Where does the ACA stand 103 days into the new administration?
Health Care Current | May 2, 2017
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Where we stand 103 days into the new administration
By Sarah Thomas, managing director, Deloitte Center for Health Solutions, Deloitte Services LP
Last week’s news spent considerable time analyzing the new administration’s first 100 days, including questions about a renewed effort to repeal and replace elements of the Affordable Care Act (ACA).
Repealing and replacing the ACA has been a signature issue for Republican leaders for the past seven years. The American Health Care Act (AHCA), which failed to make it to a floor vote in March, was recently resurrected and was gaining traction with an amendment that would let states seek waivers to redefine key ACA provisions such as age-rating bands and essential health benefits. The latest iteration of the bill still needs to attract 216 yeas to prevail in a floor vote given the four current vacancies in the House. If it does, a big question will be whether it can pass the US Senate — even with the lower hurdle of 51 rather than 60 votes under special budget reconciliation rules.
Some industry observers appear optimistic that the administration and Congress will enact legislation this year that will repeal and replace the ACA. During an April 26 Dbriefs webinar on the administration’s first 100 days, more than half of our attendees said it was “highly likely” or “somewhat likely” that Republicans would make good on their promise to unravel the law. More than one-third, however, said it “wasn’t very likely.”
As the AHCA was creating a buzz on the Hill (again), the White House signaled that it would allow federal cost-sharing reduction subsidies to continue. At least for now. With about $7 billion in subsidies at stake, health plans had serious concerns that eliminating them would push premiums significantly higher for the 2018 plan year (see the April 18, 2017 Health Care Current). It’s worth noting that the administration has made no guarantees that the subsidies will continue indefinitely.
The administration recently finalized other major changes designed to stabilize the exchanges. On April 13, 2017 the US Centers for Medicare and Medicaid Services (CMS) released a final rule aimed at stabilizing the insurance exchanges (see the April 18, 2017 Health Care Current). Among other things, the new rules will make it more difficult for people to buy coverage outside of the open-enrollment period. It also shortens the next open-enrollment period by six weeks, from November 1, 2017 to December 15, 2017.
Administration offers states more control
To date, it seems the administration’s most significant policies have been around reducing regulation and delegating much more latitude to the states. During its first 100 days, the White House has nominated and received Senate confirmation for a number of key policymakers who appear to be agents of change, including US Department of Health and Human Services (HHS) Secretary Tom Price and CMS Administrator Seema Verma. Moreover, the White House has used its administrative and regulatory authorities to make progress on its health policy to-do list. The president’s first executive order, signed on January 20, called on federal agencies to roll back the regulatory burden of the ACA. Tangible results of this order can be seen in actions such as the Internal Revenue Service softening its enforcement of the ACA individual mandate.
Secretary Price and Administrator Verma have taken early steps in the direction of federalism. They are actively promoting the use of existing Medicaid and ACA statutory waiver authorities to shift discretion and flexibility from HHS and CMS to state governments. As my colleagues and I have noted in previous My Takes, federalism is the dominant theme in this administration’s health policy. This federalism is likely to be consequential across the public and private sectors, regardless of whether ACA repeal and replace efforts bear fruit.
So what might we see coming ahead? We see a number of deadlines facing the Congress. July 28 is when we would ordinarily expect the August recess to begin. There has been discussion of trying to pass tax reform prior to Congress leaving town, although it is unclear whether this will be the case. At the end of September is another deadline forcing legislative action on health care – when funding for the Children’s Health Insurance Program (CHIP) ends. CHIP is popular with legislators on both sides of the aisle and with the states, but reauthorization may prove challenging if it gets caught up in a second wave of health reform legislation.
Finally, we will likely begin to see the new administration’s policy direction in regulatory activity. We will be tracking Medicare payment policy regulations that will likely provide more detail on implementation of the Medicare Access and CHIP Reauthorization Act of 2015, regulations implementing provisions of 21st Century Cures, and more pilots and demonstrations coming out of the Center for Medicare and Medicaid Innovation. Regardless of what happens on the legislative side, the administration will likely begin to make its mark on the many health programs it runs and regulates.
In the News
New American Health Care Act amendment would grant new waiver authority to states
Last week, the House Rules Committee introduced a new amendment to the AHCA which would give flexibility to states around health insurance provisions of the ACA. While progress had previously stalled on the bill, several lawmakers, including those in the House Freedom Caucus, expressed support for the new amendment, which was introduced by New Jersey Congressman Tom MacArthur and North Carolina Congressman Mark Meadows, chairman of the Freedom Caucus.
