation post-passage; ACA was not.

      I understand your concern about some taking advantage of the system – there’s absolutely no question that happens. Our daughter works in an inner-city ER and her frustration is high indeed at times. We live in upstate NY, where Medicaid expansion has been in large part responsible for the uninsured rate dropping from 17.6% in a neighboring county pre-ACA to 6% today. That’s good news indeed. That said, Indiana’s Medicaid program has lessons for us all in cost-sharing and adding personal responsibility at some level. If other states make similar changes that would be good news indeed.

      Finally, when you look at health outcomes compared to cost in other countries with universal care, socialized systems, etc, their costs are much lower than ours, while most health outcomes are better.

      So, I guess how you define “success” determines if that’s acceptable.

      1. Thanks for taking the time to respond to my comment. It sure is a difficult situation and not an easy solution to please and help every single person in the country.

        I would like to see more individuals take personal responsibility for their health and not rely on government…but I understand that it is easier for me to say that when my family members and I don’t have health issues nor have we ever been in any serious accidents where hundred of thousands of dollars was spent for survival. It would be difficult to be dealt with a pre-existing condition like Type I diabetes. But I used to always think to myself when I worked in the hospital…”If smoking, obesity and diabetes didn’t exist I would be out of a job…” Well those 3 things are very preventable.

        I would love to see the representatives get along and do what’s best for American’s and not for their parties. But that is about as hopeful as world peace.

        As a nurse, I will do what I can on my level to make a difference in the lives of those who suffer. Thanks again.

        1. Spencer: we agree. It makes me nuts that I have to pay taxes to cover diseases that are largely lifestyle choices. A few years back I got into a rather heated argument with a rep from the American motorcycle association when I opined that helmetless riders should be required to carry insurance covering any and all costs due to an accident including lifetime care.

          He said that was unreasonable.

          I disagree.

  2. Thanks for the article, but the piece on hospitals and Medicaid perhaps should have had a skeptical comment from you.

    A great many American hospitals – perhaps a majority — did just fine and stockpiled cash during the period from 2000 through 2013.

    Medicaid was expanded in 2014, and hospitals did start to get paid much more often for treating the poor.

    Now I like that fact.

    But you should have included a skeptical comment when a hospital exec says that his industry is going to suffer a lot if Medicaid goes back to where in was in 2013. Other than the safety net hospitals, the industry made lots of money back then and it will again.

      1. granted, I know rather little about hospital operations….

        but hospital staff salaries are up nearly everywhere, and a vast number of hospitals have built new facilities since 2000.
        These are signs of a very prosperous industry.

Comments are closed.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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