The lack of state Medicaid flexibility in a recently leaked draft bill does not mean that such an approach will be part of the final ACA repeal bill, an industry observer said.


March 1—President Donald Trump outlined five principles to Congress for moving forward on healthcare reform, but industry observers cite various implementation challenges.

In a Feb. 28 address to a joint session of Congress, Trump urged bipartisan efforts to overhaul the Affordable Care Act (ACA) by adhering to these principles:

  • Ensuring access to coverage for those with preexisting conditions and a smooth transition for the 20 million people enrolled in individual insurance coverage 
  • Providing tax credits and health savings accounts (HSAs) to help individuals purchase coverage
  • Giving governors resources and flexibility for Medicaid operations
  • Establishing liability reforms for patients and physicians that drive insurance costs and reducing drug costs
  • Allowing the purchase of health insurance across state lines

Those principles generally correspond with the approach Republican congressional leaders seek in a ACA repeal bill they plan to enact through reconciliation, which Democrats could not filibuster, said David Hoppe, former chief of staff to House Speaker Paul Ryan (R-Wis.).

“While they may not have everything worked out, they’re getting at least the things that they can get on the same page about worked out,” Mike Strazzella, practice group leader at Buchanan Ingersoll & Rooney, said about the administration and congressional Republicans.

The House of Representatives is aiming to pass the reconciliation bill in March, with Senate approval to follow soon after, Hoppe said during a conference call. However, Republican differences have emerged with respect to some provisions, according to industry observers. For instance, Republicans are divided over whether the tax credits for purchasing coverage should be based on age, income, or both, said Seth Chandler, a visiting fellow at the Mercatus Center who specializes in health law.

Hoppe noted that despite Trump’s calls for bipartisanship, there is “less chance” for that in health care than in other policy areas.

A “big problem” with Trump’s approach, according to Chandler, is how to maintain the ACA’s prohibitions on charging more for preexisting conditions yet also grant insurers more flexibility to shape the plans they offer.

“Both of those goals seem great when viewed separately,” Chandler said. “The unbelievably complicated problem, though, is that it’s extremely difficult to meet both goals at the same time.”

The way to address that challenge, Chandler said in an interview, is through a better risk adjustment program. A leaked GOP repeal bill would continue the ACA’s risk adjustment program for insurers with costly enrollees, he said, but the Trump administration would need to improve the program through rules changes, as insurers have long urged. For instance, insurers have asked that payments under the program be based on actual costs of enrollees, which the Obama administration rejected over concerns that such an approach would incentivize spendthrift behavior by insurers.

“You can predict people’s medical expenses considerably better if you wait until after the year is over,” Chandler said, “and then see, ‘How risky was the person that we insured?’”

Health insurance provisions more likely to be included in a Republican approach include the creation of high-risk pools for those with preexisting conditions and broader access to HSAs, Hoppe said.

Chandler said the reconciliation bill also will need to include funding for cost-sharing reduction payments, known as CSRs, which the ACA authorized for marketplace enrollees with incomes of up to 250 percent of the federal poverty level. Congressional Republicans successfully challenged those payments in court, but the marketplaces will not stabilize without such assistance.

Those payments are key to the stability of the marketplaces in 2018, even after the Trump administration recently issued a stabilization rule.

“I don’t see how any responsible insurer can write premium rates without knowing if they are going to get 15 percent of their income or not,” Chandler said, referring to the estimated revenue from CSRs.

However, Chandler panned Trump’s call to allow interstate insurance purchases.

“That is not a cure-all for the problem we are facing,” Chandler said.

Medicaid Provisions

A Fitch Ratings analysis of Trump’s speech noted that it hinted at some support for continued federal funding for the ACA’s newly eligible Medicaid enrollees—estimated by the U.S. Department of Health and Human Services (HHS) at 9.1 million people in FY15. HHS estimated that states received $58.1 billion in funding to provide that coverage in 2015

Fitch concluded that Trump’s comments implied support for the block-grant or per-capita-cap approach described in an ACA repeal-and-replacement outline recently issued by Ryan. Those approaches would establish limits on federal spending while providing unspecified new implementation flexibility for states.

“Fitch anticipates states would likely respond with health care spending cuts, cuts to other programs such as education, and revenue measures,” Fitch analysts wrote.

Although a lack of state flexibility in Medicaid was among the provisions of the leaked draft bill that drew pushback from GOP governors, some policy watchers saw the discussion as part of the legislative process.

“Everybody needs to remember a draft bill is meant to be worked on,” Strazzella said in an interview.

Despite Trump’s emphasis on the role of governors in crafting Medicaid approaches, Hoppe downplayed state leaders’ influence on the federal government’s role in the program going forward.

“There will be a transition period, and that will be part of it,” Hoppe said, referring to an expected shift away from the ACA’s Medicaid expansion in the replacement bill. “The governors will have an important role but not determinative.”  

The Ryan plan significantly reduces the ACA Medicaid expansion’s funding over an unspecified transition period. Trump's speech did not make clear the administration's view of such a decrease, Fitch noted.

Post-Reconciliation Legislation

Portions of the ACA cannot be replaced through a simple-majority vote in favor of a reconciliation package, Hoppe noted. For instance, legislative language that replaces the infrastructure of the ACA’s health insurance program will require the support of some Senate Democrats.

“Those are issues right now that as you look forward over the next four or five months, you see that there’s going to have to be the ability to get 60 votes in the Senate,” Hoppe said.

A follow-up bill also will be needed to address further changes to Medicaid, including reauthorization of the Children’s Health Insurance Program and the future of 340B program, according to Strazzella. That bill could draw on the recommendations of an ongoing Medicaid-overhaul task force led by Rep. Brett Guthrie (R-Ky.).

Follow-up legislation also will need to address the medical liability reforms and drug-cost reduction measures sought by Trump.

“The president is reaching across the aisle, and Rep. [Elijah] Cummings [D-Md.] is reaching across the aisle as well to recognize that they do have a shared interest in the high cost of some prescription medications and how they want to address that,” Strazzella said.


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

Publication Date: Wednesday, March 01, 2017