The amendment proposes three types of waivers to exempt states from ACA-imposed rules governing the small-group and individual markets:
- Age rating ratio waiver: The AHCA amendment would raise the age ratio - or how much more a health plan may charge a beneficiary based on their age - to 5 to 1 (from 3 to 1). This waiver would allow states to increase age ratios based on their population’s demographics and needs, starting January 2018.
- Essential Health Benefits (EHBs) waiver: The AHCA amendment would allow states to define EHBs for coverage sold though both the individual and small-group exchanges beginning in January 2020. According to policy experts, this could also impact ACA programs that are defined using EHB benchmarks, such as the limits on out-of-pocket expenses and annual and lifetime benefit caps, as well as what services insurers would need to cover.
- Health status consideration waiver: The AHCA amendment would allow health plan issuers on the exchanges to consider the health status of potential enrollees when setting premiums under certain conditions. Also known as medical underwriting, this would only be permitted in a state that provides financial assistance to help high-risk individuals, premium stability incentives, or an invisible high-risk pool program (see the April 25, 2017 Health Care Current).
The amendment would continue to prohibit health plans from discriminating based on gender or limiting access to individuals with preexisting conditions. Under the MacArthur amendment, all waivers submitted to the HHS Secretary would be approved by default, unless HHS responded to the request within 60 days to inform them otherwise. All waiver proposals would be required to include specific information outlining how the waiver would achieve at least one of five health policy goals:
- Reduce average health plan premiums in the state
- Increase health plan enrollment
- Stabilize the health insurance market
- Stabilize health plan premiums for individuals with preexisting conditions or
- Increase consumer choice of health plans available
The AHCA was introduced on March 6, but was pulled from the House floor on March 28 for further committee negotiations. The legislation would repeal or modify ACA insurance provisions, including the individual and employer mandates and industry taxes, and restructure financing for Medicaid (see the Deloitte analysis ‘ACA repeal and replace: The proposed American Health Care Act and its potential impact on employers’). While there is no set date to bring AHCA to the floor for a vote, lawmakers say health care remains a top priority for this session.
Some individual insurance markets have improved but further stability still needed
The future stability of the individual market under the Affordable Care Act (ACA) depends on robust participation from health plans and consumers, according to recent analyses from Kaiser Family Foundation (KFF) and the American Academy of Actuaries. Before the White House indicated it would allow cost-sharing reduction subsidies (CSR) to continue (see this week’s My Take), KFF researchers estimated the loss (expected to be $10 billion in 2018) would raise premiums by 19 percent, costing federal government an additional $2.3 billion in premium subsidies to cover the projected rate increases.
Although some plans faced steep losses during the first two years of the ACA, the market has been showing signs of stabilizing. Initially, health plans set premiums too low when they did not know the general cost of the exchange population. Last-minute policy changes, such as letting people stay on non-ACA-compliant plans, further skewed the exchange population toward the older and sicker. However, after three years, and significant premium hikes, medical loss ratios – the percent of premiums insurers spend on claims and expenses that improve health care quality, and a measure of plan solvency – have been nearing pre-ACA levels.
However, many counties only have one health plan participating in the exchanges and the ongoing uncertainty may exacerbate these issues. The American Academy of Actuaries noted factors that could improve the individual market:
- Increased enrollment – A sufficient number of enrollees with a balanced mix of healthy and younger people to spread risk
- A stable regulatory environment – A predictable regulatory environment that facilitates fair competition can encourage plan participation
- Plan competition – Sufficient plan participation and offerings improves competition and consumer choice
- Limit cost growth – High quality care and low health care spending growth help make insurance more affordable and desirable by consumers, because most premium dollars go toward paying medical claims
While the White House has signaled the CSR payments can continue for now, their long-term future is unclear. House v. Price, the lawsuit filed by House Republicans during the Obama administration that called the program into question, is ongoing (see the April 25, 2017 Health Care Current). KFF projected that cutting the payments would save the federal government $10 billion. However, repealing CSRs would increase the cost of premium tax credits by $12.3 billion, increasing net federal spending in the exchanges by $2.3 billion, or 23 percent, in 2018.
