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The Keckley Report

Health Reform: What’s Next?

By May 8, 2017March 1st, 2023One Comment

Last Thursday, by a vote of 217-213, the House of Representatives passed the American Health Care Act (AHCA) which its proponents claim repeals the Patient Protection and Affordable Care Act (ACA). Not exactly.

In reality, the ACA includes much more than the AHCA’s provisions related to insurance coverage in the individual market, Medicaid funding, pre-existing condition coverage, cost sharing subsidies and oversight of insurers by states –the primary foci of the AHCA (See Fact File below). The ACA includes training of better-prepared healthcare workforce, physician self-referral limitations, hospital quality reporting, implementation of value-based purchasing programs, a national quality strategy, comparative effectiveness research, community health center expansion and much more not mentioned by pundits and journalists covering the AHCA’s narrow win in the House.

The Affordable Care Act is still the law of the land. At least four Republican Senators have expressed reservation about the AHCA’s potential impact on insurance premiums for the elderly and sickest and the impact of Medicaid cuts on the states, and three Senators said the AHCA does not go far enough in cutting federal spending and control over healthcare. So, the Senate has formed a 13-person working group, led by Tennessee’s senior Senator Lamar Alexander, to construct its own version. Then, if it’s bill passes the Upper Chamber, the Senate and House bills would proceed through a joint conference process to reconcile their differences before being voted on by each chamber and then, if passed in both, become law if signed by the President. In other words, there’s still much work ahead for those who have pledged to repeal the ACA.

And while the political drama surrounding the AHCA played out last week, both Houses passed FY17 funding authorization to keep the federal government operating thru September, averting a government shutdown at midnight Friday. In the omnibus spending package, healthcare figured prominently: the U.S. Department of Health Human Services (HHS) got $2.8 billion increasing its annual budget to $73 billion and the National Institutes of Health (NIH) received a $2 billion bumping its annual budget to $34.1 billion. But the FY18 budget which starts October 1, suggests major cuts will be on the table: the administration has proposed a 25% cut to the NIH’s FY18 budget and the AHCA’s reduction of federal funds for Medicaid ($880 billion over 10 years). So, the development of the FY18 budget over the next few weeks in tandem with the Senate’s foray into its health reform legislation will feature healthcare’s future prominently.  

It seems to me the Upper Chamber has a unique opportunity to reframe our national discussion about health reform from a narrow focus on insurance coverage to health system transformation. It’s a big idea! As Senator Alexander’s working group goes about the task of crafting its repeal and replace plan, acknowledging the numerous hanging chads in the Affordable Care Act, it might start by clarifying three concepts muddled by industry noise and partisan bickering of late:

Affordability:  Affordability is about more than insurance premiums. For the average household making $53,000 annually, the ability to pay for healthcare is out of reach for 7 in 10. Most can’t afford out of pocket payments, co-pays, deductibles, over-the counter therapies, dental, vision and mental health. Most skimp on preventive health and delay exams and tests. Many can’t pay for the meds they need or the preventive care they’d like. If an insurance plan covering a pre-existing condition is too expensive, those effected will not have coverage. It’s that simple. The spotlight about affordability has been on insurance premiums, but for most households, premiums are only part of the challenge.

Access: Access is about more than carrying an insurance card. Access is about a continuous relationship with a provider who’s skillful in coordinating care for individuals and families. It’s about emergency and outpatient services close to home and work, digital health that connects providers and patients and specialized facilities that treat the sickest and injured. Having an insurance plan that covers little, has a low premium and shifts costs to individuals and families is not improved access.

Health system: Our health system is about neither health or a system. Let’s face it: we have built the world’s most technologically advanced, specialized array of health services and programs because it’s good business. There’s more money to be made for lenders and investors in hip replacements than reducing demand for total joint procedures thru lifestyle modification. There’s more to be made in bariatrics than eliminating social determinants that predict obesity. We book revenue in our practices and hospitals from procedures that are unnecessary and we shy from end of life care discussions though much of the 27% of Medicare’s spend in the final months is wasted. Funding for preventive health is the first to be cut, and primary care providers are paid substantially less than specialists. And none of these activities is coordinated so medical records travel with individuals and care across settings is seamless. Ours is not a health system: we operate a collection of co-dependent, loosely connected providers, payers and suppliers who participate in an industry where demand is increasing and profits achievable.

The debate we’re having about the Affordable Care Act and the American Health Care Act is necessary and timely. But if it defaults to a discussion about insurance premiums and Medicaid funding and fails to address the more fundamental question—what’s the future of the U.S. health system? How can it deliver more value to its citizens more efficiently and effectively? How should it be regulated and what should be the responsibility of individuals in playing an active role in self-care? How might the costs of our R&D investments in diagnostics and therapeutics be shared by the global market that benefit? Should health insurance cover only catastrophic needs or everything, and what role should employers play if at all? How should primary and preventive health be delivered and funded to address income and educational disparities, social determinants, ethnic distinctions, physical and mental health, nutrition and food insecurity, medication management and health-related financial stress? And what role should the aggregate investment in our healthcare ecosystem which employs 17 million and is 18% of our GDP play in the context of our economic growth and fiscal budgets?

