ACA repeal would trigger $166B loss for hospitals by 2026 — 3 things to know from AHA, FAH

Hospitals would take a $165.8 billion loss on net income if the ACA were repealed without replacement, according to a report commissioned by the Federation of American Hospitals and the American Hospital Association.

The report, which healthcare economics firm Dobson DaVanzo prepared, uses H.R. 3762 — the reconciliation bill vetoed by President Barack Obama in January — as its model of what an ACA repeal would look like.

If this bill were passed under a Trump administration, it would repeal the ACA's individual mandate, the employer mandate, premium tax credits, cost-sharing subsidies, the transition reinsurance program, Medicaid expansion and a handful of other taxes, such as the medical device tax. The bill would also restore Medicaid Disproportionate Share Hospital payments that were cut under the ACA. The $165.8 billion estimated negative impact on hospitals includes restored Medicaid DSH payments.

Here are three key takeaways from the analysis.

1. Before incorporating the restoration of DSH payments, Dobson DaVanzo estimates the loss of health insurance coverage under an ACA repeal would have a $399.8 billion negative net impact on hospital revenue over the next decade. This estimate assumes most of the coverage provisions under the ACA would be repealed and coverage would return to similar levels seen before the ACA was implemented. The report accounts for about 2 million so-called "woodwork" individuals who likely enrolled in Medicaid due to increased awareness after the passage of the ACA, although they may have been eligible before Medicaid expansion.

2. However, the proposed bill does call for restoration of reduced Medicaid DSH payments. Medicaid DSH payments were reduced under the ACA to help offset the cost of increasing coverage. If these reductions were restored, Medicaid payments to hospitals would increase by $45 billion. Even though H.R. 3762 did not directly restore Medicare DSH reductions, these payments would increase by $49.5 billion, according to the report. This is because Medicare DSH payments are determined using a formula based on the percent change in uninsured Americans under age 65 compared to 2013. Since the report assumes the number of uninsured will return to pre-ACA levels, Medicare DSH reductions would be nearly eliminated.

3. Overall, an ACA repeal similar to H.R. 3762 would reduce hospital net income by $165.8 billion between 2018 and 2026. The report notes the loss in health insurance coverage would reduce utilization and drive down hospital costs by about $139.4 billion by 2026. This gain, combined with the restored DSH payments, helps partially offset the $399.8 billion negative net impact caused by the loss of health insurance coverage.

Here is a breakdown of how Dobson DaVanzo arrived at the overall net impact of an ACA repeal.

Impact of lost coverage on hospital revenue

($399.8 billion)

Hospital costs gained back from reduced utilization by newly uninsured

$139.4 billion

Impact on Medicare DSH payments

$49.5 billion

Restored Medicaid DSH reductions

$45.0 billion

Total positive impact

$233.9 billion

Net impact of ACA repeal on hospital net income

($165.8 billion)

"Losses of this magnitude cannot be sustained and will adversely impact patients' access to care, decimate hospitals' and health systems' ability to provide services, weaken local economies that hospitals help sustain and grow and result in massive job losses," AHA President and CEO Rick Pollack and FAH President and CEO Chip Kahn said in a letter to President-elect Donald Trump. They urged Mr. Trump to protect gains in health insurance coverage when considering an ACA replacement. However, if this cannot be done, they urged the President-elect to do away with hospital payment reductions included in the law to offset the cost of providing care to more uninsured patients.

"Restoring these cuts for the future is absolutely essential to enable hospitals and health systems to provide the care that the patients and communities we serve both expect and deserve," Mr. Pollack and Mr. Kahn wrote.

 

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