ACA Replace and Reform: What Does it Mean for Providers and Patients?


Most Alabama healthcare providers agree that the current Affordable Care Act (the "ACA") is not working and needs substantial revision. Premiums, deductibles and co-payments are too high for many patients to afford meaningful coverage, and there is insufficient competition in the health insurance market. Healthy individuals are opting to pay the penalty and go without coverage. Moreover, providers are facing complicated new payment methodologies such as MIPS and bundled payment demonstration projects that are expensive to implement and offer little in the way of improved patient care. Physicians are expected to complete more paperwork and deal with bloated bureaucracies even while they implement expensive new software programs. As a result, providers are having difficulty maintaining satisfactory financial results and recruiting new physicians.

Last month, in an effort to improve the healthcare payment environment and address some of these concerns, the U.S. House of Representatives passed a bill to repeal some key portions of the ACA. Specifically, this legislation guts a number of major provisions of the ACA, including:

  • Ending the tax penalty against individuals without health coverage.
  • Ending the Medicaid expansion funding provision of the ACA.
  • Replacing the ACA's cost-sharing subsidies based on consumers' incomes and premium costs with tax credits that increase as consumers age.
  • Repealing taxes on certain higher income Americans, insurers, and drug and medical device makers to pay for ACA.

The bill also provides that consumers who let their coverage lapse for more than 63 days in a year would be required to pay a 30 percent surcharge to reinstate their lapsed insurance coverage obtained through an exchange. Currently, hospitals and other providers frequently have patients who fail to pay their premiums after enrollment without any real disincentives for future re-enrollment. As a result, there are many cases of retroactive denials and payment offsets for patients that appeared to have coverage on admission or at a first encounter. This change would hopefully encourage patients to keep their coverage in place even when they are not facing an immediate health emergency.

The House bill includes some provisions designed to rein in spending. For example, the bill would change Medicaid from an open-ended program to one that gives states a fixed amount of money per person per year. States could also adopt rules that eliminate the mandated coverage for all pre-existing conditions. States would, however, receive $8 billion over five years to finance high-risk pools that cover those individuals with pre-existing conditions, and states would get $130 billion over a decade to help people afford coverage. The legislation also retains one of the most popular portions of the ACA: allowing children to remain on their parents' insurance plans until the age of 26.

Because Alabama has not expanded Medicaid coverage under the ACA, it is unlikely to be impacted by any efforts to limit further expansion. Currently, Alabama Medicaid covers over 50 percent of births in our state and the threshold for Medicaid qualification is a relatively low level of annual income. Because Alabama's Medicaid expenditures per Medicaid recipient are low in comparison with most other states, Alabama providers will probably not see increases in Medicaid reimbursement if the current version of the ACA repeal and replace legislation is fully implemented. Even if the legislation provides greater flexibility for Medicaid programs, Alabama providers are unlikely to see transformational changes in the Medicaid program because of the overall lower levels of funding.

The Senate is expected to take several months to develop its own legislation to repeal the ACA. It is unlikely that the Senate will pass the House legislation without major amendments. The Senate bill will likely do more to phase out Medicaid expansion over time. Sen. Susan Collins (R-ME) and Sen. Bill Cassidy (R-LA) have co-authored an ACA replacement with a considerably more moderate report than the House legislation. Conservative Senators Mike Lee (R-UT), Ted Cruz (R-TX) and Rand Paul (R-KY) have been pushing a more radical approach to reduce governmental involvement in healthcare and return to more free market principles. Senate Democrats seem content to continue ACA as is despite the myriad of problems.

As a result of these opposite approaches, it remains to be seen whether the current bill will be recognizable when (and if) it passes the Senate. Nevertheless, most commentators agree that the House's action is a significant step towards President Trump's campaign promise to "repeal and replace ObamaCare." At this point, the only real certainty for Alabama providers is constant change and confusion with the hope of a more market-based health care delivery system in the future.

Colin Luke is a partner with Waller and a Practice Group Leader with Healthcare Compliance and Operations.


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