Viewpoint: The CBO score of the revised AHCA — Implications for hospitals

On May 24, the Congressional Budget Office issued its 41-page cost estimate (a.k.a. "score") of the revision of H.R. 1628, the American Health Care Act of 2017, which was passed by the House of Representatives on May 4.

 

At a high level, the CBO and Joint Committee on Taxation estimate that the legislation would reduce the cumulative federal deficit over the next 10 years (2017-2026) by $119 billion, $32 billion less than the previous version of H.R. 1628. This conclusion, that the legislation would reduce the deficit, is politically important, as it meets the requirements of the budget reconciliation process and therefore requires only a simple majority, rather than 60 votes, in the Senate for passage. If the legislation had increased the deficit, the 60-vote requirement would have been imposed.

The version of H.R. 1628 passed by the House is more politically moderate and, relative to the previous version, provides $38 billion in additional funding to generally increase coverage and reduce premiums and/or out-of-pocket costs. It includes:

  • $15 billion for the Federal Invisible Risk Sharing Program, which provides payments to health insurers for covering high-cost enrollees
  • $15 billion in funding to states to use for maternity coverage, newborn care, and prevention, treatment, or recovery services for people with mental or substance use disorders 
  • $8 billion in funding to states that obtain a waiver from the requirement for community rating (the prohibition against setting premiums on the basis of an individual's health status if the person had not maintained continuous coverage) to use for reducing premiums or out-of-pocket costs for people who would face higher premiums as a result of the waiver

As a result of these changes to the bill, the number of people with health insurance would be "slightly higher" than the originally proposed version of the AHCA, and average premiums for insurance purchased individually (non-group insurance) would be lower.

Implications for hospitals and health systems

Relative to the prior version of the bill, the revised AHCA is directionally positive for provider organizations because: 1) it provides more direct funding to them from the federal government; and 2) it reduces uncompensated care by generally increasing coverage and reducing premiums, especially for those with pre-existing conditions.

Regarding 1), the aforementioned $15 billion in funding for maternity coverage, newborn care, and prevention, treatment or recovery services for people with mental or substance use disorders will be channeled to provider organizations.

As for 2), while the CBO score provides detailed analysis of the legislation's effects on the federal budget versus the prior version of the bill, in its analysis of the AHCA's effects on health insurance coverage, it compares the legislation versus current law (i.e., the Affordable Care Act), while briefly mentioning that "the number of people with health insurance…be slightly higher" relative to the prior version.

In addition, it's important to understand that the CBO cost estimate excludes from the insured population those individuals who purchase policies that would not cover major medical risks, including young and healthier-than-average individuals. Thus, the AHCA as it currently stands devotes more resources to the high-risk and high-cost portion of the population — largely through the Patient and State Stability Fund, whose funding grew from an original $100 billion to $123 billion in the revised bill — while allowing the low-utilizers of medical care to choose lower levels of coverage.

In summary, relative to the prior version of the bill, based on the CBO score, the passed version of the AHCA is better for hospital finances as it reduces uncompensated care and provides more funding to providers for certain vulnerable populations.

In addition, it is widely expected that the Senate's forthcoming health reform bill will move further to the political center, which will most likely mean more coverage and access to care relative to the previous version of the AHCA, which would help hospitals and health systems.  

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