Related: Some analysts say that mandating all plans to sell through exchanges could improve the individual market. Currently, there are still two distinct individual markets in most states:
- The ACA-established federal and state exchanges where consumers must buy plans if they want premium tax credits
- The “off exchange” market where consumers purchase plans directly from issuers
Together, the two groups represent about 7 percent of the insurance market. However, some plans only sell products off exchanges. People who purchase plans outside of the exchanges tend to buy either more generous plans with higher premiums or plans with more cost sharing. Washington DC and Vermont require all individual plans to be sold through exchanges. Both areas have small populations, so this move may have helped with the stability of the exchange market.
(Source: Cynthia Cox , Larry Levitt, and Gary Claxton, “Insurer Financial Performance in the Early Years of the Affordable Care Act” Kaiser Family Foundation, April 2017; “Steps Toward a More Sustainable Individual Health Insurance Market,” April 2017; “Federal Government Could See Net Increase of $2.3 Billion in Costs in 2018 if ACA Cost-Sharing Reduction Payments Eliminated,” Kaiser Family Foundation, April 2017)
CMS says it will announce MIPS eligibility in May
Last week, the CMS announced that it will notify health care organizations which clinicians (identified through their Tax Identification Numbers) are eligible to participate in the Merit-based Incentive Payment System (MIPS) by the end of May. This comes after the Medical Group Management Association sent a letter to CMS Administrator, Seema Verma, saying that CMS had said it would notify clinicians of their eligibility status the December before the performance year starts.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) changes how Medicare pays clinicians under the Physician Fee Schedule (PFS). They can choose between two tracks under the Quality Payment Program (QPP): MIPS or advanced alternative payment models. CMS exempts clinicians with patient low volumes (100 or fewer per year) or those who bill less than $30,000 annually from the QPP. It reviews claims to determine whether clinicians should be exempt.
When it finalized the MACRA regulations, CMS estimated that half of physicians currently paid under the PFS may be excluded from MIPS participation in 2017; 14.4 percent due to their clinician type (e.g., physical and occupational therapists, psychologists, and audiologists are exempt from the program), and 32.5 percent due to low Medicare patient volume or revenue.
The first performance year under MACRA began January 1, 2017, and clinicians’ 2019 payment rates will be based on their 2017 performance (see the Deloitte analysis MACRA: Disrupting the health care system at every level).
States seek to impose Medicaid work requirements
Several states are seeking to impose work requirements for Medicaid beneficiaries. HHS Secretary Tom Price and CMS Administrator Seema Verma in a letter recommended states use Section 1115 waivers to encourage childless adults to obtain employment (see the March 21, 2017 Health Care Current).
Arizona: Arizona wants to require able-bodied adults to work or participate in job training and capping enrollment at five years, unless recipients meet certain exemptions, such as having a full-time job or being a caregiver.
Arkansas: Arkansas wants to amend its Medicaid expansion waiver known as “Arkansas Works” to include stricter work requirements for all childless adults (see the March 14, 2017 Health Care Current).
Kentucky: Kentucky wants to require able-bodied adults without dependents (ABAWD) and who are also above the federal poverty line (FPL) to meet community engagement requirements to work, volunteer or participate in job training to maintain Medicaid coverage. The state would also require these ABAWD Medicaid recipients, regardless of their standing with respect to the FPL, to meet these same community engagement requirements if they enroll in vision or dental coverage.
Maine: Maine wants to impose the same recently approved work requirements for its food stamp recipients, for its Medicaid beneficiaries – childless adults would be required to work part-time or demonstrate that they are searching for work.
Wisconsin: Wisconsin wants to limit enrollment to four years for childless adults unless they meet certain requirements, including working or participating in job training (see the April 25, 2017 Health Care Current).
States like Indiana have previously sought to include work requirements in their Medicaid program demonstrations, which were rejected under the previous administration. Though Indiana’s waiver renewal does not include Medicaid work requirements, it refers recipients to a work search program. Kentucky is awaiting CMS approval and is poised to become the first state with a Medicaid work requirement.
New diabetes prevention model test “pay for success” in Michigan
In Michigan, non-profits are testing a new “pay-for-success” model to improve diabetes prevention. With funding from a number of investors, The National Kidney Foundation is expanding a diabetes prevention program started 2012. The program helped half of its enrollees lose 5 percent of their body weight and increase physical activity to an average of 221 minutes per week.
