Is the American Health Care Act a ‘critical first step’ or unsupportable?

HHS Secretary Tom Price, M.D., supports the reconciliation recommendations known as the American Health Care Act, and considers the changes a necessary and important first step in further reforming the U.S. health care system. In a letter to the chairs of the House Committees on Energy & Commerce and Ways & Means, Price explained that in his view, the proposed legislation aligns with President Donald Trump’s promise to repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Two major industry groups, however, said that they could not support the current version of the bills.

American Health Care Act 

On March 6, 2017, House Speaker Paul Ryan announced the American Health Care Act, consisting of two committee “budget reconciliation legislative recommendations,” which would be passed under the provisions of S. Con. Res. 3, a resolution which developed a streamlined process for Congress to pass health reform without threat of Senate filibuster. The document from the Ways & Means Committee would alter many of the ACA’s tax provisions, including eliminating penalties related to the individual and employer mandates, while the Energy & Commerce Committee’s document focuses on changes to the Medicaid program (see Republicans present health reform that is neither repeal nor replacement, March 7, 2017). Both committees began markup on the bills less than two days after the documents were made public.

First step in Administration’s plan

According to Price, the reconciliation legislation is just the first of three planned steps in undoing the ACA’s reforms. The reconciliation process can only be used to change some ACA provisions, though not all, and also cannot be used for all of the Trump Administration’s planned reforms. To complete those changes, HHS has two more planned steps; first, taking administrative actions to provide patients with additional options and give states more flexibility in Medicaid spending, and second, to support legislation on Trump’s other priorities including sale of insurance across state lines and medical tort reform. HHS noted that the Administration has already begun work on the second step, including Trump’s Executive Order on minimizing the economic burden of the ACA (see Trump Administration previews health care plans with Executive Order, regulatory freeze, January 23, 2017) and a Proposed rule designed to stabilize the health insurance marketplace by altering enrollment periods and other rules.

AHA and AMA opposition

Two major stakeholders in the health reform debate are the American Hospital Association (AHA) and American Medical Association (AMA), both of which released statements saying that, as currently written, neither organization could support the American Health Care Act. AHA President and CEO Richard J. Pollack wrote a letter on behalf of the hospitals, health systems, health organizations, and clinician partners associated with the group, and first raised concerns about the lack of coverage estimates from the Congressional Budget Office (CBO) and asked that Congress wait until an estimate is available before proceeding with formal consideration of the Act. The letter also listed the AHA’s policy concerns, including the restructuring of Medicaid—which “already pays providers significantly less than the cost of providing care—and the elimination of funding sources while continuing the ACA”s reductions in hospital payments.

Similarly, AMA President Andrew W. Gurman, M.D., wrote that the Act would reverse the ACA’s coverage gains, with millions of Americans losing coverage, and insisted on the involvement of physicians in the health reform debate. AMA Vice President and CEO James L. Madara, M.D., wrote a letter to the Committee Chairs and Ranking Members in which he said the organization cannot support the Act as drafted “because of the expected decline in health insurance coverage and the potential harm it would cause to vulnerable patient populations.” He noted concerns that rolling back the ACA’s Medicaid expansion would limit state flexibility and urged the Committees to “do all that is possible” to prevent individuals who currently have health insurance from losing that coverage.

KFF offers facts about Medicare spending

As the new Administration and Congress consider changes to federal health care programs, including Medicare, a Kaiser Family Foundation (KFF) issue brief offers spending facts about the program, which currently accounts for roughly $1 of every $7 in federal spending. The brief indicated that repealing the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would increase spending and worsen the program’s long-term financial outlook, but noted that Medicare faces challenges apart from ACA repeal, including higher health costs and an aging population.

Although the program faces financial challenges, KFF noted that Medicare “isn’t going broke.” The Hospital Insurance Trust Fund, which pays for Part A benefits, primarily through payroll taxes, is expected to pay for full insurance benefits until 2028, at which point it will be able to pay for 87 percent of hospital benefits. Part B physician services and Part D drug benefits, however, are paid for through a combination of general revenues and beneficiary premiums and are set only a year in advance. As a result, they are not subject to a funding shortfall, but higher projected spending would increase the amount of general revenue funding and beneficiary premiums required to cover costs. Spending on Part benefits is expected to rise faster than spending on benefits paid for under Parts A and B, with per-capita spending expected to rise 5.8 percent for Part D between 2015 and 2025, compared to 3.2 percent for Part A and 4.6 percent for Part B.

The aging U.S. population is resulting in higher Medicare spending. For example, the number of people over age 65 is expected to double from 2010 to 2050 from 40 million to 84 million, while the number of people over 80—who account for a disproportionate share of Medicare spending—is expected to nearly triple, from 11 million to 31 million. Medicare spending accounted for 15 percent of the federal budget in 2016, and is expected to increase to 18 percent of the federal budget, accounting for $1 in every $6 spent, by 2027. Average annual growth in spending is expected to increase more quickly between 2015 and 2025—at a rate of 7.1 percent—than it did immediately after the ACA was enacted between 2010 and 2015, when it increased at a rate of only 4.4 percent.

