With the stunning victory of Donald Trump in Tuesday’s presidential election, everyone is wondering how the President-elect and the Republican Party will implement the campaign promise to “repeal and replace” the Affordable Care Act (ACA) on “Day One” of a Trump Administration. After President-elect Trump’s first meeting with President Barack Obama at the White House on Thursday, while Trump continued to list action on the ACA among his first priorities as President, he already had retreated from a position of blanket repeal to a more nuanced position of amending some parts of the law, and keeping other parts.
While Republicans maintained the majority of seats in the House of Representatives and re-gained the majority in the Senate in last week’s elections, there are still enough Democrats in the Senate for a filibuster of any blanket “repeal and replace” legislation. House Speaker Paul Ryan has pointed to a budget reconciliation bill to repeal funding for parts of the 2010 law as the legislative vehicle for “repealing the ACA”; the Senate and House enacted such legislation at the end of 2015, which was vetoed by President Obama in January 2016.
President-elect’s Trump Health Care Policy
Here is what President-Elect Trump’s just-launched transition website says about health care policy:
It is clear to any objective observer that the Affordable Care Act (ACA), which has resulted in rapidly rising premiums and deductibles, narrow networks, and health insurance, has not been a success. A Trump Administration will work with Congress to repeal the ACA and replace it with a solution that includes Health Savings Accounts (HSAs), and returns the historic role in regulating health insurance to the States. The Administration’s goal will be to create a patient-centered healthcare system that promotes choice, quality and affordability with health insurance and healthcare, and take any needed action to alleviate the burdens imposed on American families and businesses by the law.
To maximize choice and create a dynamic market for health insurance, the Administration will work with Congress to enable people to purchase insurance across state lines. The Administration also will work with both Congress and the States to re-establish high-risk pools – a proven approach to ensuring access to health insurance coverage for individuals who have significant medical expenses and who have not maintained continuous coverage.
The Administration recognizes that the problems with the U.S. health care system did not begin with – and will not end with the repeal of – the ACA. With the assistance of Congress and working with the States, as appropriate, the Administration will act to:
- Protect individual conscience in healthcare
- Protect innocent human life from conception to natural death, including the most defenseless and those Americans with disabilities
- Advance research and development in healthcare
- Reform the Food and Drug Administration, to put greater focus on the need of patients for new and innovative medical products
- Modernize Medicare, so that it will be ready for the challenges with the coming retirement of the Baby Boom generation – and beyond
- Maximize flexibility for States in administering Medicaid, to enable States to experiment with innovative methods to deliver healthcare to our low-income citizens
Millions of Americans Rely on the Affordable Care Act for Health Insurance Coverage
Here are the facts that President-elect Trump and the 115th Congress will have to face as they consider action on repealing or amending the ACA:
Since 2013, 20 million Americans have been gained health insurance by enrolling in health plans through the federal health insurance marketplace and marketplaces in 11 states and the District of Columbia created by the ACA, by becoming eligible for expanded Medicaid, or by being able to keep their health insurance coverage because of ACA reforms. We are in the middle of the fourth open enrollment period, which began on November 1 and ends on January 31, 2017. Nearly 14 million Americans are expected to renew their current ACA health plans or enroll for health insurance for the first time through one of the federal or state marketplaces. 85% of those enrolled in ACA-created marketplace health plans receive federal tax credits to help subsidize their monthly premiums. The ACA also provides cost-sharing subsidies to help low-income Americans pay their health insurance co-payments and deductibles. Nearly 60% of those enrolled in ACA marketplace health plans use the cost-sharing subsidies.
So on “Day One” of a Trump Administration, January 20, 17, President Trump is not going to act to disrupt the health insurance of 20 million Americans, with less than two weeks to go in the fourth open enrollment period. There are literally billions of dollars at stake, as well as dozens of health insurance plans, thousands of hospitals, and hundreds of thousands of physicians and other health care providers who are relying on those enrollments to continue their business operations through coverage year 2017. As a businessperson, Trump simply won’t put such a significant portion of the U.S. economy into chaos and jeopardy.
