The Senate is expected to restore much of the $800 billion in Medicaid cuts included in the House-passed AHCA.

May 10—Hospital finance leaders are closely following how a Senate version of healthcare reform legislation addresses Medicaid funding and marketplace subsidies for older enrollees after a House-passed version made deep cuts to both.

Following passage May 4 by the House of Representatives, the American Health Care Act (AHCA) has moved to the Senate, which is expected to make substantial changes to the legislation.

“It sounds like the Senate wants to create its own bill and not try to just push around the House bill,” said Gail Wilensky, PhD, a senior healthcare official under President George H.W. Bush. “That doesn’t necessarily mean completely ignoring the House bill, but they don’t feel constrained by what the House did.”

The bill repeals and replaces some provisions of the Affordable Care Act (ACA), implementing major changes to Medicaid and the government-operated portion of the individual insurance market. Hospital groups opposed the bill primarily over concerns that it would reduce the number expected to have insurance in 2026 by 24 million (according to an earlier Congressional Budget Office [CBO] estimate). Most of those coverage cuts would come through an estimated $800 billion reduction in the growth of Medicaid over the next 10 years.

“As the backbone of our nation’s health safety net, America’s hospitals and health systems—which include more than 270,000 affiliated physicians and 2 million nurses and other caregivers—believe it’s vital that Medicaid be protected,” Rick Pollack, president and CEO of the American Hospital Association (AHA), said in a written statement.

The Senate bill is being put together primarily by a 13-member working group of Republican senators led by Senate Majority Leader Mitch McConnell (R-Ky.). That group includes senators who have pushed for complete repeal of the ACA and others from states that have approved its Medicaid expansion. The membership of the working group was notable to some healthcare policy observers for not including Sens. Susan Collins (R-Maine) and Bill Cassidy, MD (R-La.), who coauthored a bill earlier this year to allow states to decide whether to keep the ACA coverage expansions, use the funding for other forms of coverage, or return to pre-ACA funding levels.

Although little is certain about what shape the Senate version of the bill will take, potential cuts in federal funding for Medicaid and subsidies for enrollees in ACA marketplace plans were the key areas of concern to hospitals.

A CBO score for the final bill passed by the House is not expected until the week of May 22, but the Senate’s work on its own bill has already begun, noted Chad Mulvany, director of healthcare finance policy, strategy and development for HFMA.

Hospital finance leaders note that federal law still will require those facilities to provide free care for medical emergencies to the newly uninsured. Hospitals would expect a $165.8 billion decrease in revenue through 2026—after accounting for a restoration of Medicaid disproportionate share hospital (DSH) payment cuts that were required by the ACA—according to an analysis of an earlier version of the bill.

If the ACA’s Medicare and Medicaid DSH reductions are retained, that would produce another $102.9 billion in hospital cuts, according to the analysis, which was performed by Dobson DaVanzo & Associates and commissioned by the AHA and Federation of American Hospitals.

Hospitals face an even larger financial impact from what the bill does not include: a restoration of the ACA’s Medicare cuts. The AHCA leaves in place an expected $289.5 billion in reductions to the Medicare inflation update over the coming decade, according to the Dobson report.

Medicaid Concerns

The bill’s Medicaid cuts will likely force some states to either reduce Medicaid eligibility levels or cut provider payments to offset the growing burden on state budgets, according to a new assessment by S&P Global Ratings (login required).

Hospitals would likely be the prime target of any state Medicaid-rate reduction because other types of providers would either opt out of the program or face unsustainable losses from any cuts, Mulvany said.

Wilensky was doubtful that the Senate would approve Medicaid cuts anywhere near the $800 billion level. However, major Medicaid changes—including a reduction in the federal matching rate for the newly eligible population—are likely.

“That you weren’t going to see a 90 percent [matching rate] forever seems pretty obvious,” Wilensky said in an interview.

The House-passed AHCA would reduce the federal match in Medicaid for early expansion states to 80 percent starting this year, while the 19 non-expansion states could receive the enhanced match if they adopt the expansion by the end of this year, as noted in an HFMA overview of the bill (HFMA member login required).

Marketplace Impacts

The marketplace subsidy concerns stem from provisions that would reduce the amount currently available for older enrollees—who generally use more hospital services—while increasing subsidies for younger enrollees. The change could help stabilize the ACA marketplaces but leave older, pre-Medicare-eligible enrollees with unaffordable healthcare costs. That situation could increase hospitals’ charity-care and bad-debt costs.

The AHCA would replace the ACA’s subsidy structure with one that provides age-based subsidies ranging from $2,000 for ages 29 and below to $4,000 for ages 60 to 64. Those subsidies would not be adjusted to account for regional premium differences. The bill would eliminate cost-sharing subsidies for marketplace enrollees earning less than 250 percent of the federal poverty level.

Provisions that could partially offset those new subsidy restrictions include a $100 billion, nine-year fund to help stabilize the marketplaces through programs such as high-risk pools for those with costly preexisting conditions. However, Collins said reproducing her state’s successful risk pool nationally would cost $15 billion a year.

Wilensky said she expected the Senate to try to wrap up its consideration of the legislation by mid-summer.

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

Publication Date: Thursday, May 11, 2017