Although the high drama of the Senate debate on repeal of the Affordable Care Act seems to be over for the time being, health care reform remains in the headlines.
Trump's Threats Regarding Congressional Coverage And Cost-Sharing Reduction Insurer Reimbursements
On July 29, 2017, President Trump tweeted, "If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!" This tweet carries a double threat: to end the cost-sharing reduction (CSR) payments that insurance companies receive to reimburse them for reducing cost sharing for low-income enrollees, and to stop Office of Personnel Management payments for members of Congress and their personal staff. White House Counselor Kellyanne Conway reinforced President Trump's threat by saying on Fox News on the 30th that the President would decide within the week whether the cost-sharing reductions would continue.
CSR Payments
Any Health Affairs Blog reader is intimately familiar with the CSR issue. The ACA requires insurers to reduce cost-sharing (deductibles, coinsurance, copayments, and out-of-pocket limits) dramatically for individuals with incomes between 100 and 250 percent of the federal poverty level. About 6 million Americans receive cost-sharing reductions. Many see their deductibles effectively eliminated. The ACA requires the federal government to reimburse insurers for these CSRs, and government has been making monthly payments to the insurers for doing so. It is expected to pay about $7 billion for the CSRs this year.
The House of Representatives sued in 2014, claiming that this reimbursement was illegal because Congress had not appropriated money for the CSR payments. A district court agreed with the House and enjoined the payments in 2016, but stayed its order pending an appeal. The Obama administration filed an appellate brief arguing that the court did not have jurisdiction to hear a lawsuit by the House of Representatives, but also that there was in fact an appropriation to cover the CSRs.
The House asked for a delay in filing its responsive brief, and then, when Trump became President, asked for further delays while it conducted negotiations with the Trump administration. Attorneys general from 17 states and the District of Columbia have asked to intervene in the lawsuit to protect the subsidies, but the court has not yet ruled on their petition.
The question before the court continues to be whether there is an appropriation for the CSRs. If there is, then the President cannot legally refuse payment of the money. If the administration is advised by its lawyers that the funds have not been appropriated, contrary to the position of the Obama administration, the administration could so inform the court and stop paying the money. The states would presumably continue to argue that the funds have been appropriated, if they are allowed to do so. Insurers, the states, or consumers might also file a new lawsuit to compel payment of the CSRs.
The contract that insurers have signed with the federal marketplace arguably gives them the right to withdraw if the payments are cut off. The insurers cannot terminate policies, however, only participation in the exchange. Also, insurers would have to give notice under state law to withdraw, probably 90 days. If payments are terminated this late in the year, insurers might decide it was not worth the trouble of withdrawing unless they were forced to for solvency reasons or decided to leave the market for good (in which case they might have to give 180 days' notice).
The most likely response of insurers would be to either raise premiums dramatically for 2018—probably by 20 percent above premium increases they have otherwise planned—or to not return to the market for 2018. Premium increases would be greater in states that have not expanded Medicaid, because they have a higher proportion of exchange enrollees who qualify for premium tax credits. In states that permitted it, the insurers would load the entire increase on silver plan premiums. This would raise the benchmark and dramatically increase federal expenditures on premium tax credits. It is estimated that ending the CSR payments would increase federal expenditures by $2.3 billion for 2018 and $31 billon over 10 years.
Moreover, people in the individual market who do not qualify for premium tax credits—many of them the farmers, ranchers, and small business people who elected Donald Trump—are likely to face dramatically higher premiums. The healthier among them may drop their coverage, but those who are not able to may not be happy about the change.
FEHB Payments For Legislators And Their Staffs
The second threat is to end FEHB payments for members of Congress and Congressional staffers. The ACA provides that "the only health plans that the Federal Government may make available to Members of Congress and congressional staff" are ACA exchange plans. The requirement that members of Congress purchase coverage through the exchange was included in the ACA because of a political gambit offered by an opponent of the law, Charles Grassley. Reportedly, Senator Grassley, intending to embarrass Democratic supporters of the law, offered an amendment requiring members of Congress to purchase coverage through the same exchanges through which many of their constituents would be purchasing coverage. Democrats, however, embraced the idea and added it to the ACA. Members of Congress and their staff are the only Americans required to get their coverage through the ACA marketplaces.
The intent of Congress as to how coverage would be paid for was clear all along. Members of Congress are federal employees and Congressional coverage is paid for in the same way coverage for other federal employees is funded — through the federal Office of Personnel Management. The payment is no more a "bailout" than are the payments that President Trump and his staff receive as federal employees.