ACA provisions reducing payments to providers and Medicare Advantage (Part C) plans reduced overall spending growth from 9 percent between 2000 and 2010 to 4.4 percent between 2010 and 2015. KFF cited a Congressional Budget Office (CBO) report and stated that ACA repeal would add $802 billion to Medicare spending through 2025; KFF opined that repeal would lead to higher deductibles, premiums, and cost sharing for beneficiaries and would hasten the insolvency of the Hospital Insurance Trust Fund (see Repealing the Affordable Care Act—an unaffordable idea?, Health Law Daily, June 24, 2015). With the ACA in place, KFF reports that net Medicare spending is projected to grow from 3.2 percent of the gross domestic product (GDP) in 2016 to 5.7 percent of the GDP in 2046; prior to the ACA, net Medicare spending was projected to account for 8.5 percent of the GDP in 2046.

Is HHS Secretary too high for Price?

The presumptive nomination of Rep. Tom Price (R-Ga) to lead HHS as the agency’s Secretary was considered on January 18, 2017, by the Senate Committee on Health, Education, Labor and Pensions. The committee’s chair, Lamar Alexander (R-Tenn), praised the nomination of Price, calling him an “excellent nominee” and highlighting how he will “build a better bridge” to repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The top Democrat in the committee, Senator Patty Murray (D-Wash) questioned Price on policy, conflicts of interest, and past statements, including one suggesting cost is not an issue for women buying birth control.

Opening statement

In his opening statement, Price talked about his passion for medicine, experience as a physician, and fascination with “fixing things.” He pointed to problems in the health care industry, recalling the point when he noticed “more individuals within our office who were dealing with paperwork, insurance filings, and government regulations than there were individuals actually seeing and treating patients.” He highlighted his goal of returning the focus of health care to the patient.

ACA

Price also noted his belief that the ACA should be repealed and replaced simultaneously and concurrently—a position that is consistent with the most recent stances of President-elect Trump (R) and House Speaker Paul Ryan (R-Wis). Price and Alexander both expressed a desire to avoid a “quick-fix” and to, instead, develop health care reform “that’s done in the right way, for the right reasons, in the right amount of time.”

Critique

Murray challenged Price’s qualifications and positions, including Price’s prior opposition to allowing Medicare to negotiate drug prices and plans to shift $1 trillion in Medicaid costs onto states. Additionally, Murray suggested that Price did not meet a basic, necessary qualification to lead HHS, namely the ability to put science before ideology. Finally, Murray condemned the Senate’s decision to move forward with Price’s confirmation hearings amidst an ongoing investigation into Price’s allegedly unethical medical stock trades during his time in the House.

Value-based payments and EHRs expected to continue trajectory during reform

Despite the uncertainty surrounding health care reform under the upcoming Trump administration, health law experts project that the transition to value-based payments and further development of electronic health record (EHR) systems will be a constant in the coming years. Four of Avalere Health’s senior vice presidents offered their opinions during the 2017 Healthcare Industry Outlook webinar, making educated guesses about what upcoming changes the industry may see.

What will change?

The webinar started with the topic on everyone’s mind: what will happen to the Patient Protection and Affordable Care Act (ACA)? Broadly, the presenters expect that federal spending on health care will be capped and states will be granted more flexibility in designing their Medicaid programs. Reduction of regulations to encourage the private sector to provide a range of products in a competitive market is also to be expected.

The likelihood of repeal was discussed for several different ACA sections. The most likely to be repealed were the individual and employer mandates, subsidies, industry taxes, Medicare tax for high earners, and cuts to disproportionate share hospitals. Certain reforms, like protection for pre-existing coverage, drug related provisions, and changes to Medicare Advantage and Medicaid payment provisions are considered likely to remain. Subjects likely to be up for serious debate are Medicaid expansion, the Center for Medicare & Medicaid Innovation (CMMI), essential health benefits, and the preventive services coverage requirement.

Other areas

The focus on quality and value in health care is not expected to waver during the new administration. In light of significant regulatory and policy barriers, providers are unable to establish outcome-based contracts and create more innovative payment arrangements. More flexibility in the ability to establish and agree on value between parties is expected to be a policy pressure point.

The value discussion typically focuses on provider performance, but the presenters noted that drugs are an important value consideration, especially in light of rising costs. The traditional approach to determining drug value is expected to evolve, as frameworks had previously been established based on clinical benefit, toxicity, and product cost, which ignored patient considerations and relied too much on data from limited populations. In addition to incorporating more real world data, drug value frameworks have begun to focus on not only on health outcomes, but patient experiences and financial considerations during treatment.

Although “virtually every hospital” is using some sort of EHR system, interoperability continues to be a sticking point. In the near future, the ability to more effectively use, share, and interact with data is expected to improve. Continued advancements in studying data is also expected to change the way providers practice, including big advances in population health.