Key Takeaways: Today the Senate released their hotly anticipated “discussion draft” of the American Health Care Act. As expected the bill moderates the House’s approach to Medicaid expansion and tax credits to support the individual market. The AHCA also provides a nice surprise for mental health and SUD treatment facilities.
- Status quo for Medicaid expansion for three years with three year phase-down of expansion funding
- Transforms the Medicaid program from an open-ended entitlement to a per capita or block grant financing system
- Permits increased flexibility for states to revise their Medicaid programs and reduces administrative burden of Section 1115 waivers by making those for managed care permanent under certain circumstances
- Sends buckets of money to states to create parity between expansion and non-expansion states; stabilize insurance markets and provide funding for innovations
- Brings more oversight to Medicaid program
- Funds Cost Sharing Reduction payments through 2019 but repeals the program beginning in 2020
- Makes available tax credits for people living at 0-350 percent of poverty depending on age. The amount of assistance will depend on the extent to which premiums exceed the percentages of household income listed below:
- Amends the Medicaid IMD exclusion to permit inpatient care for 30 days for opioid addiction treatment and up to 90 days a year
Nothing in the Senate version changes our view that the AHCA is a significant headwind for inpatient hospitals. The bill is bad enough, apparently for THC management to step out from under the umbrella of its trade group and send an email blast out to all employees asking them to oppose it. That sort of thing rarely happens.
In the near term, the Senate draft and what may eventually be passed by both houses is certainly more comfortable for hospitals than the more conservative version that is the House-passed AHCA. The Medicaid and individual market dollars will flow a little longer and the stabilization dollars will keep the insurance markets from deteriorating further.
The bill is, in the short term, bad news for Medicaid Managed Care Organizations who will face some disenrollment due to better federal oversight mandated by the AHCA. This requirement, coupled with state-based initiatives to impose work requirements, cost-sharing and other reforms on Medicaid populations, will drive the number of covered lives down in the next year or two.
In the long term, however, the imposition of a per capita or block grant Medicaid system aligns well with managed care and should provide the catalyst for expansion in those states that have not adopted it in part or in whole. The bill makes permanent, under certain circumstances, managed care waivers, thus eliminating some of the uncertainty that accompanies the five year demonstration format that has been in place since the 1960s.
The amendment to the IMD exclusion is welcome news for states that have been driving toward this change through Medicaid Section1115 waivers. The bill makes the change uniform across the states and is great news for UHS, ACHC and AAC.
Lastly, relief from the MLR ratios beginning in 2019 in those states willing to consider it, the repeal of the EHBs and other insurance provisions are, ironically, good news for the insurance industry which until recently was getting little love in Washington.
Below is a revised clip and save chart of the major provisions:
There is a lot in this bill and we will dive into it over the next few days. In the meantime, call with questions. The government is open late and so are we.
Emily Evans
Managing Director
Health Policy
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