4 key questions on Medicaid, the economy and how hospitals are preparing for the AHCA

House Republicans put forward the American Health Care Act on March 6, which would repeal the ACA and replace it with new legislation that eliminates the individual mandate, calls for the Medicaid expansion to remain through Jan. 1, 2020, and restructures Medicaid's federal funding to a per-capita cap instead of the current open-ended federal entitlement.

The AHCA also restructures Americans' tax credits to purchase health insurance, replacing the income-based subsidies under the ACA with age-based and income-capped tax credits.

On March 20, House Republicans released changes to make some adjustments limiting the Medicaid expansion and allotting addition funds for age-based tax credits for the elderly but didn't officially update the amount provided to individuals. The changes also delayed the ACA Cadillac tax on luxury-employer sponsored health plans to 2026, extending the delay an additional year.

Here, Jeff Goldsmith, PhD, associate professor of public health sciences at the University of Virginia in Charlottesville and national advisor with Navigant Healthcare, discusses how the AHCA could affect hospitals in its current state and what to expect going forward.

Note: Responses have been edited for length and clarity.

Question: How could the ACHA affect hospitals financially?

Jeff Goldsmith: To the extent that the bill causes people to lose coverage, we know what that does to hospitals; it creates self-pay bad debts from people without insurance. If the bill is going to reduce Medicaid spending, we know that a large chunk money has to come out of what would otherwise have been paid out to hospitals, and potentially leave them with unpaid medical bills.

Q: The AHCA would shrink the Medicaid pool in most states. How would that affect hospitals?

JG: I don't think necessarily that shrinking Medicaid enrollment is a bad idea if we can give the people who lose Medicaid coverage adequate tax credits to purchase private insurance. The new, much larger Medicaid program created by the Affordable Care Act is built on an unsustainable foundation; 80 million Medicaid enrollment is entirely possible in the wake of a recession, which would bankrupt the provider network at the payment rates we have now. If AHCA tax subsidies are adequate enough to enable people who are at or above the 100 percent poverty to afford private coverage, that's not a bad thing. In particular, it isn't very expensive for the TANF [temporary assistance to needy families] beneficiaries to obtain private insurance. We shouldn't be measuring our success by whether we have preserved ACA's Medicaid expansion as is, but instead by how we're able efficiently to cover the Americans have presently have coverage.

Q: What would be the most beneficial way to structure Medicaid services in the future?

JG: We need to think hard about how we structure the benefits that folks who are on Medicaid receive.

The hospital emergency room is not an affordable "front door" to the care system. Comprehensive primary care must play a big role. A lot of hospitals are now employing primary care physicians; one of the questions we need to ask is what role do those physicians and their supporting cast play in averting unnecessary ER visits and hospitalizations. Effective team-based primary care is a low-cost vehicle to make sure people are doing the things they should from a diet and risk management standpoint. Hospital systems will re-evaluate the role their primary care networks play in helping people who are underinsured or uninsured stay healthy.

Q: The CBO recently found 14 million fewer people would be covered under the AHCA next year and eventually that 24 million fewer people would have health coverage. Also the bill was forecast to reduce the federal deficit by $337 billion from 2017 to 2026. How much credence do you give those numbers?

JG: I was not dazzled by CBO's methodology, but was surprised that it was deficit neutral. Even if half as many people actually lose coverage, it is not sustainable policy. It is far from clear how this bill in its present form would affect private coverage. CBO has a less than impressive track record of forecasting the effects of legislation on the private insurance risk pool.

Q: Do you think the bill will pass through Congress?

JG: There is an intense political process underway among a divided Republican party. It is not clear that any version of the current bill, with the big coverage loss and the harm to the care system involved, would pass the Senate. The big issue I addressed in my blog post is the inadequacy of the tax subsidies for people over the age of 50. Among the pre-Medicare population, it may cost $1,000 to $1,200 per month or more for private healthcare coverage. If the subsidy structure in this bill is in place in the final version, those people only get around $4,000 per year over 60 years old and $3,500 from 50 to 60 years old. That's not even close to adequate. If those subsidies stay where they are now, the rate of uninsured folks 50 to 64 who make less than $30,000 a year (e.g., nearly all of them) rises from 12 percent to 30 percent.

The gap between what the subsidy provides and the actual cost to cover people 60 years old or older is not OK and the AHCA is unlikely to become law as it's currently written.

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