“Repealing and Replacing” the ACA
However, as soon as the 115th Congress begins its session on January 3, 2017, there are likely to be bills immediately introduced and debated in both the House and the Senate to try to implement the campaign promise to “repeal and replace the ACA”. Senate Majority Leader Mitch McConnell is much more conflicted about the ACA, given that his home state of Kentucky has successfully implemented the law (including Medicaid expansion), including the reluctant support of a Tea Party-suported Republican governor, Matt Blevin, who has clashed with McConnell (and unsuccessfully ran against McConnell for his U.S. Senate seat in 2014). Therefore, it is likely that Congressional action will be shaped more by Speaker Ryan. Given Ryan’s public positions on health care policy and his budget reconciliation strategy, the first actions of the 115th Congress will likely include the following:
- de-funding the federal health insurance marketplace that serves residents of 39 states, beginning coverage year 2018
- de-funding federal tax credit subsidies for health insurance premiums for low-income individuals and families beginning coverage year 2018, including those now available through the state health insurance marketplaces
- de-funding federal subsidies for cost-sharing (co-payments and deductibles) for low-income individuals and families, including those now available through the state health insurance marketplaces; this already has been challenged by the House Republicans in litigation pending in the District of Columbia Court of Appeals, so a Trump Department of Justice would immediately reverse the current legal defense of those subsidies; it is not clear whether how quickly such de-funding would be implemented, but this is one part of the ACA that might get undone during the 2017 coverage year
- repeal several sources of revenues intended to pay for the ACA, including the so-called “Cadillac” tax on high cost employer-provided health insurance plans (that had been delayed until 2020) and a 2.3% tax on medical devices (that had been temporarily suspended for 2016-2017).
The Congressional Budget Office estimated in March 2016 that the federal government would spend $43 billion for premium tax credits and $9 billion for cost-sharing subsidies in Fiscal Year 2017. If these federal subsidies are repealed or overturned by the courts, these $52 billion in health care costs would be shifted to the millions of individual low-income Americans who now rely on them to afford their ACA marketplace health plans. Without these federal subsidies, hundreds of thousands, if not millions of Americans, would not no longer be able to afford health insurance, and may lose their coverage. The numbers of uninsured would increase, resulting in higher avoidable emergency and hospitalization costs when the uninsured are forced to delay seeking health care. There would be additional pressures on safety net providers including community health centers and public hospitals to provide care to these newly uninsured.
However, in the 11 states and District of Columbia that now operate state health insurance marketplaces, there is a likelihood that many of those state legislatures would act to continue their marketplaces, using state rather than federal dollars for some premium tax credits and cost-sharing subsidies. This would be similar to RomneyCare that was implemented in Massachusetts in 2006, and state health care reform that was almost enacted in California in 2008. For example, if federal subsidies for cost-sharing are undone by a court decision or by Congress, states might replace some or all of those subsidies with state-funded subsidies. States could enact an employer mandate (requiring employers to offer health insurance to their employees) and an individual mandate (requiring individuals to purchase health insurance, even if healthy, or be subject to fines) that would apply to their states. These state marketplaces and reforms would face not be simple or easy, especially to replace the level of federal ACA subsidies with state budget dollars.
Meanwhile, all this change and uncertainty will inevitably result in more health plans leaving the health insurance marketplaces, resulting in less competition, and higher premiums and even more cost-sharing requirements from the remaining health insurance plans. This, in turn, will make health insurance less affordable regardless of whatever federal and state solutions “replace” the ACA, resulting in more Americans returning to becoming uninsured.
In addition, the current Department of Justice opposition to the mega-mergers of national health insurance plans (Aetna with Humana, and Anthem with Cigna) is likely to get reversed, and there could be even more mergers, which also would result in less competition, and higher premiums and cost-sharing requirements for all health insurance products. It is not clear how mega-merged health plans would or would not participate in state health insurance marketplaces during a Trump Administration.
