Despite repeal plans, the hospital sector outlook remains neutral as Republicans consider replacement plans that could provide similarly broad coverage.

Dec. 7—Repeal of the Affordable Care Act (ACA)—without replacement—would cost hospitals $165.8 billion from 2018 to 2026, according to estimates prepared for two large hospital advocacy groups.

The estimate was modeled on repeal legislation that Congress cleared in 2015 and that was vetoed in 2016 by President Barack Obama. It does not account for an unspecified ACA coverage replacement measure that members of the incoming Trump administration and the Republican-led Congress said they want to enact.

Such cuts “will create challenging and potentially unsustainable financial circumstances that could ultimately reduce patients’ care options,” Chip Kahn, president and CEO of the Federation of American Hospitals (FAH), and Rick Pollack, president and CEO of the American Hospital Association (AHA), wrote in a letter to President-elect Donald Trump and congressional leaders.

The negative consequences from repeal would stem primarily from reduced utilization of hospital services as an estimated 22 million people lose insurance coverage by 2026, which would increase the total number of uninsured to 50 million nationally. That loss in coverage would stem from repeal of the subsidies for ACA marketplace coverage and of funding for states to expand Medicaid eligibility, as well as the elimination of the individual mandate and its tax penalties.

“This would lead to a loss of coverage for a large number of individuals who had just gained coverage under ACA implementation and a reverse movement of a number of the insured from the Marketplaces and Medicaid back to Commercial coverage,” wrote healthcare economists at Dobson | DaVanzo, who authored the report.

The hospital groups’ estimates of coverage losses were less severe than those of others, such as the left-leaning Urban Institute, which this week estimated in a report that 29.8 million would lose coverage under repeal.

The hospitals’ report acknowledged that repeal would not affect Medicaid coverage for those who were previously eligible and who came forward to enroll during expansion, which it estimated at 2 million people. However, recent research estimated that these so-called woodwork Medicaid enrollees actually comprised 44 percent of the 8.8 million people whom the Census Bureau found to have gained coverage in 2014.

A second Dobson | DaVanzo analysis estimated hospitals face another $148 billion in cuts from 2010 to 2026 stemming from additional legislative and regulatory actions that were separate from the ACA.

Some Increases

The financial impact on hospitals of ACA repeal would be somewhat lessened by the elimination of several ACA cuts, including $45 billion in scheduled cuts to Medicaid disproportionate share hospital (DSH) payments and $49.5 billion in Medicare DSH payments. The ACA cuts a total of $102.9 billion in DSH payments to hospitals from 2018 to 2026.

However, the repeal bill is not expected to restore an estimated $289.5 billion in Medicare cuts for hospitals, which the ACA requires from 2018 to 2026.

“We strongly believe that any repeal legislation must be accompanied by provisions that protect the coverage for those currently receiving such protection,” the hospital advocates wrote. “However, if that is not the legislative path to be pursued, then it is vital that such legislation provide a true clean slate and also include repeal of the reductions in payments for hospitals services embedded in the ACA—specifically the substantial reductions to hospitals’ annual inflation updates and the cuts to Medicare and Medicaid DSH payments.”

Replacement Details

Discussion about an ACA replacement plan continued in Washington, D.C., this week amid reports that congressional leaders have reached out for input from governors and state insurance commissioners.

Although many of the details of a replacement plan remain in flux, Jenifer Healy, a senior managing director for Dentons and a former healthcare adviser to Sen. Bob Corker (R-Tenn.), said replacement plans will likely include tax credits for buying individual coverage and Medicaid expansion funding.

Former-Sen. Tom Coburn (R-Okla.) said at a Dec. 6 Capital Hill briefing that congressional Republicans are not looking to cut Medicaid coverage funding from post-ACA levels but to allow states much more flexibility in using those funds to provide coverage. One possibility floated at the briefing is that the same level of Medicaid funding could end up widening coverage by allowing states to spend that money on private insurance coverage instead.

The rationale for such an approach stems from a summer report by the Actuary for the Centers for Medicare & Medicaid Services that found the per person cost of the Medicaid expansion was $6,366 for 2015, or about 49 percent more than previously estimated. Conversely, coverage for those enrolled in ACA marketplaces cost about half as much as the per person Medicaid expansion cost.

“If you give states the experimentation ability to say, ‘How can we target our dollars across exchanges and across Medicaid more effectively, then we can think of innovative ways to address those challenges,’” Paul Howard, director of health policy at the right-leaning Manhattan Institute, said in an interview.

Shifting those funds to commercial payers could more effectively move care for Medicaid enrollees to lower-cost sites such as primary care offices and ambulatory surgery centers, which Medicaid programs have struggled to do, Howard said.

Hospital Sector Outlook

The latest projections and continuing uncertainty on what will replace the ACA came as credit rating agencies offered generally neutral 2017 outlooks for hospitals.

For instance, a Dec. 5 report from Moody’s Investors Service issued a stable outlook for not-for-profit hospitals based on expected patient volume growth of about 1 percent and favorable revenue growth at hospitals pursing outpatient expansion strategies.

However, “Any major regulatory changes or disruption of current policy could pressure the outlook,” the report noted.

A Dec. 6 outlook from Fitch noted that “healthcare providers, specifically acute care hospital companies, have the most to lose if the ACA insurance expansion is gutted because it has resulted in more paying customers for the sector.”


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

 

Publication Date: Thursday, December 08, 2016