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The House just passed ACA repeal. Now what?

May 4, 2017

    In voting 217-213 to pass the American Health Care Act (AHCA), the House just accomplished something that seemed highly improbable just six weeks ago.

    Back on March 24, lacking sufficient support, House GOP leaders canceled their planned vote on the bill, which would repeal and replace major components of the Affordable Care Act (ACA) and enact major Medicaid reforms.

    But GOP leaders secured the votes for passage after agreeing to two amendments to the AHCA in recent days: one that would allow states to apply for waivers of ACA-mandated requirements including waivers to let insurers impose health status underwriting on individuals who don't maintain continuous coverage, and another adding $8 billion in funds to fund high-risk pools in states that seek such waivers.

    Yet there's a long road ahead before the bill might head to President Trump's desk. Here are three key things to know about what could happen with the AHCA and how the bill's potential passage should and shouldn't affect provider strategy.

    1. The revised bill passed today likely still would negatively impact provider finances through a combination of cuts to Medicaid and reduced coverage in the individual market.

    The House passed the AHCA before the Congressional Budget Office (CBO) weighed in with its analysis (or "score") of the bill's potential budgetary and insurance coverage impacts.

    CBO's score of a previous version of the AHCA estimated that by 2026 the bill would increase the number of uninsured Americans by 24 million, reduce federal funding for Medicaid by 25 percent, and reduce the number of individuals with employer-sponsored insurance by 7 million.

    The Senate can't move forward on the AHCA until the CBO releases an updated score of the bill, which could significantly impact the prospects for eventual passage, particularly given that moderate Republicans have expressed concerns about the impact of Medicaid cuts on their states.

    However, we don't expect a new score to signal a change to the potential broader financial implications of the AHCA for providers as the underlying framework remains largely the same.

    The AHCA would still likely cause a drop in provider revenue, driven by an increase in uncompensated care and states making changes to Medicaid eligibility, benefits, and payment rates. The AHCA also would still likely hasten the trend toward consumerism in health care by nearly doubling the contribution limits for HSAs and lowering the actuarial value of individual market plans, leaving patients to bear higher out-of-pocket costs.

    2. The bill faces an uncertain future in the Senate and—even if it does eventually pass—is highly likely to be significantly modified to comply with Senate rules and garner sufficient support.

    There's a lot of uncertainty about the AHCA's prospects and path forward in the Senate. Senate Republicans have been waiting to see whether the House would pass the AHCA before setting their plans. Now that the House has passed the AHCA, we expect to get more visibility into the Senate's path forward in coming days.

    One reason for that is the composition of the chamber: Republicans have a margin of just three votes (since Vice President Pence can break ties), and several moderate members have expressed concerns about the bill. For example, four GOP senators in early March pledged to vote against an earlier draft of the AHCA because it would sunset the ACA's Medicaid expansion.

    Another reason is the rules of the chamber: The Senate Parliamentarian would need to decide which provisions of the AHCA meet the complex requirements to pass via the reconciliation process (which requires only a simple majority for budget-related legislation).

    So passage in the Senate seems far from certain, but it isn't impossible. Senate Republicans may look to pass something, even if it's fairly different than the House's version of the AHCA, in order to enter into negotiations with the House. In particular, the Senate may modify the legislation once the Parliamentarian has ruled and CBO has issued a score on the bill. That said, whatever emerges is still likely to be a net negative for provider revenue; the biggest question is around the magnitude of impact to providers.

    3. For providers, passage of the AHCA underscores the need to double down on efforts to improve efficiency, elevate performance, and expand patient access.

    Providers must keep a close eye on the AHCA debate as it moves to the Senate and the potential implications of the bill. But as we outlined following the election, we continue to recommend that providers focus on a few essential no-regrets strategies that will serve them well as policy continues to develop in coming months:

    • Be prepared to live under further cuts to public reimbursement. Providers should double down on cost-cutting strategies including reducing care variation and rationalizing footprint. Importantly, providers will need to bolster efforts to serve Medicaid enrollees, uninsured, and other safety-net populations.

    • Develop an internal Medicare risk strategy. As MACRA implementation ramps up, providers need to have a deliberate strategy around Medicare risk.

    • Renew and revisit your physician alignment strategy. Given continued interest for alignment options among physicians, health systems will need to know with whom they want to work, in what capacity, and with which performance goals in mind.

    • Accelerate your investment in consumer-oriented care delivery. Although the AHCA might accelerate the shift to a consumer-driven market, the industry already is experiencing a seismic shift toward these new market dynamics. Consumers increasingly demand easier and more-affordable access to care, and greater flexibility in payment options.

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