Speaker Ryan, and now President-elect Trump, have noted several parts of the ACA that they favor preserving, including the prohibition against denial of health insurance because of pre-existing conditions, and allowing young adults to remain covered by their parents’ health insurance plans until age 26. While these provisions are now popular, it is uncertain how they will continue to be financially viable without the other parts of the ACA, including the employer mandate, the individual mandate, “guaranteed issue and community rating” (requiring health plans to sell health insurance to all individuals within a reasonable range of prices, so that sicker individuals or those with pre-existing conditions can’t be charged unaffordable prices), and other consumer protections such as no annual or lifetime limits on the amount of covered health care services, limits on administrative costs and profits on health insurance plans (medical loss ratio), a minimum list of “essential health benefits” that must be covered by all health insurance plans, no cost-sharing for a list of preventive services and screenings, and standardized grievance and appeal rights if coverage or specific health care services are denied. The ACA’s expansion of eligibility for Medicaid, as well as federal subsidies for premiums and cost-sharing to ensure that health insurance purchased through the ACA marketplaces is affordable for low-income individuals and families, are also important pieces to the ACA’s re-structuring of the health insurance markets to make them work for everyone.
If parts of the ACA are de-funded or repealed, Speaker Ryan and President-elect Trump do reference a return to high risk pools to cover those with pre-existing conditions or a history of high health care utilization and cost. Unfortunately, 35 states attempted to operate and subsidize such high risk pools before the ACA, and few succeeded in providing any affordable health insurance options for those that needed such coverage. Because the utilization and costs were so high, the extremely high premiums and cost-sharing charged in these high risk pools made them unaffordable, which meant that few purchased such coverage, which in turn, drove up the costs for those that did have the coverage (because even less premium and cost-sharing revenue was being collected from those insured in these insurance pools). These high risk pools cost billions of dollars and still left most individuals with pre-existing conditions uninsured.
Another element of both President-elect Trump and Speaker Ryan’s proposals would be to allow health insurance plans to be sold across state lines, or nationwide. While there is superficial attractiveness to having more health insurance plans compete with each other, the reality is that there is wide variation in the degree of regulation and health consumer protections among the states, which is the real reason why some health plans only operate in some states. If any health plan could be offered in any state, this would create a “race to the bottom” for health plans to find the states with the least restrictive regulations as their operational base, to avoid all the greater restrictions in every other state. This would essentially repeal all the strong consumer protections that have been enacted in more progressive states. For example, the state of California has strong regulation of both traditional health insurance plans and managed care plans, including requirements for a broad availability of providers, timeliness of care, and reporting on the quality of health care actually provided. California also has strong requirements for health plans to provide language assistance to consumers with limited English proficiency and who need health care interpreters and translations of health care documents. All these strong consumer protections now required for health plans operating in California could become meaningless if any health plan could re-organize in another state with less requirements, and then offer health plans in California without having to meet those California state requirements.
Both President-elect Trump and Speaker Ryan also have proposed providing greater federal support for health savings accounts (HSAs). Individuals and families that create such accounts can deduct their contributions to the accounts on their federal income tax returns and then use these accounts to pay for out-of-pocket co-payments and deductibles, and other health-related expenses that often are not covered by health insurance plans (such as over-the-counter medication and vision care). By definition, health insurance plans linked to HSAs have lower premiums but much higher deductibles and cost-sharing requirements. HSAs are beneficial to individuals and families with higher incomes (who can use the deductions), and are generally healthy (and therefore unlikely to reach the deductibles and cost-sharing limits, which can be paid from the HSA). In turn, health insurance plans favor these HSA-linked health plans because they attract more members because of the lower premiums, but also receive the higher deductible and cost-sharing payments from consumers who actually utilize the coverage. HSAs are not viable options for low-income individuals and families who often can’t benefit from the tax deduction, and are likely to have higher health care utilization so won’t end up “saving” much year to year in their HSAs because they have to pay for all their deductibles and cost-sharing.
Interestingly, Speaker Ryan’s plan also includes support for private health insurance marketplaces to replace the federal and state government marketplaces. Of course, the main difference is that there would be no federally-funded ACA subsidies in these private marketplaces to ensure that health insurance is affordable for low-income Americans. Ryan’s plan does mention “portable and refundable” tax credits to help pay for health insurance but there are few details how such tax credits would be implemented, and how they would be different than either the ACA subsidies (for low-income individuals and families) or HSAs (available to everyone).
Speaker Ryan’s plan also supports more “consumer-directed” health care, “defined contribution” options, and employer-controlled “health reimbursement accounts.” While all these options appear to be attractive because they sound consumer-friendly, they in fact shift financial responsibilities and risks from employers and health plans onto consumers. Again, these arrangements are more beneficial to higher income individuals and families and those that are healthy and less likely to utilize health care because they wouldn’t have significant health care costs and their higher incomes allow them to absorb any financial risks. However, these options are simply not financially viable for low-income Americans and those that do need to access health care services.