This was recognized in a rule promulgated by OPM in 2013. If the current administration believes that this rule is in error, it would need to promulgate an amended rule through notice and comment rulemaking, which would take months. It is hard to believe, however, that a rule cutting off OPM payments for members of Congress and their staff would be legally defensible in lawsuits that would surely follow.
In a third development, Republican Senators Cassidy (LA), Graham (SC), and Heller (NV) continue to push their proposal for ACA repeal. The senators met with President Trump on July 28, while Senator Cassidy met with Secretary Price and several state governors on July 31. The Graham-Cassidy-Heller amendment builds on the original Better Care Reconciliation Act. Like the BCRA, it defunds Planned Parenthood for a year, prohibits tax credits for plans that cover abortions, provides for small business association health plans, expands 1332 waiver authority (considerably), defunds the prevention and public health fund after 2018, and repeals a number of ACA taxes and limitations on tax preferences (not including the Medicare surcharge and unearned income tax for high income taxpayers). It also includes per capita caps for Medicaid with a block grant alternative. Whether some of the included provisions could be included in a reconciliation bill has been called into question by the Senate Parliamentarian, and they might well be subject to a point of order objection before they were enacted into law.
The primary innovation of Cassidy-Graham-Heller is that it would end premium tax credits, cost-sharing reduction payments, and enhanced Medicaid expansion funding by 2020, and offer in their stead block grants, which could be used to provide coverage, stabilize markets, reduce cost-sharing, and provide wraparound coverage for persons in the expansion group. These grants would begin at about $140 billion in 2020 and increase by $3 billion each year through 2026. Although the CBO has not analyzed the bill, the Center on Budget and Policy Priorities (CBPP) reports that the block grant would begin in 2020 at 16 percent or $26 billion below current projected funding levels, and end in 2026 at $83 billion or 34 percent below current projected levels.
Grants would be distributed according to complicated formulas that take into account factors including income, age, population density, and Medicaid expansion population. Clearly there would be winners and losers under these formulas. The CBPP reports that the formula would move money away from states that have expanded coverage to those that have not. States would have to match federal grants, beginning with a 3 percent match in 2020 which would grow to 5 percent in 2026, which will likely discourage some states from applying.
While the concept of the Cassidy-Graham-Heller bill might prove attractive to those in Congress and elsewhere who would like to move authority and funding to the states, it is difficult to see how it would be possible for each state to implement its own subsidy program by 2020. It is also likely that, even leaving aside the matching money explicitly required by the bill, states would end up with far less money than they would need to continue current coverage levels. It is not obvious why Cassidy-Graham-Heller should prove more attractive than other proposals that were rejected during the recent Senate debate.
Bipartisan House Group Offers Market Stabilization Agenda
On the House side, a group of about 43 centrist Republicans and Democrats calling themselves the Bipartisan Problem Solvers Caucus have reached consensus on a list of proposals for stabilizing the health care industry. Their ideas include:
- A mandatory appropriation for the cost-sharing reduction payments,
- A state stability fund,
- Raising the threshold for application of the employer mandate from 50 employees to 500, and for full-time work from 30 to 40 hours,
- Repealing the medical device tax, and
- Providing technical changes and clearer guidelines for 1332 state innovation waivers and for section 1333, which allows states to enter into Health Care Choice Compacts allowing the sale of insurance across state lines.
The bipartisan group says that it continues to discuss recapturing premium tax credit overpayments (which are already recaptured, subject to caps for low-income recipients); encouraging the use of generic drugs for Medicare Part D; speeding up brand drug discounts for Medicare beneficiaries in the doughnut hole; creating Medicare bundled payments for post-acute care; reducing Medicare payments for bad debt; and accelerating competitive bidding for Medicare Advantage.
The House is now on summer recess and will remain there through August. When it returns, looking for bipartisan consensus might be a good place to start moving forward on health reform. Partisanship does not seem to have succeeded.
All But One Ohio 'Bare' County Covered
Finally, some good news. The Ohio Department of Insurance announced on July 31 that 19 of the 20 'bare' counties (counties without any insurers on the exchange) in Ohio are now covered for 2018. Nationally, there now remain only 19 counties—14 in Nevada, 4 in Indiana, and 1 in Ohio—with a total of 15,000 residents without an insurer available on the exchange for 2018.
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