In this type of pay-for-success model, private investors give non-profit organizations upfront funding tied to outcome measures in an effort to improve or scale social service programs. Payers such as the government or health plans will repay the investor as long as the non-profit has met certain predetermined benchmarks for success. These social-impact type bonds are intended to reduce costs in the long-term through preventive interventions. Through the pay-for-success model, the National Kidney Foundation is expanding care to 3,000 low-income people living in Oakland, Wayne, Macomb, Genesee, Kent and Muskegon counties who are at-risk of developing type 2 diabetes. If weight loss measures and target participation in the healthy lifestyle-change program are met, health plans will be able to save money and repay the investor, Local Initiatives Support Corporation, for its investment.
This is the second “pay-for-success” model in Michigan. Previously, the financing model was implemented to improve birth and health outcomes for at-risk mothers. The model encourages home-visitation and better coordination of care for expecting at-risk mothers. More than a dozen “pay-for-success” models are underway across the nation.
Predicting and preventing hospital readmission rates
With the continued shift to value-based care, hospitals are increasingly focused on reducing readmission rates. And preventable readmissions are not just a problem in the US. Globally, 20 percent of patients are readmitted within 30 days of discharge. Researchers in Singapore have developed a web-based tool that predicts a patient’s 15-day readmission rate. By more accurately predicting higher risk patients, hospitals can more effectively target preventable readmissions, and potentially reduce unnecessary costs.
The tool identifies high-risk patients and prompts the care team to consider targeted interventions during admission, discharge, and post-discharge. The research team tested the tool on 621 patients discharged from two Singapore hospitals over two-months. Prior research has shown that early readmission (within seven days or less) is more likely to be causally related to the preceding admission episode, while later readmissions (between eight and 30 days) have demonstrated associations with morbidities and social determinants of health. Both sets of risk factors can be addressed by hospitals and health systems.
The web-based tool calculates the likelihood of readmission based on the presence of certain risk factors, including age, pre-existing conditions, number of discharge medications, discharge destination, and evidence of premature discharge against medical advice. The study showed that the number of medications prescribed at discharge was significantly associated with 15-day readmission risk. For each additional medication prescribed, the risk of 15-day readmission increases by six percent.
Patients who the hospital identifies are at high risk for 15-day readmission may benefit from specialized discharge planning, medication counseling, caregiver training, or be eligible for home visits. Researchers concluded that prescribing additional medications that may be more discretionary, such as for mild pain, mild constipation, or nausea, could harm some patients if it adds to their medication regimen. Timely and targeted medication counseling as well as educational initiatives to help patients understand the importance of medication adherence are likely important to improving overall patient outcomes, including readmission risk reduction.
The study also found that patients discharged to nursing homes had higher readmission risks. The researchers concluded that ensuring that patients enter appropriate care facilities may help reduce readmissions.
The team is now refining the tool and integrating it into electronic medical records in Singapore.
Analysis: Deloitte’s recent paper, Navigating bundled payments: Strategies to reduce costs and improve health care, discusses strategies many hospitals, health systems, health plans, and technology companies are trying to reduce readmissions and improve care coordination. Providers that participate in bundled payments, a method of paying for health care in which one price is set for a package, or bundle, of services that previously would have been paid for separately, are often highly motivated to achieve improved health outcomes and reduce unnecessary costs. The strategies identified in the paper that leading stakeholders are finding successful include:
- Investing in care coordinators to track and periodically contact patients after hospital discharge to assist with medication reconciliation, educate them on symptoms to monitor, and encourage follow-up with their physicians;
- Hiring less-expensive staff, and not only relying on nurses to help patients and meet care coordination goals;
- Striving for prompt scheduling with community physicians and outpatient rehabilitation services to improve outcomes, and relying on pharmacists to support medication reconciliation and underscore the necessity for adherence;
- Using analytics to identify patients with the constellation of comorbidities and other health and support issues that put them at the greatest risk for readmissions.
APMs such as bundled payments in health care are becoming more prevalent, as health care stakeholders are interested in strategies that use incentives to achieve better value. Legislation including the MACRA is encouraging more health care organizations to participate in APMs and take on more risk. Aligned incentives, paired with innovative tools like the one coming out of Singapore, is likely to help hospitals and health systems reduce readmissions, improve the patient experience, and reduce unnecessary costs.