The Perfect Storm: Putting America’s Health Care in Peril The American Health Care Act & the President’s Proposed Budget
Analysis by Dan Derksen, MD, Director, Az Center for Rural Health
Update - CBO Analysis of Senate version, June 26, 2014:
The American Health Care Act (AHCA) was passed by the U.S. House of Representatives on May 4, 2017 by a vote of 217 to 213. The Congressional Budget Office posted its costs and coverage estimates of that bill on 05/24/20171. If passed by the Senate then signed by the President, the CBO estimates it would:
- Increase U.S. uninsured by 14 million in year 2018, and 23 million uninsured by year 2026.
- Increase the uninsured total to 51 million Americans by year 2026, versus 28 million who would lack insurance in 2026 under the current Affordable Care Act (ACA) law.
- Decrease by almost $1.5 trillion dollars the federal funding of health coverage over 10 years (2017-2026) by cutting Medicaid funding to states ($830 billion) and eliminating ($665 billion) in marketplace subsidies to help low-income Americans buy health plans (page 39 CBO Report1).
- Disproportionately affect the frail elderly, blind, disabled and rural Medicaid enrollees.
- Cut by $830 billion dollars over 10 years in federal Medicaid funding to states, resulting in 14 million fewer Medicaid enrollees by 2026.
- Reduce by $665 billion dollars over 10 years in federal subsidies to help individuals buy health insurance (also known as the nongroup or individual health insurance market) by eliminating in year 2020 the ACA’s refundable tax credits and cost sharing reductions. These would be replaced by $275 billion in tax credits for nongroup insurance in year 2020.
- Allow insurers in 2018 to charge older enrollers five times more than younger enrollees, versus three times more under current law.
- Allow insurers to impose a 30% charge to individuals who did not maintain continuous coverage.
- Allow states to waive the Affordable Care Act’s consumer protections and thereby stop requiring insurers to include the 10 essential health benefits (such as preventive services, newborn care, and maternity coverage), and allow insurers to go back to charging people more for pre-existing conditions (eliminates the community rating) if a person had not maintained continuous coverage.
- Appropriate $8 billion dollars per year in 2018 in funding for states that obtain a waiver for a Patient and State Stability Fund starting in 2018 for those with pre-existing conditions.
- Provide $15 billion in funding to states choosing to waive the ACA requirements for community rating and essential health benefits for maternity coverage, newborn care, prevention, treatment, or recovery services for people with mental and/or substance use disorders.
- $610 billion in federal Medicaid funding to states. It is not clear how this relates to AHCA cuts.
- $193 billion for the Supplemental Nutrition Assistance Program (SNAP, aka food stamps).
- $72 billion in Supplemental Security Income (SSI) disability.
- $21 billion in Temporary Aid to Needy Families (TANF).
- $87 billion for the National Institutes of Health
- $18 billion for the Centers for Disease Control and Prevention
Summary of the American Health Care Act as passed by the House on 05/04/2017:
Title 1, Subtitle A—Patient Access to Public Health Programs, Sec. 101: Ends funding after 2018 for the ACA’s Prevention & Public Health Fund of almost $900 million/year, a cut of 12% of the Centers for Disease Control and Prevention annual budget. The fund was largely allocated to states for public health preparedness (e.g., for prevention of the spread of Ebola and Zika virus) and education programs (e.g., to address the opioid epidemic). Arizona would lose $46.8 million over five years from this fund.
Title 1, Subtitle B—Medicaid Program: Repeals the ACA’s Medicaid Expansion starting in 2020. There have been 11 million Medicaid expansion enrollees in the 31 states + D.C. that expanded Medicaid as allowed by the ACA, including 16 states that currently have Republican governors. Since the first open enrollment period that started in October of 2013, Medicaid/CHIP enrollment grew by 17 million individuals, to total 75 million currently. The ACA has the federal government covering 100% of the costs of Medicaid expansion for the first three years, then decreased the federal share of costs to 95% in 2017, and to 90% by 2020 and beyond. The American Health Care Act discontinues coverage for individuals with a break in eligibility for more than one month, and incentivizes states to perform eligibility redeterminations ‘no less frequently than once every 6 months.’
Title 1, Subtitle C—Per Capita Allotment for Medical Assistance: Amends Title XIX of the Social Security Act (Medicaid) to per capita-based cap or block grant federal payments to states. This is a dramatic change in the financing of Medicaid. Under Social Security Act law, the federal statutory minimum covers 50% of the costs of a state’s Medicaid program, through the Federal Medical Assistance Percentage or FMAP, based on a state’s per capita income compared to the national average. Of the 75 million Americans enrolled Medicaid and CHIP, half are children. Of the $545 billion dollars spent on Medicaid in 2015, $300 billion was spent on aged and disabled Medicaid enrollees.
The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) analyzed and reported AHCA effects on costs, coverage and federal funding reductions on 03/13/17, 03/23/17 and 05/24/17. CBO-JCT estimated the AHCA would cut federal funding of state Medicaid programs by $830 billion dollars over 10 years, increase the uninsured by 14 million Americans that would have been covered by Medicaid, and an additional 9 million uninsured due to cuts in the subsidies to individuals and families purchasing health plans on state and federally facilitated health insurance marketplaces.
