Will the AHCA affect Medicaid’s nonelderly adults with disabilities?

The changes to Medicaid under the American Health Care Act (AHCA), as approved by the House Energy and Commerce Committee, carries potential implications for the nearly seven million nonelderly adults with disabilities currently covered under Medicaid, according to a Kaiser Family Foundation (KFF) issue brief. KFF’s issue brief describes how the AHCA would change Medicaid and offers insight on its potential effect upon nonelderly adults with disabilities by examining the type of insurance nonelderly adults with disabilities have, how they qualify for Medicaid, what their characteristics are, what services they receive from Medicaid, and how much Medicaid spends on the disabled.

The AHCA would change Medicaid in three major ways: (1) it would change Medicaid’s financing structure to a per capita cap, resulting in an estimated $880 billion reduction in federal Medicaid spending from 2017 to 2026, according to the Congressional Budget Office (CBO cost estimate of AHCA) (see CBO: Republican plan saves billions as 24M lose coverage, Health Law Daily, March 14, 2017); (2) it would repeal the enhanced federal matching funds for Patient Protection and Affordable Care Act’s (ACA, section 2001) (P.L. 111-148) enrollees as of January 1, 2020, except for those enrolled by December 31, 2019, who do not have a break in eligibility of more than one month; and (3) it would end the enhanced federal matching funds for Community First Choice (CFC) (ACA, section 2401), which provides attendant care services for people with disabilities, as of January 1, 2020 (see ‘American Health Care Act’ earns first stamp of approval, Health Law Daily, March 9, 2017).

Here is a summary of the KFF findings:

  • Type of health insurance. Thirty-six percent of nonelderly adults with disabilities are working for pay compared to 77 percent of those without disabilities. Among those who are working, 64 percent have access to employer-sponsored health insurance, compared to 68 percent of nondisabled workers. Thirty-one percent of nonelderly adults with disabilities have Medicaid, compared to 10 percent of those without disabilities. Only 41 percent have private insurance, compared to 74 percent of those without disabilities.
  • How do they qualify for Medicaid? KFF found that some nonelderly adults with disabilities are eligible for Medicaid through the ACA’s Medicaid expansion and some through a disability-related pathway based on both their low income and functional limitations.
  • Nearly 85 percent of nonelderly adults with disabilities have incomes below 200 percent of the federal poverty level (FPL) ($24,120 per year for an individual in 2017). Fifty-seven percent are white, 23 percent black, 16 percent Hispanic, and 3 percent Asian. About one-third of those enrolled in Medicaid have three or more functional limitations, which is more than two and one-half times the rate for those disabled who are privately insured and more than double the rate of those who are uninsured.
  • What services do they receive from Medicaid? Through Medicaid, nonelderly adults with disabilities have access to regular preventive care as well as medical care for illnesses and chronic conditions. States must provide certain minimum services for adults, such as inpatient and outpatient hospital, physician, lab and x-ray, and nursing home services. States also can choose to provide a broad range of optional services, including prescription drugs, physical therapy, private duty nursing, personal care, rehabilitative services, and case management. Most home and community-based services (HCBS) are also provided at the option of the state.
  • ACA expansion options. Section 2001 of the ACA offered states the option to expand Medicaid to nearly all nonelderly adults with income up to 138 percent of the FPL. As of 2017, 32 states have adopted the expansion. Section 2401 of the ACA created the CFC option to provide attendant care services and supports with a 6 percent enhanced federal matching funds. Eight states elected this option as of 2016. Section 2402 of the ACA also allowed states (17 as of 2015) to offer HCBS through the section 1915(i) option ( Sec. Act §1915(i)), which allows states to serve people with functional limitations that do not yet rise to an institutional level of care. Section 2703 of the ACA also created the Medicaid health homes option, which enables states (22 as of 2016) to provide care coordination services for people with chronic conditions at a 90 percent enhanced federal match for the first two years.
  • How much does Medicaid spend on people with disabilities? As of 2011, people with disabilities accounted for 15 percent of total Medicaid enrollment but 42 percent of program spending. Per enrollee spending for people with disabilities totaled $16,643 in 2011, more than five times higher than for adults without disabilities ($3,247) and nearly seven times higher than for children without disabilities ($2,463). One-half of states spend between $15,000 and $19,999 per enrollee for people with disabilities, and another third of states spend between $20,000 and $34,999 per enrollee for people with disabilities.

