HealthCare Roundtable e-News – Jan. 6, 2017

ACA Repeal Would Increase Uncompensated Care by $1.1 Trillion: Report

A partial repeal of the Patient Protection and Affordable Care Act (ACA) similar to what Republicans appear to be planning would increase the amount of uncompensated care sought by uninsured patients by more than $1 trillion over 10 years, according to a report from the Robert Wood Johnson Foundation and the Urban Institute.

A year ago, the GOP-controlled Congress used the budget reconciliation process to pass a bill (H.R. 3762) that, among other things, would have repealed major portions of the ACA, including the law’s individual mandate, employer mandate, “Cadillac tax” on high-value health insurance plans, 2.3 percent medical device tax, creation of the Medicare Independent Payment Advisory Board, and expansion of Medicaid eligibility.

President Obama vetoed it, but Republican lawmakers had demonstrated that they could get a repeal bill to the president’s desk, since budget reconciliation legislation does not allow for filibusters and, thus, requires only a simple majority of votes to get through the Senate. Republican leaders have indicated that repeating this process will be one of their priorities once Trump takes office on Jan. 20.

The report from the Robert Wood Johnson Foundation and the Urban Institute concluded that, if a similar bill is passed into law, uncompensated care – health care for which a provider receives no payment – would total $88 billion in 2019 and $1.1 trillion from 2019-2028. This would result from an increase of 29.8 million in the number of uninsured people in the country. The previous repeal bill did not significantly increase federal funding for uncompensated care. If that is the case again, the report estimates that state spending on such care would increase sixfold, “if they were to finance it all.”

“Thus, the additional financial burden of uncompensated care is likely to fall hardest on health care providers,” the report states. “Partial ACA repeal could lead to a fourfold increase in the amount of uncompensated care providers finance themselves compared to current levels.”

The $1.1 trillion breaks down into $296 billion in additional uncompensated care by hospitals, $218 billion by prescription drugs, $147 billion by physician practices, and $406 billion by other services.

The report stresses that, since providers might not be willing to absorb such cost increases, the estimates are projections of “the amount of care that the newly uninsured would seek, not the value of the uncompensated care they would actually receive.”

“[Providers] provision of free and reduced-price care would surely increase to some extent, but the amount of unmet need for health care services would also increase considerably without a substantial increase in federal funding to support it,” the report states.

Lawmakers could address the uncompensated care issue and others if and when they pass a repeal bill, but GOP legislators do not have a program ready to put in the ACA’s place. This could mean that Republicans will delay or phase out repeal, giving them time to develop a replacement plan. Critics, though, say that this could create uncertainty that could destabilize the insurance market.

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Repealing ACA May Be More Difficult than Expected for Republicans

The new Congress took office on Jan. 3, and the Senate immediately began debating a resolution that would undo major portions of the Patient Protection and Affordable Care Act (ACA).

Republican lawmakers and President-elect Donald Trump have vowed that one of their top priorities now that the GOP controls both chambers of Congress and, as of Jan. 20, the White House will be to repeal the ACA. A straightforward repeal bill would be blocked by a Democratic filibuster in the Senate, so Republicans plan instead to use budget reconciliation legislation – which cannot be filibustered but can only be used for matters directly related to revenues or spending – to bring an end to major portions of the law.

In addition, Vice President-elect Mike Pence said that Trump is “working on a series of executive orders that the president-elect will put into effect to ensure that there is an orderly transition, during the period after we repeal Obamacare, to a market-based health care economy.”

Republicans do not have an ACA replacement ready, but The New York Times reported that Pence said the GOP plan would include a focus on health savings accounts, allowing insurance sales across state lines, and the use of association health plans. Tax credits for insurance purchases and high-risk insurance pools could also be part of the approach.

With no consensus within the party about what to do after the ACA goes away, though, Republicans appear likely to delay the effective date of repeal. Rep. Chris Collins, R-N.Y., a member of Trump’s transition team, said on Jan. 5 that no major changes to the law would be made until at least 2019.

