The precipitous rise and fall of the AHCA: Implications for hospitals

The American Health Care Act (AHCA), the Republicans' first attempt at a Patient Protection and Affordable Care Act (ACA) replacement plan, had a short, 18-day life in the limelight.

After its introduction on March 6, it worked its way thru various House committees, and a Congressional Budget Office analysis released on March 13 slowed its momentum by concluding, among other things, that millions more Americans would be uninsured under the AHCA than under the ACA (14 million in 2018, 21 million in 2020, and 24 million in 2026).

After it became clear that the roughly three-dozen member Republican House Freedom Caucus—which sought a more aggressive piece of legislation that would gut the ACA—would not support the bill, House Speaker Paul Ryan concluded that the Republicans lacked the needed votes. Thus, on March 24, he pulled the AHCA from the floor. Ryan told reporters, "I don't know what else to say other than Obamacare is the law of the land" and "We're going to be living with Obamacare for the foreseeable future."

In the wake of the AHCA's failure, as usual, political pundits were quick to identify who gets the blame, who were the winners, and who were the losers. While a number of analysts have described a logical spectrum of strategic options for the Republicans, one has to wonder whether any healthcare reform legislation can make it thru Congress during the Trump administration. President Donald Trump and congressional Republicans have their campaign promise to repeal and replace Obamacare hanging over their heads, they must deal with the ACA-based healthcare system that has serious flaws, and they must grapple with fragmentation within their own party, not to mention fairly unified opposition by congressional Democrats. It's a political hornet's nest.

In some ways, the U.S. political scene is starting to look like many Western European democracies, which have multiple political parties, none with a clear majority. Out of sheer pragmatism and a common desire to get things done, many of those nations have coalition governments or their political parties have formed temporary coalitions to pass legislation on specific policy areas.

Assuming continued gridlock in Washington regarding health reform, what are the biggest implications for hospitals?

First, the status quo will continue—for now. As Speaker Ryan said, "Obamacare is the law of the land."

Second, the Achilles' heel of the ACA, the individual health insurance market, will continue to weaken, due to relatively unhealthy membership pools (referred to as "adverse selection"), decreasing numbers of participating health plans, and significantly higher premiums—which push consumers to go without insurance or choose high-deductible health plans. As a result, hospitals could experience rises in uncompensated care, as patients struggle to pay out-of-pocket expenses.

Third, it's full steam ahead for value-based care, namely, the ACA's five healthcare delivery reforms: accountable care organizations, the Hospital Value-Based Payment Program, the Hospital Readmissions Reduction Program, bundled payments, and the payment adjustment for hospital-acquired conditions. Thus, hospitals would be wise to devote more attention and resources to these programs for direct and indirect reasons. The direct reason is that hospital finances are impacted. Each of the aforementioned programs uses economic carrots and/or sticks to reward or punish provider organizations for quality and/or cost performance. The indirect reason is that most premium dollars go toward paying medical claims. Therefore, keeping premiums affordable requires keeping health spending (utilization) in check. Moderating health spending growth is a key to the sustainability of not only the individual market, but also the healthcare system as a whole.

Fourth, hospitals should advocate for inclusion of a repeal of the ACA's reimbursement rate cuts (market basket revisions and productivity adjustments to the Inpatient Prospective Payment System) in any future health reform bills. A day after the AHCA's release, American Hospital Association President and CEO Richard J. Pollack's sent a letter to Congress in which he stated, "...we object to eliminating the funding from some sources, but leaving in reductions to payments for hospital services." As an example of the former, the AHCA would have benefited medical device manufacturers by repealing the 2.3 percent Medical Devise Excise Tax, which generates about $2 billion in tax revenue per year for the federal government. However, it would not have repealed the aforementioned market basket revisions and productivity adjustments to the IPPS which were a major source of funding for the ACA and will generate an estimated $23.5 billion in 2018 and $30 billion in 2019 in savings for the federal government.

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