- Draft GOP Plan Would Cap Health Insurance Tax Exclusion
- Report Warns of Revenue Cuts to Medicare Advantage
- Patients with Chronic Conditions Want More Guidance: Survey
- ACOs Reduce Post-Acute Care Spending, Study Finds
A draft Republican plan to repeal and replace the Patient Protection and Affordable Care Act (ACA) would cap the income tax exclusion for employer-provided health insurance, according to published reports.
The GOP-controlled House voted dozens of times during the Obama administration to repeal all or part of the ACA. With Republicans controlling both the House and Senate and with Donald Trump in the White House, that goal is now within reach. However, the GOP does not have a replacement plan yet, and many Republican lawmakers are wary of enacting legislation that will result in 18 million people losing health insurance within the first year, with that number climbing to 32 million within a decade, according to the Congressional Budget Office (CBO).
Exempting the total value of health insurance provided by employers from income taxes is the federal government’s largest “tax expenditure.” If all such benefits were taxed as income, federal revenues would increase by $2.7 trillion over 10 years, according to the Treasury Department. Many economists argue that the exclusion distorts the health care market, increasing the use of high value plans, which can encourage greater use of health care services.
While full taxation of insurance benefits would likely be politically impossible, the draft GOP plan would cap the exclusion at the 90th percentile of current premiums, according to Politico. In practice, this would replace the ACA’s “Cadillac tax,” a levy on high-value health insurance plans.
Bloomberg BNA, in its report on the draft, cautioned that a Republican aide said the proposal being reported on “might not be the most recent version.”
The plan would also replace the ACA’s subsidies for insurance purchases in the state-level exchanges with age-based tax credits that would increase from $2,000 for people under age 30 to $4,000 for people over age 60, according to Politico, which added that, “A related document notes that [Health and Human Services] Secretary Tom Price wants the subsidies to be slightly less generous for most age groups.”
Other provisions of the proposal include:
- Providing $100 billion in “state innovation grants” to assist with the coverage of expensive enrollees.
- Allowing insurers to charge older beneficiaries up to five times as much as younger ones. (The ACA limits the ratio to 3:1.)
- Assessing a 30 percent penalty on the premiums of people who allow their coverage to lapse, then reenroll.
The plan also would eliminate federal funding for Planned Parenthood, which could face opposition by some Republicans in the Senate, where the GOP’s narrow majority means that every vote will count.
CBO reportedly is calculating budget estimates for the proposal. Those results could lead to revisions in the plan before its introduction.
The legislation is structured so that it can be passed using the budget reconciliation process, which does not allow for filibusters and, thus, requires only a simple majority of votes to get through the Senate. Since this process can only be used for tax and spending measures, the GOP plan would not fully repeal the ACA. It would, however, eliminate major portions of it, including the law’s individual mandate, employer mandate, subsidies for the purchase of insurance through the exchanges, Cadillac tax, 2.3 percent medical device tax, and federal funding for the expansion of Medicaid eligibility.
Congress was in recess for the week of Presidents’ Day. Republicans are expected to officially propose their health care plan soon after returning to Washington.
At least one prominent Republican has doubts about the GOP following through on its “repeal and replace” promise. Former House Speaker John Boehner of Ohio flatly said at a meeting of the Healthcare Information and Management Systems Society that “that’s not what’s going to happen. They’re basically going to fix the flaws and put a more conservative box around it.”
“Most of the Affordable Care Act, the framework, is going to stay there,” Boehner said, adding, “In the 25 years that I served in the United States Congress, Republicans never, ever, one time agreed on what a health care proposal should look like. Not once.”
A proposal from the Centers for Medicare & Medicaid Services (CMS) could mean that Medicare Advantage beneficiaries will, on average, “face higher premiums and costs or reduced benefits,” according to a report produced for a health insurers’ association.
Medicare Advantage (MA) offers managed care plans through private companies, which receive a fixed amount of money from the federal government per beneficiary each month. Around 18 million people – about one-third of all Medicare beneficiaries – are in Medicare Advantage.