“We’re not going to pull the rug out from under anyone,” Collins said. “There’s no reason to worry the next two years.”

Trump, meanwhile, warned GOP lawmakers on Twitter to “be careful” not to act in such a way that they are viewed as being responsible for what they regard as a failing and – among many of their voters, at least – unpopular law.

“Massive [premium] increases of ObamaCare will take place this year and Dems are to blame for the mess,” Trump tweeted. “It will fall of its own weight – be careful.”

Sen. Rand Paul, R-Ky., echoed that theme in cautioning that putting repeal well ahead of replacement could backfire for Republicans.

“If Congress fails to vote on a replacement at the same time as repeal, the repealers risk assuming the blame for the continued unraveling of Obamacare,” Paul said. “For mark my words, Obamacare will continue to unravel and wreak havoc for years to come.”

American Enterprise Institute (AEI), a conservative think tank, also came out against the “repeal and delay” strategy,” saying it “carries too much risk of unnecessary disruption to the existing insurance arrangements upon which many people are now relying to finance their health services, and because it is unlikely to produce a coherent reform of health care in the United States.”

“The most likely end result of ‘repeal and delay’ would be less secure insurance for many Americans, procrastination by political leaders who will delay taking any proactive steps as long as possible, and ultimately no discernible movement toward a real marketplace for either insurance or medical services,” AEI stated.

The institute also suggested that the approach that seems to be favored by GOP lawmakers of enacting a replacement plan with several smaller bills rather than a single piece of legislation “is a signal that Republicans in Congress may not have a clear vision of what they want to do.”

President Obama issued a warning to legislators in his party, advising them in a Capitol Hill meeting not to “rescue” Republicans by working with them to develop an ACA replacement.

Senate Minority Leader Charles Schumer, D-N.Y., after meeting with Pence, indicated that he would try to follow Obama’s advice.

“If you are repealing, show us what you’ll replace it with,” Schumer said. “Then we’ll look at what you have and see what you can do.”

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High-Price Drugs Driving Increases in Medicare Part D Catastrophic Coverage Spending

Federal expenditures for catastrophic coverage in Medicare Part D have more than tripled since 2010, largely because of the use of a few high-price drugs, the Centers for Medicare & Medicaid Services (CMS) Office of the Inspector General found.

Medicare Part D provides prescription drug coverage to seniors and disabled people, including “catastrophic coverage,” in which the federal government pays nearly all drug costs once a beneficiary’s out-of-pocket spending reaches a certain amount – $4,700 in 2015 and $4,950 in 2017.

In 2010, CMS paid out $10.8 billion for catastrophic coverage, but that number rose to $33.2 billion in 2015, an average increase of more than 25 percent per year, the inspector general stated in a report. Ten drugs accounted for about 30 percent of all catastrophic coverage costs in 2015, with two of the top three (hepatitis C drugs Harvoni and Sovaldi) having average monthly costs of more than $30,000. Blood cancer drug Celgene, which has an average monthly cost of more than $11,000, was No. 2 in overall spending in 2015. Of the 10 drugs, four came out after 2010, while the prices of the six that were on the market that year increased sharply between then and 2015.

The catastrophic coverage expenditures accounted for about 6 percent of all Medicare spending – not just Part D – in 2015.

“The dramatic growth in Federal payments for catastrophic coverage and the underlying issue of high-price drugs must be analyzed and addressed to secure the future of the Part D program,” the report stated. “Continued growth at this pace may pose a risk to the sustainability of the program. In addition, the issue of high-price drugs is not exclusive to catastrophic coverage; it affects Federal payments for the entire Part D benefit and can lead to higher premiums and drug costs for all.”

The inspector general suggested that “CMS will likely need additional tools to address these issues,” possibly including providing plan sponsors with more incentives to lower costs, increasing the transparency of drug prices, promoting “value-based options,” and allowing the federal government to negotiate drug prices.

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