Senator Alexander’s working group has the chance to start this dialogue: healthcare is more important than politics and partisanship. I have known Senator Alexander for many years. He’s a dedicated public servant in the traditions of Senators Howard Baker (R-TN) and Sam Erwin (D-NC), who led the Watergate investigation as statesmen committed to the greater good of our Republic. As an Ohio State grad student assigned to study the impact of the televised hearings on the public’s view of our political system’s perceived trustworthiness and effectiveness, I witnessed firsthand their collegiality and mutual respect. It heartened my sense that our political system could come together to do important work, contrary to the popular view that big ideas come to Washington to die. I hold that hope as the working group begins its work.

Statesmen in both parties, industry leaders and thoughtful citizens should be a part of this journey to define the future for our healthcare system. That’s what’s next in health reform!


Fact File: Key Provisions in the AHCA:

Medicaid expansion and state responsibility: Repeal of Medicaid expansion, replaced by block grants/capitated payments to states based on 2016 baseline FMAP funding (starts 2020). States that expanded Medicaid under the ACA would be required to re-determine expansion enrollees’ eligibility every six months with a temporary 5% FMAP increase to states as an incentive. $10 billion over 5 years would be provided to states that did not expand Medicaid. Elimination of the Medicaid Disproportional Share Hospital (DSH) funding cuts for non-expansion states in 2018 and elimination of the cuts for expansion states in 2020.  Provides $123 billion (over 10 years) for state-run high risk pools as replacement of ACA and insurance market stabilization unfolds.

Individual mandates and coverage: Repeal of the individual mandate replaced by a continuous coverage requirement allowing insurers to charge a 30% late-enrollment surcharge to any applicant who went longer than 63 days without continuous health insurance coverage during a 12-month look back period. Elimination of the ACA’s premium tax credits and cost sharing subsidies by 2020 replaced by new age-based tax credits beginning in 2020. 

Employer responsibility: Repeal of the penalties associated with the employer responsibility provisions and delay of the Cadillac tax until 2025. Elimination of the ACA’s small business tax credit beginning in 2020. 

Preventive health: A one-year freeze on mandatory funding to nonprofit essential community providers primarily engaged in family planning and reproductive health services that provide abortions in cases that do not meet the Hyde Amendment exception for federal payment and received over $350 million in federal and state Medicaid dollars in fiscal year 2014. Increased funding for the Community Health Center Fund, which awards grants to Federal Qualified Health Centers (FQHCs). Repeal of the Prevention and Public Health Fund annual appropriations for prevention, wellness and public health initiatives starting fiscal year 2019. 

State-led insurance market stabilization: Creation of the state-controlled Patient and State Stability Funds to lower patient costs and stabilize state markets by any combination of providing financial assistance to high-risk individuals who do not have access to health insurance through an employer, incentives to help stabilize health insurance premiums, increase access to preventive health services (dental, vision, mental health and substance use disorder) or provide payments (directly or indirectly) to healthcare providers for provision of certain healthcare services, direct assistance with out-of-pocket costs (copayments, coinsurance, premiums and deductibles). 

Insurance regulation by states: Repeal of the ACA actuarial value standards used to set plan tier (Bronze, Silver, Gold and Platinum) allowing more flexibility in benefit plan design.  Modification of the permissible age variation in health insurance premiums from 3 to 1 to of 5 to 1 with states permitted to set their own ratios. States would have wide latitude in defining “essential health benefits,” pre-existing conditions, and lifetime coverage caps. The provision allowing individuals to remain on their parents’ health plans until age 26 and allows insurers to charge those with pre-existing conditions more for coverage.

Key Results for the AHCA per the Congressional Budget Office’ initial assessment: The AHCA will reduce federal deficits by $150 over 10 years primarily by cutting Medicaid payments to states and reducing subsidies for low income individuals purchasing coverage. It repeals taxes on insurers, medical devices and the wealthy. Per the CBO, 14 million would lose coverage next year in addition to the 29 million not currently covered, and 24 million more would lose coverage by 2026. Insurance premiums for younger and healthier enrollees would go down and rates for sicker and older (50+) would increase by 20% or more.

One Comment

  • Tom Quinn says:

    I agree with your points. As usual, you are factual and insightful. But the discussion also has to include what is affordable by the federal government (and the states). How does government health care spending compete for resources with other priorities — interest on debt, security and military costs, social mandates)? Tax revenue has to be part of the discussion. As a political society, we ignore these discussions (and necessary decision-making) at our peril.