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AHCA DEBACLE: Healthcare Repeal and Replace Train Derails

AHCA DEBACLE: Healthcare Repeal And Replace Train Derails

For old-time comedy TV aficionados, after the House leadership’s repeal and replace debacle this week, it was hard not to think of two I Love Lucy episodes. In the first, Lucy and Ethel were selling Aunt Martha’s Old Fashioned Salad Dressing. Despite all the fanfare over prospects for huge sales and success, the girls came to the laughable conclusion that they were selling a product for less than it actually cost to produce and they were going to “make it up in volume.” In the second episode, on a bet with the boys, Lucy and Ethel go to work in a chocolate factory – the conveyor belt goes crazy and creates quite the sticky mess. An analogy for the current situation? Let’s see.

House leaders have been negotiating with various factions in their caucus to create concessions to garner enough votes for passage of the repeal-and-replace bill, the American Health Care Act (AHCA). It employed tightrope theatrics by Speaker Paul Ryan and other leaders due to the need to attract conservative members to the bill, but not lose moderates. They failed miserably: the vote had to be called off Thursday for lack of the 218 votes needed to pass. In an effort to call recalcitrant lawmakers’ bluff, President Trump demanded an up-or-down vote Friday. The gambit failed and the bill was withdrawn by House leaders Friday. Even if Trump’s idea had succeeded, the bill would have died a miserable death in the Senate as a number of GOP senators are known to oppose anything that looks like AHCA. They were busy crafting their own successor to Obamacare as a substitute.

The Freedom Caucus members employed a “move the bar” negotiating style and failed to commit. Given some of the negative changes, a number of moderate Republicans came out against the bill. The Congressional Budget Office (CBO) reported the same 24 million Americans that just gained coverage under the ACA would ultimately lose coverage with implementation of the AHCA. By 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law (based on today’s circumstances, at least). What’s more, the prized deficit savings in the original bill went down by $186 billion (from $337 billion originally estimated) over a decade. In the short-term, premiums would continue to increase considerably, by a projected 15-20 percent annually.

From a sheer policy standpoint, the concessions made to the Freedom Caucus would further undermine the healthcare system and the few improvements put in the bill were less than meaningful.

  • The amendment made things even worse by repealing the mandatory Medicaid expansion on March 1, 2017 and sunsetting the optional ability for a State to cover adults above 133% of the Federal Poverty Level (FPL) at the end of 2017. Under the base bill, the enhanced federal funding for expansion populations essentially would attrite away given the churn in Medicaid by the mid 2020s.
  • The entitlement nature of Medicaid would go away in favor of a per capita cap allocation program in the main bill. The amendment now would also give states an option to take a straight block grant with additional eligibility and benefit flexibility. As potentially risky for states as the per capita cap is, the block grant likely would have less chance of keeping up with needs. We instead recommend that the bill adopt the same flexibility on eligibility and benefits (with some reasonable floors) as is proposed with the block grant, but maintain a reasonable per capita block grant allocation and growth formula.
  • The amendment looks to allow up to $85 billion in additional monies to be used by states to add to the fixed dollar tax credits based on age to help older Americans obtain access to coverage who would otherwise not be able to obtain it. In essence, the $4,000 per year tax credit allotted to those 60 years of age and older is not generous enough. The $85 billion truly is a pittance and does not solve the problem. At the same time, lower-income, younger individuals, who also face major barriers to coverage, would not be covered by the funding, either.
  • Over the past few days, the Trump administration and Speaker Ryan committed to ending the essential benefits mandates and giving states cognizance over this. The Freedom Caucus also asked for the removal of the pre-existing condition limitations bar. The latter was rejected. Democrats cry that maternity, mammogram and behavioral health benefits will be ripped from Americans.This, along with the Medicaid changes and concern over subsidy levels, led to moderate GOP members’ defections (even with some small funding to be allocated to states to possibly continue certain services). We believe some relief from the high actuarial value (ACV) driven in part by essential benefits is needed. But there is also a tipping point that could create access issues for the more adverse if benefit levels are diminished too much.

The bottom line is that the House’s approach to repeal and replace has been nothing short of abysmal. It has been governed by the need to fulfill political promises swiftly and without regard to sound policy analysis. To justify their approach, the GOP argues that the current Obamacare system is crashing and the “static” CBO analyses that show millions losing coverage are false. We admit the analysis is static and we don’t know who will lose coverage if the Affordable Care Act (ACA) stays in place. But the reality is, the ACA successor would still mean millions continue to have no coverage in the future, notwithstanding what happens under Obamacare in the future.

In summary, the GOP would replace one bad bill with another. The failure this week could open up opportunities. No one should throw their hands up now and give up. Let’s move to a go-slow approach where forthright Republicans and Democrats craft a true policy bill that takes into consideration all the subtle moving parts:

  • Rich actuarial value and essential benefits need to be reined in, but not at the expense of benefits that emphasize prevention and management and discriminating against adverse populations that need fairly robust benefits to control ultimate costs.
  • Craft cost-effective product strategies that serve both the relatively young and healthy as well as older and more health complicated.
  • Adequately subsidize premiums to ensure access to care while and ensure the subsidy is not so robust as to dissuade responsible use of the healthcare system.
  • Recognize that Medicaid is a cost-effective way to cover the lowest income Americans. Target reforms to create a sustainable benefit model as well and ensure participants contribute in a number of ways to their healthcare.
  • Recognize the only way to bend the cost curve and to improve quality is to ensure all Americans receive upfront prevention services and management.

President Trump seems to say that he wants to move on from repeal and replace. Next week we will discuss where we think repeal and replace may go and the prospect for other healthcare reforms.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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