An influential member of Congress hopes a recent waiver failure might spur Congress to act on CSR legislation.


Oct. 23—The end of federal cost-sharing subsidies for enrollees in plans sold on government-run marketplaces likely would lead to an increase in uncompensated care that would worsen hospitals’ financial situation, according to a new court filing.

The American Hospital Association (AHA), the Federation of American Hospitals, the Catholic Health Association of the United States, and the Association of American Medical Colleges filed a friend-of-the-court brief  Saturday in a legal challenge—State of California, et al., v. Donald J. Trump, et al.—to the administration’s recent decision to end cost-sharing reduction (CSR) payments. The legal challenge to the discontinuation of the payments was led by 19 state attorneys general.

The subsidies for enrollees in Silver plans sold through the Affordable Care Act’s (ACA’s) marketplaces—estimated to total $10 billion in 2018—were ended in October after months of threats by President Donald Trump. He said they could not continue because a federal judge had ruled they were illegally provided without congressional approval.

But advocates for hospital, insurers, and other healthcare groups have urged that the administration reinstate the subsidies through executive authority and that Congress appropriate permanent funding.

The recent amicus brief was an attempt by hospitals to underscore the financial stakes involved in the issue.

“Hospitals accept the price of some uncompensated care as the cost of doing business and as a way to relieve financial stress on poorer patients,” the hospital groups stated in their brief. “But the increase in uncompensated care that will result if federal reimbursement for cost-sharing payments is eliminated will make it harder for hospitals to serve their patients and their communities.”

Hospitals already provide substantial amounts of uncompensated care to lower-income patients—$35.7 billion in 2015 alone, according to the latest AHA tally. More than $10 billion of that comes from writing off cost-sharing payments from insured patients.

An increase in uncompensated care could stem from a loss of coverage that would render patients unable to pay for needed care, or from higher ACA coverage premiums that would leave enrollees with less available to pay their out-of-pocket costs, the hospital groups stated.

“Either way, the bottom line is the same: Lower- and middle-income patients will find it harder to pay their medical bills, leaving hospitals with greater uncompensated-care burdens, and therefore with fewer resources available for free care, financial assistance, fee-reduction programs, and other benefits to make and keep their communities healthy,” the hospitals stated in the brief.

The concerns ran somewhat counter to the projections of the Congressional Budget Office, which concluded that the loss of CSR payments would result in lower premiums for most individual-market enrollees and in a decrease in the number of uninsured after 2020.

Hospitals were counting on coverage increases under the ACA to reduce uncompensated-care burdens, but marketplace plan enrollees “may have plans with deductibles so high that their insurance is illusory,” the brief stated.

That concern was supported by new research that found more than one-fourth of U.S. adults with health insurance were underinsured in 2016, including 44 percent who got their coverage from the federal marketplace and almost 25 percent in employer plans. The share may be even higher in the private individual-insurance market because no subsidies are available there.

The financial stress caused by patients’ inability to afford the out-of-pocket costs of high-deductible health plans has started to appear in hospitals’ bottom lines—and not just those of hospitals in the 19 states that did not expand Medicaid eligibility.

For instance, Minnesota Hospital Association member hospitals reported that one subset of uncompensated care spiked by 20 percent, to $425 million, in 2016. Thirty-nine of the association’s member hospitals are operating at a loss; most of those are in rural areas.

“Eliminating federal reimbursement for cost-sharing reductions threatens to make these problems worse and to spread them to even more hospitals,” according to the brief.

ACA Cuts

The threat that CSR payment cuts could reduce coverage or hamper patients’ ability to afford out-of-pocket costs comes as the full force of the ACA’s spending cuts has begun to go into effect. The ACA will cut Medicare and Medicaid disproportionate share hospital (DSH) payments for uncompensated care by $36.1 billion by the end of the decade. The Centers for Medicare & Medicaid Services (CMS) has proposed $43 billion in further cuts to DSH payments from FY18 through FY25—those cuts began this month.

The ACA also reduced Medicare payments to hospitals by reducing their annual inflation increases, which the CMS chief actuary estimated will cut another $233 billion from hospitals over 10 years.

“But without federal reimbursement of cost-sharing reductions, hospitals will have to shoulder the Act’s funding cuts and an uncompensated-care burden similar to what they carried before the Act,” the hospital groups stated in the filing. “That is a one-two punch from which hospitals and their communities cannot easily recover.”

Waivers Withdrawn, Rejected

In a related development, Iowa on Monday withdrew an ACA 1332 waiver application that was intended to help stabilize the state's insurance market. The withdrawal was blamed in a joint statement from Gov. Kim Reynolds, a Republican, and CMS Administrator Seema Verma on too-rigid ACA rules.

The lead sponsor of federal legislation to appropriate the CSR payments, Sen. Lamar Alexander (R-Tenn.), said the withdrawal underscored the need for his legislation. That bill also would allow greater state flexibility in creating rules for their individual-insurance markets.

“Iowa’s decision is further evidence that the Affordable Care Act is too restrictive to allow states to help people who need to buy insurance,” Alexander said in a statement. “The so-called guardrails have become roadblocks. The Alexander-Murray bipartisan legislation … would allow the Secretary of Health and Human Services to approve Iowa’s waiver as originally submitted.”

The fate of the legislation is uncertain amid a partisan fight over how much state insurance regulatory flexibility it should allow.

The Trump administration also rejected a 1332 waiver from Massachusetts Monday because officials from the commonwealth filed it too late. The ACA requires states to give federal officials at least 180 days to review such waivers, which also are required to undergo a public comment period. Massachusetts filed its waiver Sept. 8 and wanted it to be approved before Nov. 1, when open enrollment begins.

Alexander said his bill would allow states to get waivers approved in as little as 45 days.


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

Publication Date: Monday, October 23, 2017