Healthcare Reform

Outlook for Healthcare Policy: Uncertain

December 19, 2016 3:28 pm

Amid steep uncertainty, healthcare advisers and policy watchers are relying on previous Republican initiatives that were designed to replace the ACA to anticipate the components of such 
a measure.

Following the election of Donald Trump as president and of a Republican majority in Congress, both of which have expressed opposition to many of the federal healthcare policy initiatives of the past eight years, payer and provider leaders are preparing for an uncertain future. The broad outlook amid the uncertainty: Although major insurance coverage initiatives may change, key industry initiatives and trends are more likely to continue.

The president-elect and Republicans in the incoming Congress have pledged to repeal and replace the Affordable Care Act (ACA), around which healthcare providers and payers have organized many of their financial and strategic initiatives in recent years.

The timing of the ACA’s repeal and the design of its replacement law remain highly uncertain. So healthcare advisers, advocates, and policy observers have focused on previous Republican proposals to identify what they view as the most likely scenarios.

The Expected Process

Votes to repeal the ACA are expected to occur within the first 100 days of the new administration and to be modeled on the repeal that Congress cleared and that President Obama vetoed in early 2016. That measure would have delayed the effective repeal date for a couple years to provide time for a replacement measure that would use more conservative economic principles to provide coverage.

Democrats and many provider advocates have strongly opposed repeal without working out the details of a replacement, but Democrats are not expected to be able to stop the repeal measure, which previously passed on simple majority votes in both chambers of Congress. After repeal, a protracted effort is expected to replace many initiatives of the ACA.

Republicans are expected to aim for enactment within two years to minimize the political implications. But such a timeline will mean both resolving numerous complex policy issues and garnering enough Democratic support to qualify it as a bipartisan alternative to the ACA—a major Republican goal, according to former congressional staff. Such a measure also would need enough Democratic votes in the Senate to reach the 60-vote threshold required to overcome any filibuster.

“There are moderate Democrats that would agree that there are other ways to get increases in coverage; it’s just that the political question hasn’t been answered yet,” says Jenifer Healy, a senior managing director in the international law firm Dentons and a former congressional aide.

Such efforts to find bipartisan agreement could start with areas of the ACA that the GOP has expressed interest in retaining in any replacement. Such areas include allowing young adults to stay on their parents’ insurance policies until age 26 and banning the use of pre-existing conditions to deny coverage.

Crafting such a bipartisan ACA replacement measure will face numerous challenges, but one key issue for providers, payers, and patient advocates is whether the new law would provide public or private insurance coverage for as many people as have been able to receive coverage under the ACA. (About 20 million previously uninsured people gained coverage through the ACA, according to the Obama administration.)

“We strongly believe that any repeal legislation must be accompanied by provisions that protect the coverage for those currently receiving such protection,” the leaders of the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) wrote to Trump and congressional leaders. a

Among the reasons hospitals are carefully tracking the outcome of the ACA repeal-and-replace debate is that those organizations stand to lose $165.8 billion from repeal—without replacement—from 2018 to 2026, according to estimates prepared for the AHA and FAH. Those losses would chiefly stem from the end of insurance coverage for many of their patients.

Republican replacement plans, such as “A Better Way” (, introduced by Speaker of the House Paul Ryan (R-Wis.), have not been scored by the Congressional Budget Office (CBO) on their expected cost or extent of insurance coverage provided. However, conservative healthcare policy advisers expect the replacement measure to cover about the same number of people—assuming those people want the coverage. Conservatives have argued the ACA forced many to buy coverage who did not want it.

“I do not believe the president-elect and Congress are going to do something that fundamentally takes back insurance coverage for these 20 million individuals and doesn’t provide them, or approximately that number, with some type of coverage—not necessarily exactly the same number, and certainly not exactly the same coverage, but with some kind of coverage,” says Gail Wilensky, PhD, senior fellow at Project Hope, Washington, D.C., and administrator of Medicare and Medicaid for President George H. W. Bush.