KFF believes that the AHCA’s per capita cap and elimination of the enhanced federal financing under the ACA expansion will put the states under budgetary pressures due to a reduction in Medicaid funds. It believes that these budgetary pressures may result in the limitation of Medicaid services for recipients, including the nonelderly disabled. KFF believes that careful consideration of the AHCA implications is warranted.

AHA asks MedPAC to slow its roll on MACRA proposals

The American Hospital Association (AHA) believes that changes to the implementation of the Medicare Access and CHIP Reauthorization Act (MACRA) (P.L. 114-10) should wait until more data is available from providers. In a letter to the Medicare Payment Advisory Commission (MedPAC), the AHA expressed concerns about several proposals, including assigning clinicians to groups, aggregating results at the local market level, and replacing most clinician-reported measures. The AHA also addressed rising drug costs, encouraging MedPAC to focus on the issue.

MedPAC meeting

The letter serves as AHA’s response to MedPAC’s January meeting, during which the commission discussed items to include in a report to Congress in June. MACRA created two payment systems, the Merit-based Incentive Payment System (MIPS) and the Advanced Alternative Payment Model (APM), which are in the early stages of implementation by clinicians and hospitals. The January meeting involved discussion of several policy changes, including a MIPS redesign, which the AHA believes should be delayed until data and experience from these clinicians is available for consideration. The AHA noted that the first performance period for both programs began January 1, 2017, and that CMS views this as a “transition year” for MIPS.

Policy proposals

MedPAC proposed assigning clinicians to groups or regions and assigning an aggregate MIPS quality and cost performance score based on the performance of others in the community. The AHA believes that clinicians should be permitted to voluntarily collaborate, and that applying an aggregate score would be arbitrary. Additionally, the AHA proposes providing an option for hospital-based physicians to use the hospital’s CMS quality and resource use measure performance for MIPS. However, the association opposes the proposal to replace clinician-reported outcomes measures with CMS measures based on Medicare claims data. The AHA pointed out that claims data does not reflect a patient’s particular history, course of care, and risk factors, which would result in basing clinician performance on unreliable data.

The APM has an incentive payment designed to encourage participation in the model, rather than reward or penalize performance. MedPAC proposed only allowing participating clinicians to receive this incentive upon successfully achieving the APM’s goals. The AHA views such a change as a double reward or double penalty for participants, rather than compensation for the learning curve and resource investment required upon entering new payment models. The AHA also expressed concerns about the proposals intended to “balance” incentives offered for MIPS and APMs, believing that these proposals make MIPS less attractive than APMs, even though AHA members believe that MIPS is already a less attractive option.

Drug pricing

The AHA believes that changes to Medicare Parts B and D could alleviate some of the drug cost burdens borne by the federal government and beneficiaries. The AHA expressed several concerns about Part B drug payment policy solutions, fearing that these changes could penalize hospitals for price increases and shift the burden for high list prices onto physicians. However, the AHA supports MedPAC’s Part D proposals while offering proposals of its own: disallowing co-pay assistance cards, developing value-based payment arrangements, requiring rebates, varying patient cost-sharing, and issuing annual reports.

CMS actuary releases 2016-2025 health care expenditure projections

The growth in national health expenditures is expected to average 5.6 percent annually over 2016-2025, according to a report from the CMS Office of the Actuary. Health care spending is projected to grow 1.2 percentage points faster than gross domestic product (GDP) during this period. As a result, the health share of GDP is expected to rise from 17.8 percent in 2015 to 19.9 percent by 2025. This growth in national health expenditures is driven by a projected faster growth in medical prices, offset by a projected slowdown in the use of medical goods and services. The projections in the report are based on current law and do not assume potential legislative changes by the new administration.

The report also projects health care spending to grow 5.4 percent in 2017, due to faster growth in Medicare and private health insurance spending; and at an average rate of 5.9 percent for 2018-19, as projected growth in Medicare and Medicaid accelerates. For 2020-25, an average growth of 5.8 per year is projected, due to the deceleration in growth in the use of medical goods and services.

ACA-related findings

Although the largest health insurance coverage impacts from the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) have already been observed in 2014-15, the report projects the insured share of the population to increase from 90.9 percent in 2015 to 91.5 percent in 2025. The report attributes this increase to continued growth in private health insurance enrollment, in particular for employer-sponsored insurance, during the first half of the decade.

