Several key Republican lawmakers have reportedly shifted their rhetoric in recent weeks from repealing and replacing the Patient Protection and Affordable Care Act (“ACA”) to repairing it. But with many of the leading ‘repeal’ plans promising to reinstate certain elements of ACA immediately, the differences between these two paths may be academic.
Throughout the last election cycle, Republicans promised newly insured individuals they would not lose insurance coverage if the ACA were repealed. Facing pushback from the public on certain popular provisions of the law, Senator Lamar Alexander (R – TN), chairman of the Senate health committee, announced the alternative plan could be more accurately described as a “repair” than a replacement. Adding to the mixed message, Speaker of the House, Rep. Paul Ryan, (R – WI) said ‘repairing’ the ACA actually meant repealing and replacing it.
Semantics aside, it is becoming increasingly clear that the GOP replacement plan will share some characteristics with the ACA. Fundamentally, most prominent GOP alternatives mirror the ACA’s multi-payer system in which consumers are offered tax credits for purchasing private insurance on an individual marketplace, while public programs like Medicaid are bolstered through federal funds. Within this context, differences exist as to how the tax credits will be distributed, how the Medicaid funds will be applied, and how insurers will be restricted in shaping their plans. Also like the ACA, Speaker Ryan’s “Better Way” plan seeks to prohibit insurers from excluding members based on preexisting conditions, and to allow adults up to age 26 to remain on their parents’ plans. Health and Human Services Secretary nominee Tom Price, who has proposed his own replacement plan, supports a limited form of preexisting condition exclusions and stated in his confirmation hearing that he would considering preserving the CMS Innovation Center that has housed many of the ACA’s value-based payment reforms.
Possible Implications of a Complete Repeal for Rural Hospitals
An overhaul of the ACA comes at a critical time for healthcare in rural America. A December 2016 report from the CDC found a decline in life expectancy for Americans—particularly among Americans living in rural areas—for the first time in 20 years. The CDC attributed this finding to rural Americans having higher rates of chronic illness, obesity, alcoholism, mental illness, and suicide relative to their urban counterparts. The financial health of hospitals serving rural populations remains dire; an estimated 700 rural hospitals across the country are vulnerable to closure.
Here are some elements of the ACA that have especially affected rural healthcare and whose repeal would have significant impacts on rural providers.
Repealing the ACA’s Medicaid expansion would be a massive blow to rural health providers, but its impact would be greater, naturally, in states that opted to expand Medicaid in the first place. After the U.S. Supreme Court made expansion optional in 2012, thirty-two states including the District of Columbia expanded Medicaid coverage under the ACA. For providers in states that declined to expand Medicaid, a repeal of the expansion will be business as usual.
In so-called “expansion states,” many hospitals will see an increase in uncompensated care if the ACA’s replacement withdraws federal support for expanded Medicaid programs. The American Hospital Association has estimated repealing the expansion of Medicaid would cost hospitals across the United States more than $160 billion due to reductions in Medicaid revenue received and an increase in unpaid medical bills. These financial losses would impact all hospitals, especially rural hospitals due to a greater percentage of their patient populations gaining coverage under the Medicaid expansion relative to urban and suburban hospitals.
Medicare and Other Reimbursement Cuts
The ACA contained a variety of Medicare payment cuts that have adversely affected health providers. Repealing some of these cuts, such as the reduction in reimbursement from Medicare Advantage plans, would benefit health providers including those in rural areas. The same goes for repeals of payments that compensate hospitals treating a disproportionate share of uninsured patients (“DSH” payments); however, while cuts to Medicare DSH payments have hurt some rural hospitals, such hospitals would be much more heavily impacted by the ACA’s planned reductions in Medicaid DSH payments, which have been delayed and therefore not yet felt by rural hospitals.
Of note, the across-the-board 2-percent sequestration cut to Medicare payments, first passed into law in 2011, was not a part of the ACA and would not be undone merely by way of an ACA repeal.
The ACA contained several initiatives aimed at tying providers’ payments to the quality of their care (Accountable Care Organizations; Hospital Value-Based Purchasing Program; Hospital-Acquired Condition Reduction Program, and more) and further directed CMS to test and implement new approaches to compensating providers in hopes of containing costs. Currently, the CMS Innovation Center administers dozens of programs in this “value-based” mold, and private payers have followed suit.
Repealing the ACA without immediately reinstating the statutory basis for these value-based programs would cause significant confusion and disarray in the provider community. While many providers would likely breathe a sigh of relief without the threat of penalties for readmissions and other quality measures, these programs have been widely adopted and their repeal would disrupt delivery and workflow changes and technological investments that providers have made since the ACA’s passage.
The 340b Drug-Pricing Program was enacted by Congress in 1992 to provide low-cost drugs to designated “social safety net” medical facilities in economically distressed areas of the country. A provision of the ACA expanded the 340b Program, causing 1,100 rural hospitals to become eligible to purchase low-cost drugs from drug companies. The expanded 340b Program was a windfall for many rural hospitals, especially when the typical rural hospital operates on small margins. An outright ACA repeal would eliminate these valuable cost-savings.
An increase in insured patients is a benefit to all providers, including rural hospitals. Therefore, the repeal of the ACA’s “individual mandate,” requiring all taxpayers to purchase health insurance or else pay a penalty, will not help rural healthcare to the extent that it raises the uninsured rate.
However, as discussed above, rural hospitals treat a higher percentage of Medicaid patients relative to urban hospitals, and a lower relative percentage of commercial-pay patients. This will limit the impact of changes to the individual marketplace on rural providers.
The frustratingly limited benefit of the individual mandate on rural health is especially pronounced in states that have declined to expand Medicaid. That is because the ACA was never redesigned to account for the optional Medicaid expansion; therefore subsidies for buying private insurance were never extended to patients who would otherwise have been covered under expanded Medicaid programs (a problem known as the “coverage gap”).
Individuals falling in this coverage gap have incomes that exceed eligibility for Medicaid, but fall below the lowest income eligible for premium tax credits under the ACA. An estimated 2.5 million adults fall into this category. If the coverage gap had been closed through amendments to the ACA, rural providers in non-expansion states would be more affected by possible changes to the private insurance marketplace.