However, key financial details for hospitals are that previous Republican replacement plans have proposed eliminating the $102.9 billion in disproportionate share hospital payment cuts scheduled under the ACA from 2018 to 2026 while retaining the estimated $289.5 billion in ACA Medicare hospital cuts required from 2018 to 2026.

In the Interim

Before a replacement is enacted, the ACA health insurance marketplaces will need to continue to function and provide coverage for a yet-to-be-finalized number of enrollees who sign up for 2017 coverage. But those marketplaces were struggling before the election, with 25 percent average premium increases for 2017, a shortage of young adults enrolling, and the departure of large national carriers following steep losses. So interim steps likely would be needed to stabilize the marketplaces while a replacement law is fashioned.

“I’m very concerned that this kind of economic instability could actually be made worse by what’s potentially on the table for repealing parts of the ACA,” says Kavita Patel, MD, FACP, a nonresident fellow at the left-leaning Brookings Institution.

Among the options to keep the marketplaces functioning in the interim is an extension of 2017 insurer rate filing deadlines and nixing of many of the special enrollment periods (SEPs) that insurers cited as contributing to steep losses, say policymakers.

Previous Republican proposals suggest the replacement measure could generally use a marketplace structure but should eliminate many of the coverage requirements in favor of allowing insurers to design plans that offer a wide range of benefits. The proposals also suggest that returning full regulation of the health insurance plans to the states would serve to increase competition and lower the cost of plans sold there.

“The large health plans have been very clear about what they think about the exchanges,” says Richard Gundling, vice president of Healthcare Financial Practices for HFMA. “There have been several problems including enrollment and exceptions to a stable enrollment period, and in the first year, a lot of the problems were driven by individuals’ ability to come onto a health plan when they needed it and then go off. So if enrollment issues could be fixed, and the ability to risk adjust were available, then the exchanges could improve.”

A potential model for replacement marketplaces could be the Medicare Advantage market, which has become composed principally of HMOs, with very few PPOs.

“The GOP has always been more supportive of Medicare Advantage, and there may be a case for making Medicare Advantage the model for the replacement measure,” Gundling says.

Among the many challenges a replacement plan will need to address is how to replace the individual mandate, which Republicans strongly oppose and which has driven an insufficient number of young, healthy adults to enroll.

America’s Health Insurance Plans has indicated it would support a repeal of the mandate if Congress provided additional incentives to support insurance companies and bring healthier individuals into the marketplace.

Some healthcare finance analysts have suggested a successful GOP replacement would need elements that include some type of requirement for continuous coverage to replace the individual mandate, and stricter limits on SEPs.

Combining those elements with other reforms—such as greater plan flexibility, tax credits instead of premium subsidies, wider age-rating bands, and additional risk pools—could produce improvements.

“You just could end up with a solution there that actually enlarges the individual market from its current size of 17 million because you bring in the healthy segments of the population,” says Matthew Borsch, a healthcare equity research analyst for Goldman Sachs.

Medicaid Outlook

For hospitals, the greatest financial impact from repealing and replacing the ACA would come from the effect on Medicaid, according to industry analysts.

“We saw the benefits from Medicaid expansion were much more material than any benefits from the exchanges,” says Emily Wadhwani, FACHE, a director at Fitch Ratings who tracks hospital finances. “The exchanges were less of a benefit than a lot of folks expected. It depends on the market you operate in, but in general, exchange enrollees tended to be healthier, less robust users of the healthcare system, so the impact on the margin from that patient population was less meaningful than from the Medicaid population, which tends to consist of older, heavier users, in general.”

Republican proposals have repeatedly called for moving federal Medicaid funding into a block grant structure that would provide greater latitude to states to change the program. Previous block granting proposals have raised concerns among some health policy watchers because many derived savings from slowing the growth of spending to less than the rate of medical inflation.