Medicaid provides public health insurance coverage to over 70 million low-income and disabled Americans. Medicaid is a partially funded by the federal government and partially funded by each state, based on complicated formulas. The federal government is projected to spend over $376 billion on Medicaid in Fiscal Year 2017, with hundreds of billions more spent by the states. 31 states and the District of Columbia have implemented the ACA’s expansion of Medicaid eligibility, which has extended insurance to over 14 million Americans.
Both Speaker Ryan and President-elect Trump have supported the conversion of the Medicaid program into block grants or per-capita allotment formulas to the states. Rather than retaining federal regulation of Medicaid on such issues as the types of health care services available, states would receive their expected annual federal funding for Medicaid in a single payment, and then would have broad discretion how to spend those federal dollars to administer the Medicaid program in that state, including restricting health care services and limiting eligibility (for example, continuing to lower the income threshold for eligibility so that only the lowest income individuals and families would be eligible). It is not clear whether states would have to continue to maintain their share of state dollar contributions to Medicaid in order to receive this federal funding. States also would be able to impose conditions and requirements for receiving Medicaid, including cost-sharing and work requirements. These types of fixed payments based on past enrollment also fail to adapt to inevitable economic downturns, when the number of Americans who are unemployed and/or uninsured go up, but a state only has a fixed sum of federal funding to respond to that increased need. It is likely that Democrats in the Senate would attempt to filibuster against the conversion of Medicaid into block grants or per-capita formulas.
If Medicaid is converted into block grants or per-capita allotments, the 31 states and District of Columbia that have expanded Medicaid under the ACA are likely to do their best to use the federal funding to continue their state Medicaid programs as they are currently operated. Congress may also try to repeal the ACA’s expansion of eligibility for Medicaid, which would be opposed not only by Senate Democrats, but all the governors (including Republican governors) and some Republican Senators from those 31 states. Unfortunately, the states that have refused to expand Medicaid are the states that are most likely to restrict health care services and/or eligibility, narrowing even further the number of low-income individuals and families that would be covered by Medicaid in their states.
Children’s Health Insurance Program (CHIP)
Another public health insurance program is the Children’s Health Insurance Program (CHIP), which needs to be re-authorized by the end of this Fiscal Year 2017. Because this is a program that Hillary Clinton is associated with creating, this may be a target for de-funding under a Trump presidency. On the other hand, Republicans like Senator Orrin Hatch, chair of the Senate Finance Committee, also are legislative champions of CHIP. Like Medicaid, CHIP is jointly funded by both the federal government and state governments, but the federal share of the funding is generally higher than for Medicaid (although the costs for children’s health care are generally lower than the cost of health care for the adults in Medicaid). Over 8 million children are covered by CHIP and the federal government is projected to spend $15 billion for CHIP in Fiscal Year 2017. If CHIP is not re-authorized, many of the children now covered would either have to seek coverage under Medicaid (which might be funded differently, as discussed above), or become uninsured. If Medicaid is converted to block grants or per-capita allotments, this surge in children who would need Medicaid would not be factored into the funding formulas, resulting in additional pressures for states to reduce benefits or restrict eligibility to Medicaid.
Medicare is the public health insurance for all Americans age 65 and over or disabled, regardless of income. 58 million Americans are covered by Medicare and the federal government is projected to spend over $609 billion for Medicare in Fiscal Year 2017.
In 2015, Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA), making dramatic changes in how physicians and other health care providers would be paid in the Medicare (fee-for-service) program. MACRA was a bi-partisan compromise that took many years to enact. MACRA continues the shift away from fee-for-service payments (payment for the volume of visits to physician offices/clinics, or visits to emergency departments, or days of hospitalization, regardless of quality or health outcomes). MACRA creates both bonuses and penalties for value-based payments, based on achieving health care quality benchmarks and reducing the total costs of health care. The final regulation implementing MACRA was just released on October 22, with implementation beginning January 1, 2017.
