What repeal of the ACA would mean for hospital finances: 11 thoughts

House Republicans pulled their ACA repeal and replacement bill March 24, but the effort to roll back the ACA may not be over, as House Speaker Paul Ryan, R-Wis., told Republican donors Monday the GOP will push forward with health reform this year.

Repealing the ACA or significantly cutting back provisions of the health reform law will have a major impact on hospitals' finances. Here are 11 thoughts about how hospitals' finances would be affected.

1. The American Health Care Act, Republicans' scrapped ACA repeal and replacement bill, would have increased provider organizations' bad debt. Although the bill has been pulled, legislation that includes similar provisions could also cause bad debt to rise. Provisions of the AHCA that could have increased bad debt included: 

  • Eliminating the individual mandate requiring Americans to purchase insurance or pay a fee
  • Implementing a per-capita cap on state Medicaid funding and a block grant program
  • Phasing out Medicaid expansion by 2020
  • Offering fixed tax credits for Americans to buy health plans

2. Under the ACA, the U.S. uninsured rate fell to 8.8 percent in the first nine months of 2016, or 28.2 million Americans, according to the CDC. This contributed to hospitals seeing higher volumes of insured patients, and those volumes would drop if the ACA were repealed. A recent Urban Institute study found states with the largest uninsured populations saw the most medical debt. With the AHCA projected to increase the uninsured rate, it is likely the prevalence of Americans with medical debt would increase if the ACA were repealed.

3. The Congressional Budget Office and the Joint Committee on Taxation estimate 14 million Americans would have lost insurance under the AHCA by 2018, a dip the CBO largely attributes to the elimination of the ACA's individual mandate, as individuals would be more likely to forgo coverage. The CBO projects the uninsured rate would have hit 21 million by 2020 and increased to 24 million by 2026 under the AHCA due in large part to Medicaid changes.

4. The AHCA would have eliminated Medicaid's entitlement structure and restricted the program's federal funding to a per-capita cap system on Jan. 1, 2020. The Kaiser Commission on Medicaid and the Uninsured estimates switching to a per-capita cap system would reduce federal spending on Medicaid by $1 trillion (or 26 percent) over 10 years. This reduction would require states to make significant budgetary changes and could result in reduced reimbursement for hospitals, according to a Fitch Ratings report.

5. Repeal of the ACA would have a net impact on hospitals of $165.8 billion, according to a report commissioned by the American Hospital Association and the Federation of American Hospitals that analyzed H.R. 3762 — ACA repeal legislation introduced in October 2015 and vetoed by President Barack Obama in early 2016.

For-profit hospitals

6. The rise in uninsured rates under ACA repeal would result in less demand for healthcare and increased uncompensated care at for-profit hospitals, Moody's Investors Service said. "The costs of providing urgent care to the uninsured would fall on hospitals, increasing bad debt expense," the ratings agency said. Moody's said the AHCA would have been credit negative for for-profit hospitals.

7. However, without modifications to the ACA, exchange enrollment could suffer and hospitals are likely to see uncompensated care rise in 2018, according to Fitch Ratings. "The failure of the AHCA to move forward means that the ACA exchanges will be ostensibly functioning in 2018, but hospital companies will likely face higher levels of uncompensated care as fewer individuals enroll in exchange products," Fitch said.

Nonprofit hospitals

8. More uninsured Americans under the AHCA would have increased bad debt and uncompensated care costs for nonprofit hospitals, making the bill credit negative for these institutions, according to Moody's.  

9. The AHCA's provision to retain Medicaid expansion until Jan. 1, 2020, as well as its proposed elimination of scheduled cuts to Medicaid Disproportionate Share Hospital payments, would have positively affected nonprofit hospitals' finances. However, the rating agency said the positive effects are not enough to compensate for the credit negative components of the AHCA.

Safety-net hospitals

10. Washington D.C.-based America's Essential Hospitals said if Congress repeals the ACA and does not replace it with a "comparable" plan, safety-net hospitals will lose up to $40.5 billion nationwide. AEH attributed the losses to a decrease in coverage under ACA repeal and cuts to Medicaid DSH funding and Medicare from 2018 through 2026, according to a February policy brief

11. Safety-net hospitals would see uncompensated care costs of $54.2 billion over a 10-year period beginning in 2019 as a result of loss of coverage, DSH cuts with no counterbalancing coverage increases and other funding decreases, AEH states.  

More articles on healthcare finance:
Hospital stocks sink as Republicans continue healthcare reform push
South Carolina hospital at risk of losing Medicare funding
Banner Health sees operating income rise as patient volume grows

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