“That likely leads in the short run to even lower hospital payments as well as tougher eligibility for the program if the block grant is not based on a per-capita amount,” says Paul Ginsburg, PhD, director of the Center for Health Policy at Brookings.

Ginsburg says he worries that a block grant approach would pay states the same amount of money they would have received under the ACA, but only in the first year of a replacement, leaving it to states to cover growing shortfalls after that.

More optimistically, Ginsburg says block grants could give states an incentive to become more cost effective by allowing them to keep the savings, unlike than the current system, which generally forwards any savings to the federal government.

Another possible advantage of the shift is that it could allow states to use their Medicaid funding to provide private insurance coverage for those enrollees and cover more people for less money, say some policy advisers. Such reasoning stems from a summer report by the Actuary for the Centers for Medicare & Medicaid Services (CMS), which found that the per-person cost of the Medicaid expansion was $6,366 for 2015, or about 49 percent more than previously estimated. b Conversely, per-person coverage for those enrolled in ACA marketplaces costs 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,’” says Paul Howard, PhD, director of health policy at the right-leaning Manhattan Institute.

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 says.

Leadership Impacts

Healthcare industry observers also are weighing Trump’s early health policy leadership picks for clues about the administration’s policy priorities. The highest-profile position in December, at press time for this article, was Trump’s nomination of Rep. Tom Price, MD, (R-Ga.) to lead the U.S. Department of Health & Human Services.

Some have worried that beyond repealing some of the insurance coverage components of the ACA, Price could slow the movement toward alternative payment models (APMs). HHS Secretary Sylvia Mathews Burwell committed in a January 2015 announcement to shift 50 percent of fee-for-service Medicare payments to quality or value through APMs, such as accountable care organizations (ACOs) or bundled payment arrangements, by the end of 2018.

But Price led 179 lawmakers who wrote to CMS in September to urge a halt to mandatory payment models, such as the recently launched Comprehensive Care for Joint Replacement model and the proposed Cardiac Bundled Payment model.

“Rep. Price is not a fan of the mandatory bundles, so I don’t think we are going to see any more of those going forward,” says Gundling. “But in general, both Republicans and Democrats have been favorable to bundles.”

Price has joined other Republicans in opposing the Center for Medicare & Medicaid Innovation (CMMI) after it launched a controversial Part B pharmaceutical demonstration project. But some observers say Republicans ultimately may retain CMMI, which is spearheading new payment models, as a way to rapidly test and expand their proposed models through Medicare.

Mark Weller, a partner at Dentons and a former legislative director for Sen. Richard Lugar (R-Ind.), says the Trump administration and GOP-led Congress were expected to continue to support other Medicare payment reforms, such as the use of ACOs. Similarly, Republicans were expected to continue the push to implement the Medicare Access and CHIP Reauthorization Act because it was enacted with bipartisan majorities.

Also named in December was Trump’s acting administrator for CMS, Seema Verma, president and CEO of SVC Inc., a health policy consulting company. Verma designed the Healthy Indiana Plan (HIP) of former Indiana Gov. Mitch Daniels and the HIP 2.0 waiver proposal of former Gov. Mike Pence. Verma also developed recent Medicaid waivers for Iowa, Ohio, and Kentucky, and helped Michigan implement an 1115 waiver.

“We’re going to see a lot of latitude given to the states through the waiver process to reform both coverage and payment,” Gundling says. “In terms of coverage, I suspect that Indiana and Kentucky are the new models for benefit package reform. Part of the reason that Seema Verma was nominated is likely that there is an interest in seeing those innovative state-level Medicaid reform packages done across the country.”

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


a. Letter to President-Elect Trump and Vice President-Elect Pence from Richard J. Pollack, President and CEO of the American Hospital Association, and Chalres N. Kahn, President and CEO of the Federation of American Hospitals, Dec. 6, 2016.

b. CMS, 2015 Actuarial Report on the Financial Outlook for Medicaid , Report to Congress, 2015. 


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