The American Health Care Act uncouples the statutory minimum federal requirements to fund state Medicaid program. Instead, the Secretary of Health Services would block grant federal payment to states, or cap federal payment based on the state’s fiscal year 2016 expenditures, divided by the number of state enrollees for the five Medicaid coverage categories: 1) children, 2) elderly, 3) blind and disabled, 4) pregnant women and parents, and 5) childless adults (i.e., the Medicaid expansion population). As Canada’s block grant experience showed, uncoupling a federal statutory minimum shifts costs and risks. Facing declining federal support, states will be forced to curtail enrollee benefits, impose higher enrollee co-pays and deductibles, and cut payment to hospitals, physicians, and other health providers.
Title XXII—Patient and State Stability Fund: This provision adds a new Title to the Social Security Act, Title XXII, allowing states to create high risk pools. States with high risk pools had to cap enrollment, create waiting lists, impose annual or lifetime dollar limits, charge very high premiums, exclude certain conditions, and impose very high deductibles, co-pays, and cost sharing.
Repeal of ACA Subsidies and Taxes: The AHCA repeals ACA advance premium tax credit (APTC) and Cost Sharing Reduction (CSR) subsidies intended to help low-income individuals purchase health insurance plans. It replaces the ACA’s APTCs and CSRs based on income thresholds with modest tax credits based on age bands. It increases the age banding premium ratios from the ACA’s 3:1 to a 5:1 age rating structure, allowing insurers to charge older enrollees five times as much as younger people. It also allows states to apply for a waiver of the ACA essential health benefits. The ACA’s APTC tax credits and CSRs shielded low-income individuals from these premium differentials (see Arizona’s experience in the table below). The American Health Care Act’s modest tax credits, based on age bands, may create health insurance savings for younger, healthier individuals – but will dramatically increase costs for older Americans, and those with one or more chronic diseases or pre-existing conditions. The Act repeals the individual tax mandate that requires individuals to demonstrate minimum health insurance coverage or pay a tax penalty, repeals small and large business mandate taxes, tanning tax, medical device tax, health insurance tax, prescription and over-the-counter medication taxes.
The Centers for Medicare and Medicaid Services (CMS) Marketplace Enrollment for Arizona OE4
CMS released the open enrollment (OE4) final report for state and federally facilitated ACA Marketplaces in March, 2017. Americans with incomes between 100% to 400% of the Federal Poverty Level may be eligible for an Advance Premium Tax Credit (APTC12) to make buying a plan on healthcare.gov more affordable. Those between 100% to 250% may qualify for additional cost sharing reductions (CSR) to purchase Marketplace silver level plans.
Arizona ranked 16th of 50 states in average premium paid by individuals receiving subsidies, just less than the national average. Arizona ranked 42nd of 50 states in total average premium, 28% higher than the U.S. average. Two years ago, each of Arizona’s 15 counties had at least 7 insurers offering 70 plans on healthcare.gov. In 2017, BCBS is the lone insurer in 13 Arizona Counties, with Ambetter for HealthNet in Maricopa (Phoenix) and Pima (Tucson) Counties. Arizona had the largest premium increases from 2016-17 due to its market consolidation.
Enrollment rose by 4% for Arizonans receiving an APTC (column E), by 6% for those receiving an APTC + CSR subsidies (column F), and both had a slight decrease in what they paid for coverage. Enrollment declined 23% in those without tax credit subsidies (column G); they felt the full force of the jump in total premiums by insurers offering plans on Arizona’s Marketplace.
The loss of insurers offering plans in the Arizona Marketplace was associated with a dramatic increase in total premiums. However, low-income Arizonans were shielded from those increases because of the ACA subsidies – those getting an Advance Premium Tax Credit (APTC) to purchase a plan, and those receiving both an APTC and Cost Sharing Reduction (CSR) subsidies.
Severe cuts in federal funding of state Medicaid programs will disproportionately affect rural and elderly Medicaid enrollees – as 60% of Medicaid costs relate to elderly, blind, and disabled Medicaid recipients.
Eliminating the Affordable Care Act APTC and CSR subsidies for low-income Americans (a cut of $665 billion over 10 years), replacing them with a tax credit (an estimated appropriation of $275 billion over 10 years) represents a 60% federal funding reduction. Replacing APTC and CSR subsidies based on income thresholds with a tax credit based on age, combined with allowing insurers to charge five times more for older enrollees than younger enrollees (versus the 3:1 differential under current ACA law), will also shift costs to the elderly. Allowing states to waive essential health benefits will further exacerbate cost shifting to the poor and elderly, especially those with one or more chronic diseases. Such individuals will likely no longer be able to afford health insurance, and become uninsured. The increase of 23 million uninsured will in turn shift costs to health providers, hospitals and clinics through uncompensated and charity care.
REFERENCES FOR TABLE
1) 2016 Marketplace Data at CMS.gov: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-06-30.html
2) 2016 ASPE Marketplace Enrollment Final Report: https://aspe.hhs.gov/system/files/pdf/187866/Finalenrollment2016.pdf
4) Federal Poverty Level for 2017: https://aspe.hhs.gov/poverty-guidelines
CRS Report on Premium Tax Credits and Cost Sharing Subsidies, Feb 2017: https://fas.org/sgp/crs/misc/R44425.pdf