A report produced by Oliver Wyman for America’s Health Insurance Plans, however, concluded that, if the proposal is implemented as written, Medicare Advantage plans will actually see a reduction in net revenue of as much as 2 percent. The difference, according to the report, results primarily from the reinstatement of the health insurance tax, a measure that was included in the Patient Protection and Affordable Care Act and was implemented in 2014, but was suspended in 2017. This tax, Oliver Wyman found, will reduce Medicare Advantage plan revenue by 2.1 percent in 2018.
“Although not a reduction in MA payment rates, this tax will decrease net revenue for MA plans by increasing their costs,” the report stated.
The report also asserted that revenues for Medicare Advantage plans would be slightly reduced if CMS implements changes it is considering for calculating payments for employer group waiver plans (EGWPs). These are a type of Medicare Advantage plan used by state and local governments, unions and others to provide health care coverage to 3.2 million retirees at a lower cost than traditional retiree coverage.
CMS calculates EGWP payments based on a combination of individual market Medicare Advantage bids and EGWP bids. For payments in 2018, however, it may use only individual market bids. If it does so, payments to Medicare Advantage plans would be reduced by 0.2 percent, the report estimated. CMS is wary of relying on EGWP bids because, the agency has stated, “EGWPs do not compete against other plans through the bidding process, and therefore have little incentive to submit lower MA bids to CMS under the current bidding rules.”
In 2017, Medicare Advantage payments increased by 0.85 percent.
CMS is accepting comments on the proposal until March 3. The final rate announcement is expected by April 3.
Medicare Advantage has strong support in Congress – 65 senators wrote to the CMS acting administrator on Jan. 26 to ask him “to strengthen this vital and proven part of the program that has led the way on value-based care” – which sometimes results in CMS revising its payment rates upward between the initial and final proposals.
Nearly all people with chronic conditions need and want more help managing their ailments, a survey conducted by West Corporation found.
Patients with multiple chronic conditions account for the bulk of health care spending, so chronic care management is typically one of the first places to look when trying to identify potential cost reductions.
More than 9 out of 10 patients with chronic illnesses said they need help managing their illnesses, according to the results of the survey of 502 adults with chronic conditions, while 70 percent said they want more resources or clarity regarding disease management, and 59 percent said they do not think they are doing everything they could to manage their condition. Only 12 percent said their provider is doing a good job providing information about their specific conditions and needs.
“Patients are getting support from providers now, but that occurs mostly while they are sitting face to face in a physician’s office,” a report on the survey results stated. “While office visits are important, chronic patients really want more provider support at home. At home and in daily life is where patients need reminders to follow care plans. And this is exactly where small problems can go undetected and grow into large problems that send patients to the emergency room. For these reasons, patients desire additional touchpoints with their providers and solution-oriented options between visits.”
In contrast, a separate survey of 417 health care providers by West found that two-thirds of providers said they think patients are able to effectively manage their conditions.
“Patients are less confident in their abilities than providers are, so patients may be struggling without their providers even realizing it,” the report stated.
West provides technology-enabled communications in the health care field and other markets.
Accountable care organizations (ACOs) reduced post-acute care spending by nearly one-tenth in a study published by the Journal of the American Medical Association.
Medicare ACOs, which were created by the 2010 Patient Protection and Affordable Care Act, are intended to encourage health care providers to coordinate care for patients in a way that improves quality, cuts costs and moves providers and patients away from the traditional fee-for-service payment model. As long as quality standards are met, ACOs and Medicare share the cost savings that result from coordinating care.
Medicare has two ACO models – Pioneer ACOs, which “tend to be more established [and] assume a greater financial risk,” and Medicare Shared Savings Program (MSSP) ACOs, which compose the vast majority of all ACOs and involve no financial penalties if goals are not met.
In a study of a random sample of 20 percent of Medicare beneficiaries, researchers found that participation in MSSP ACOs was associated with a 9 percent reduction in spending on post-acute care – services provided after a hospital stay – or an average of $1,172 for the control group vs. an average of $1,066 for the ACO group. The lower spending, according to the researchers, resulted from reductions in discharges to skilled nursing facilities (SNFs) rather than home; shorter stays at SNFs; and reductions in acute inpatient care.
“Participation in the MSSP has been associated with significant reductions in postacute spending without ostensible deterioration in quality of care,” the researchers stated. “Spending reductions were more consistent with clinicians working within hospitals and SNFs to influence care for ACO patients than with hospital-wide initiatives by ACOs or use of preferred SNFs.”