New Senate bill retains Medicaid cuts, provides more money to stabilize individual market

Associated Press
By Mara Lee
July 13, 2017

A revised version of the Better Care Reconciliation Act retains significant cuts to Medicaid, despite the protest—and defection—of Republican centrists.

Lawmakers have also decided to keep taxes on the wealthy and insurer CEO compensation, which are projected to bring in $232 billion over a decade.

Rick Pollack, President of the American Hospitals Association released a statement saying that in the latest update released, "the unacceptable flaws of BCRA remain unchanged"

The bill adds more than $130 billion in spending, primarily for states to use for high-risk pools or reinsurance programs. There is $182 billion in the bill for that kind of aid, designed to lower premiums for those buying policies on the exchanges. Of the pool of money, in 2019, Alaska is guaranteed to receive at least $80 million, and by 2022, $192 million. Alaska has the highest insurance costs in the country. Alaska could lose the extra federal funding if their premiums fall significantly.

States would have to start matching the funds in 2022, at 7%, and that match would climb by 7 percentage points each year until it reached 35% in 2026.

The money is not limited to high-risk pool subsidies or reinsurance. The bill also allows states to spend the money for cost-sharing, which helps the lowest income people purchase insurance. That federal funding is only paid through 2020. That pool, which has been one of the most constant requests by the insurance industry, is $7 billion this year.

"Reinsurance works," said Caroline Pearson, senior vice president at consultancy Avalere Health. But she said analysts at Avalere don't believe this pool of money could counteract the destabilizing effects of other legislative proposals including reducing subsidy eligibility, ending cost-sharing and ending the individual mandate.

An additional $70 billion would help shore up the insurance marketplace in states where insurers are selling plans that wouln't follow Affordable Care Act regulations, such as no discrimination in pricing by health status, having to sell to everyone, and having to cover essential health benefits. Those states would likely suffer from adverse selection if noncompliant plans are far cheaper than those on the exchange. Another $2 billion would help state governments cover the cost of regulating insurance.

Tax credits could not be used to pay for skimpier plans, and if someone signs up for one, it does not count as creditable coverage. But with no individual mandate, there's no immediate penalty. If someone where to become sick, however, and wanted to buy a more robust plan, he or she would have to wait six months after the next open enrollment to buy a more generous policy.

The tax laws around HSAs would change, allowing people to use pre-tax dollars to buy skimpy plans.

The Blue Cross Blue Shield Association, which represents companies with the biggest market share in individual insurance, and America's Health Insurance Plans oppose non-compliant plans.

It's not certain that idea can be included in the bill because of rules about what kinds of changes can be made under budget reconciliation, the GOP's strategy to pass a repeal of the ACA with fewer votes.

Pearson said insurers could sell substantially cheaper individual plans if states have written their regulations to undermine the ACA. Higher deductibles alone might not change the individual market.

The bill also opens the door to more customers buying less comprehensive insurance on the exchanges. Until January, catastrophic plans were only allowed for those under 30 with a financial hardship, and credits could not be used to buy them. Under this bill, subsidies can be applied to catastrophic plans, and they're open to all ages. Catastrophic plans have a deductible of $7,150, though preventative care and three primary care visits are covered. Once the deductible is met, the customer pays nothing.

These plans are only a little less generous than Bronze level plans, which were already open to everyone. In Texas, for instance, out of pocket spending in Blue Cross Blue Shield Bronze plans is either $6,000 or $6,250, depending on how the deductible is set; the deductibles are either $5,000 or $6,000.

In terms of the Medicaid per-capita cap, the only significant change is that the revision would lift the federal spending cap if there's a public health emergency. Sen. Mark Rubio (R-Fla.) sought that assurance because of Florida's experience with Zika.

The per-capita cap system is designed to reduce the federal budget for Medicaid. The law would set different caps for different populations through 2024, with some federal spending matching the rate of medical inflation, and some pegged at medical inflation plus one percentage point. Those 20 and younger with chronic medical conditions "that either requires intensive healthcare interventions or meets the criteria for medical complexity" are excluded from the per capita cap. The bill says that in 2020, states must identify all these different categories of people covered on Medicaid or CHIP.

In 2025, the cap would begin to be pegged to standard inflation, which is substantially lower than medical inflation. While some of the historic spending patterns are in line with, or not much below, the first phase of caps, no group of Medicaid patients' costs grow as slowly as standard inflation.

The Washington Post reported Thursday that Sen. Majority Leader Mitch McConnell has urged senators who oppose the Medicaid cuts to vote yes anyway, because he said the stricter cap would never be implemented.

"I guess I tend to agree with him that [it] is likely to be delayed or altered by Congress in the future. Is that a winning strategy for votes? I don't know," Avalere's Pearson said.

The bill phases out Medicaid expansion on the same timeline as the last version. The updated bill also still raises costs for older customers in the exchange, and lowers the income limit for subsidy eligibility from about $48,000 to about $42,000 per person.

America's Essential Hospitals President and CEO Dr. Bruce Siegel said the revised bill " leaves untouched the most destructive provisions of the original bill: those that would gut the Medicaid program and strip affordable coverage from millions of low-income working Americans...."

Several sections of the bill directly affect hospital operations, though hospitals have been quite clear that shifting costs to states for Medicaid will impact them heavily.

Hospitals could no longer make presumptive Medicaid eligibility determinations after 2020.

The bill also makes disproportionate share hospital payments in non-expansion states more generous. These states would be spared from DSH reductions and states that are below average per capita in DSH payments would rise to the national average.

Siegel dismissed this, saying it "pales in comparison to the hundreds of billions of dollars this bill would drain from Medicaid by ending expansion and imposing spending caps."