The report also projects that national health spending growth decelerated from 5.8 percent in 2015 to 4.8 percent in 2016 as the initial impacts associated with the ACA expansions fade. In addition, Medicaid spending growth is projected to have decelerated sharply from 9.7 percent in 2015 to 3.7 percent in 2016 as enrollment growth in the program slowed. Similarly, it is projected that private health insurance spending slowed from 7.2 percent in 2015 to 5.9 percent in 2016.

Payer findings

Additional report findings regarding payers include:

Medicare. Medicare spending is projected to grow at an average rate of 7.1 percent for 2016-25, 7.6 percent for 2020-2025, and 8 percent for 2020.

  • Following consecutive years of expected slow growth of 3.7 percent in both 2016 and 2017, Medicaid spending growth is projected to quicken and average nearly 6 percent through 2025.
  • Private health insurance. Enrollment in private health insurance is projected to average 0.5 percent in growth for 2016-25; 5.7 percent for 2018 through 2019; and at an average rate of 5 percent per year for 2020 through 2025.
  • Out-of-pocket. Out-of-pocket spending growth is projected to accelerate 3.6 percent in 2016 from 2.6 percent in 2015; grow 4.8 percent for 2016 through 2025; steadily increase to a high of 5.8 percent in 2020; and then average 5 percent growth in the final years of the period.

Health sector findings. Major report findings by health sector include:

  • Total hospital spending is projected to grow at an average rate of 5.5 percent per year for 2016-25, compared to 4.9 percent for 2010-15.
  • Physician and clinical services. Growth in spending on physician and clinical services is projected to have accelerated slightly in 2016 to 6.6 percent, from 6.3 percent in 2015. It is projected to slow to 5.9 percent in 2017.
  • Prescription drugs. Prescription drug spending growth is projected to decelerate from 9.0 percent in 2015 to 5.0 percent in 2016 due to reduced use of newly approved specialty drugs, as well as an increase in the number of brand name drugs losing patent protection. It is projected to grow an average of 6.3 percent per year for 2016 through 2025.

Government spending. The report found that health care spending financed by federal, state, and local governments is projected to have grown 4.4 percent to $1.5 trillion in 2016; and is projected to increase to 47 percent of national health expenditures by 2025 (up from 46 percent in 2015).

AHA, hospital executive support for hospital mergers, despite antitrust concerns

Hospital mergers have reduced annual operating expenses at acquired hospitals, and evidence from a study cited by the American Hospital Association shows quality and service improvements stemming from mergers. According to Charles River Associates, despite antitrust concerns from the Federal Trade Commission (FTC), hospital leaders believe that mergers are a better tool for achieving better care coordination and population health management than looser affiliations between parties.

Cost savings

An analysis of non-federal short-term acute care hospital mergers between 2009 and 2014 revealed a 2.5 percent reduction in operating expense per admission at the acquired hospitals, implying annual savings of about $5.8 million (derived from average annual operating expenses). Net patient revenue per admission also declined relative to non-merging hospitals, suggesting that mergers may reduce health care costs.

Interviews with hospital executives placed savings into three categories: scale-related savings from allocating fixed costs over a larger volume of patients, reductions in cost of capital, and standardized clinical processes. In particular, supply chain savings from group purchasing and reduced overhead following consolidation of back office services were cited as important cost-saving benefits of merging.

Quality improvement 

While the study was able to quantify some cost savings related to mergers, positive effects on quality were less obvious, despite executives stressing the impact of quality improvements following clinical standardization after a merger. Small improvements were observed in a decrease in the composite indices of 30-day readmission rates, 30-day mortality rates, and overall outcome, but the only statistically significant result was a 10 percent change in the readmission rate result. The authors admitted that the modest results may partially stem from difficulty in quantifying hospital quality.

Merger specificity

The FTC asserts that improved care coordination and other benefits touted by merger supporters are not merger-specific and can be achieved through other means of association. Hospital leaders disagree based on experience showing that “looser affiliations” between parties fail to provide the necessary level of commitment and accountability to achieve the necessary cost savings and quality benefits to effectuate health reform. The interviewees opined that alliances between parties are not able to overcome the divide of being part of different systems, resulting in unwillingness to invest capital, reluctance to share intellectual property, inability to align incentives and create a common culture, and regulatory roadblocks on information sharing. The authors noted that successful loose affiliations are usually narrow in scope, limiting the cooperation to combining supply chain efforts or developing joint back office function collaborations (without sharing data between affiliates). If clinical areas are involved, they are usually limited to support services.