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3 reasons the Bipartisan Budget Act of 2018 might signal bad news to come for providers

March 14, 2018

    With the benefit of hindsight, the Bipartisan Budget Act (BBA) of 2018 not only looks like the most significant health care legislation since 2015's MACRA—it also appears to validate the power of major advocacy organizations to push through incremental legislative change in an otherwise gridlocked political environment.

    In general, physicians, hospitals, and insurers got what they wanted from the BBA:

    • Physicians got significant breathing room in MIPS—the pay-for-performance program that MACRA tied to physician reimbursement.
    • Hospitals got more stable funding for CHIP, delays in Medicaid DSH cuts, support for small rural providers, and changes to the ACO programs, among other items.
    • Insurers got more flexibility in Medicare Advantage plans, and permanent authorization for Special Needs Plans (SNPs), MA plans which cater to dual-eligibles, beneficiaries with disabilities, and institutionalized beneficiaries.

    But health system leaders need to consider the BBA within its proper context. Most broadly, the Affordable Care Act's (ACA) coverage expansion is slowly eroding. In 2018, nationwide ACA marketplace enrollments dipped by 3.7%, although that modest number hides significant variation across the states. Also, CMS's recent guidance opening the door to Medicaid work requirements will likely result in coverage losses. A recent study from the Urban Institute indicates that the move to expand the availability of short-term limited duration insurance plans will do the same. Overall, hospitals can expect the number of uninsured patients they serve to increase.

    Focusing more narrowly, we can discern three subtexts of the budget deal itself that threaten the stability of federal health spending, and that should therefore heighten concern among the provider community.

    First, Congress doesn't mind tweaking health care, as long as it doesn't cost any extra money (or even saves a little). Although there was plenty of good financial news in the bill for providers, the Congressional Budget Office (CBO) confirmed (here) that the health care provisions (comprising Division E of the bill) are more than fully paid for over the 10-year budget window. According to CBO, funding CHIP actually saves money over the long haul, while the changes to MACRA cost nothing. The Medicaid DSH cut delays, on the other hand, are offset by increasing the cuts in later years. To pay for the provisions that did cost money—community health center funding, for example—the bill cut the Medicare and Medicaid Improvement Funds and the Prevention and Public Health Fund.

    Second, Congress will consider targeting health care funding to pay for other spending priorities. Congress's reticence to spend more money on health care does not extend to other areas of the budget. Although the health care provisions are revenue positive over a 10-year budget window, the other spending in the bill—both defense and non-defense—increases spending by more than $500 billion across two years. The sum would be even higher were it not for the extension of the current 2% Medicare sequester until 2027. Yes, that's right. "Reversing the sequester"—a frequent explanation of the overall effects of the budget deal—did not apply to Medicare. Key advocacy groups have indicated that it wasn't even on the table.

    Third, growing deficits will endanger federal health care spending. With the budget deficit projected to rise to $1.2 trillion in 2019—a 79% increase from 2017 levels—Congress will be under increased pressure to search for savings in entitlement programs. These deficit levels are far from ordinary, particularly at the top of the business cycle. Should the economy turn south, the math will immediately look much worse, particularly for health care, since Medicaid spending is strongly counter-cyclical. (That is, Medicaid spending increases as the economy sheds jobs and more individuals qualify for coverage.)

    Faced with a critical decision between raising revenue with tax increases or cutting expenditures by reining in health care spending, the precedent of the BBA indicates that legislators may train their sites on health care spending. Current legislative and regulatory activity suggest that Medicaid—framed more and more as a welfare program—will be the early target. But the president's budget shows interest in changes to Medicare—for instance, the removal of site-of-service payment differentials—that the industry has long resisted.

    In spite of the failure to 'repeal and replace' the ACA, federal activity in recent months—including ending payments for cost sharing reductions (CSRs) and effectively repealing the individual mandate—has provoked concern among providers about the sustainability of their current business model. The Bipartisan Budget Act of 2018 doesn't change that picture.


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