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4 things you need to know about the House GOP plan to replace the ACA

March 7, 2017

    On Monday, House Republicans unveiled the "American Health Care Act" (AHCA), which would repeal, replace, or adjust some elements of the Affordable Care Act—but leave many elements of the ACA intact.

    Our early assessment of the bill suggests some key themes for providers as they navigate changes to the health care industry, including potential increases in uncompensated care and an accelerated shift toward consumerism. However, the proposal has been public for less than 24 hours and faces a long road before any elements would become law, key caveats for any discussion of the legislation.

    We will continue to provide more analysis as we learn more and as the bill evolves. Join us next Friday for a webconference on the legislation and/or attend one of our remaining Health Care Advisory Board National Meetings, where we'll be discussing the plan and the no-regrets priorities for health systems, regardless of what happens in Washington, D.C.

    Register for the March 17 webconference

    Here are four things providers need to know about the House GOP plan:

    1. The bill still faces a tough road ahead, and details may change

    The introduction of the bill is just the first step in a complex process. Before passing the bill through the budget reconciliation process, legislators would likely make significant modifications to meet political and legislative demands. In particular, some Republicans have already voiced concerns about components of the proposal and congressional Democrats are almost certain to oppose the legislation en masse.

    Now that the legislation has been introduced, it will be considered by several House committees before the full House would vote on it. The first hearings on the bill are scheduled for Wednesday. In addition, the bill sponsors are still awaiting a score from CBO, which will provide formal analysis of the budgetary and insurance coverage impacts of the AHCA. CBO's analysis is very likely to push the GOP to adjust elements of the bill to fit within traditional congressional budget rules.

    Importantly, the bill would face additional hurdles in the Senate. In particular, the Senate Parliamentarian would need to rule on which provisions meet the complex requirements to pass via reconciliation in the Senate. In addition, the same day the AHCA was introduced, four moderate Senate Republicans sent a letter to Majority Leader Mitch McConnell expressing concerns about the Medicaid provisions in the bill. To pass the measure, Republicans would need party unity—particularly in the Senate, where they only have a two-vote margin.

    2. The bill would likely negatively impact provider finances through a combination of cuts to Medicaid and reduced coverage in the individual market

    A number of provisions in the AHCA likely would lead to lower revenue for providers. The bill would eventually sunset the ACA's Medicaid expansion and would shift the Medicaid funding structure to a per capita cap. As a result, future federal funding for Medicaid would not keep pace with projected Medicaid spending. In response, many states might need to reduce or modify some combination of Medicaid eligibility, benefits, and payment rates, each of which would negatively impact providers.

    In addition, the bill would decrease the amount of federal assistance for individuals to purchase insurance, which would likely lead to decreases in the number of enrollees in the individual insurance market. It would also gut the individual mandate, which could lead to fewer enrollees—although it's not clear yet whether the premium surcharge for failure to maintain continuous would offset the elimination of the mandate.

    Further, the net impact of the Medicaid and individual market changes would likely be a rise in the number of uninsured patients and thus costs for uncompensated care. The AHCA would restore Medicaid DSH payments to pre-ACA levels and would provide some additional funding for safety net providers. That would help mitigate the financial challenge, but it likely wouldn't be sufficient to fully offset other losses.

    Finally, it's worth noting that the AHCA would not roll back the Medicare Inpatient Prospective Payment System (IPPS) payment cuts that were included in the ACA to pay for coverage expansion.

    3. Consumers' role in health care likely would continue to grow

    The AHCA proposes policies that would hasten the trend toward consumerism in health care. The bill would nearly double the contribution limits for HSAs. The legislation also would loosen strict actuarial value requirements for individual market plans, likely leading to increased purchase of plans with lower actuarial values and leaving patients to bear higher out-of-pocket costs.

    All of this points toward providers needing to continue efforts to develop and implement a consumer-oriented strategy.

    4. What's not included in the AHCA is just as enlightening for provider strategy

    The AHCA is silent on a number of provisions of the ACA. For example, it would leave some insurance market reforms in place, such as guaranteed issue, the ban on lifetime limits, the cap on out-of-pocket costs, and the requirement that plans allow children to stay on parents' plans through age 26.

    There is no mention in the AHCA of any payment reform-related policies. This means the AHCA would not impact CMS Innovation Center funding or programs, the Medicare Shared Savings Program, or MACRA's Quality Payment Program.

    Also, the AHCA would delay making any changes to the tax treatment of employer-sponsored insurance. The ACA included the controversial Cadillac tax, which would impose a surcharge on high-cost insurance plans offered by employers. That tax has already been delayed until 2020, and the AHCA would further delay it until 2025. In addition, the current version of AHCA would not adopt a limit on the tax exclusion for employer-sponsored insurance, a policy that had been included in an earlier, leaked draft of the bill.

    Finally, the AHCA would not alter the benefit structure of the Medicare program. Some pre-election policy proposals from Republicans included the concept of shifting Medicare to a premium support model. That idea, however, is highly controversial, and is not included in this proposal.

    Join our conversation on the House GOP's repeal and replace plan

    Join us for a webconference on Friday, March 17, where we'll discuss key aspects of the House GOP's proposal to repeal and replace the Affordable Care Act.

    We'll also will provide our early analysis on the impact of the proposal on providers and thoughts on how providers should be preparing for changes to the ACA.


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