MACRA’s successful implementation depends on many parts of the ACA, especially the work of the Center for Medicare and Medicaid Innovation (CMMI) at the Centers for Medicare and Medicaid Services (CMS). The ACA authorized CMMI to develop demonstration programs for alternate payment models to fee-for-service payments, with $10 billion to spend through FY 2019. CMMI has developed accountable care organizations, comprehensive primary care programs, bundled payments, and other models to test quality improvement and payment reform models. MACRA uses physician participation in several of these demonstration programs for eligibility for higher bonuses. Speaker Ryan and other Republicans have targeted CMMI for de-funding. If CMMI is de-funded, there will be enormous pressure on Congress by influential physician associations such as the American Medical Association to enact some other way to develop demonstration programs for MACRA so that physicians can continue to be eligible for MACRA’s payment bonuses.
In addition, it is likely that a Trump Administration and the incoming Congress will provide more support for Medicare Advantage, or Medicare managed care plans. Over time, these Medicare health plans had driven up Medicare costs, while adding revenues and profits to those health plans. Currently, about 30% of Medicare beneficiaries are enrolled in Medicare Advantage health plans. The ACA squeezed cost savings from Medicare Advantage health plans by gradually limiting payments to equivalent costs of fee-for-service or traditional Medicare, and linking payments to a 5-star quality rating system, rewarding high-performing plans and reducing payments to lower quality plans. It is unclear how the Trump Administration would reverse or weaken these requirements in order to encourage more Medicare beneficiaries to enroll in Medicare Advantage health plans.
Access to Reproductive Health Services, Including Contraceptives
One of the other highly contentious issues in the ACA is whether employers can claim that their religious beliefs exempt them from offering the ACA’s required “essential health care benefits”, including comprehensive reproductive health services, including contraceptives. These requirements apply to all health plans, including those provided by employers to their employees. In balancing the interests of both employers and employees, the Obama Administration requires an employer with a religious objection to file a statement to claim a religious exemption, which then requires the health plans used by that employer to arrange for access to the objected services such as contraceptives without using the employer’s share of the premium contributions to the health plans. Religious-based employers have challenged the requirement of filing a statement as unconstitutionally burdensome on their religious beliefs. In May, the U.S. Supreme Court vacated and remanded all the appellate decisions both upholding and invalidating the religious accommodation, instructing the parties to reach agreement on a compromise that would not require employers to file the religious exemption statement.
The 115th Congress, and Vice-President-elect Mike Pence, who has targeted Planned Parenthood and sought to restrict access to reproductive health services throughout his years in Congress and as Indiana’s governor, are likely to push for quick legislation strengthening such religious exemptions in the ACA, and/or repealing the requirement of reproductive health services from the ACA’s list of essential health care benefits, and/or repealing the requirement of any federally-defined essential health care benefits.
Protections Against Discrimination for Women and Transgender Americans
Another part of the ACA (section 1557) expanded federal protections against discrimination on the basis of race, color, national origin, sex, disability, and age. This was the first time that discrimination based on sex in health insurance and health care has been prohibited. For example, prior to the ACA, there were blanket denials of health insurance to women of child-bearing age, or women who had prior pregnancies. Consistent with legal positions taken by the Departments of Justice and Education, the Equal Employment Opportunity Commission, and several federal courts, the Department of Health and Human Services has interpreted this section of the ACA to include protection against discrimination based on gender identity and sex stereotyping (which may include sexual orientation). Five states and several religious organizations already have challenged this expansion of discrimination protections to transgender Americans in federal court. While President-elect Trump’s policy positions on lesbian, gay, bisexual, and transgender (LGBT) issues is unclear, Vice-President-elect Mike Pence and other key advisers have a long history of supporting anti-LGBT policies. While it is likely that a Trump-Pence Administration would reverse these administrative interpretations, federal courts would still be able to follow and enforce the original interpretation of the ACA including such protections. On the other hand, this section of the ACA prohibiting discrimination could be the target of Congressional repeal.
Last week’s elections have turned the page and started the next chapter in our national journey to make the U.S. health care delivery system more affordable, accessible, and effective for all Americans. While analysts and pundits will continue to dissect every statement from President-elect Trump, Vice President-elect Pence, Speaker Ryan, and Majority Leader McConnell for more insight into how they will “repeal and replace” the ACA, it is certain that health care insurance policies and options for health plans and consumers, as well as payment for state governments, hospitals, physicians, and other health care providers, will dramatically change under a Trump Administration and the 115th Congress.
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