The Fate of the Affordable Care Act Hangs in the Balance

Dec 15, 2016 | Archive

Since the election, there has been heavy speculation around the fate of the Affordable Care Act (ACA). While it’s certain changes are in the future, it’s not yet clear what those changes will look like-and how they will impact patients, providers and insurers.

All signs point to a Trump Administration focused on swiftly dismantling the ACA. Within recent weeks, House Republicans have requested a delay in a case seeking to eliminate cost-sharing subsidies that provide additional assistance to low-income Americans who purchase coverage through the Marketplace. This move is thought to be in anticipation of the incoming administration making changes to the ACA and is intended to buy time to develop a replacement while avoiding any potential disruption to the market.

More recently, the President-elect announced the nomination of U.S. Rep. Tom Price to the position of Secretary of Health and Human Services (HHS) and the nomination of Seema Verma to lead the Centers for Medicare and Medicaid (CMS). In these positions, the two are set to have key roles leading the redesign of a replacement for the ACA.

Price, an orthopedic surgeon, has been a harsh and long-time critic of the ACA, going so far as to credit the law with “ruining” the health care system. In fact, he was one of the first to introduce a replacement proposal for the law. Verma’s credentials include working alongside Vice President-elect Mike Pence to develop Indiana’s conservative approach to Medicaid expansion.

These nominations reflect the sense of immediacy regarding the need for changes to the ACA that has radiated from the Trump team throughout the campaign and continued post-election. Despite the expressed intention to immediately repeal and replace the law, it’s not likely we’ll see overnight changes due to political challenges and potential procedural hold-ups.

It’s anticipated any type of change would take effect after the 2017 plan year, giving those who purchase insurance on the Marketplaces time to make other arrangements for coverage and giving insurers time to recalibrate and adjust. That said, the Marketplaces aren’t going to close up shop come Jan. 20, and consumers won’t instantly be stripped of financial assistance to afford coverage. Changes to the ACA will take time.

Changes to portions of the law could be achieved through a Senate budget procedure that requires a simple majority vote-possible for the Republicans to achieve with their 51-seat majority. This process allows provisions that address federal revenues, taxes and related spending. This would allow for changes to aspects of the law such as premium subsidies (tax credits), individual mandate penalties for not having insurance, and Medicaid expansion.

One of the big questions surrounding replacement of the ACA is the impact on Medicaid expansion and the fate of those who have obtained coverage as a result of it. Trump’s seven-point health care plan calls for Medicaid block grants, while a recent report from Kaiser Family Foundation says states may have the option to choose between Medicaid block grants or Medicaid per capita cap financing. Either structure changes the design of the Medicaid program by shifting more power to the states and reducing federal funding. This decrease in funding could transfer the burden of some costs to states, members/patients and providers.

So how does each program work? Policymakers have some flexibility with regard to federal funding levels, eligibility requirements, benefits, state matching, and beneficiary protections. These aspects would be determined by policymakers.

  • Medicaid Block Grants. Block grants provide a set amount of funds to the state for Medicaid. According to the Kaiser Family Foundation, “previous block grant proposals have determined a base year financing amount for each state and then specified a fixed rate of growth for federal spending.” The amount of money granted to the state remains the same regardless of enrollment volume.
  • Medicaid Per Capita Cap. The federal government determines a state reimbursement cap per enrollee. State payments are calculated using a formula that multiples per enrollee spending by number of enrollees. In this scenario, spending fluctuates based on enrollment volume. Those spending fluctuations do not, however, account for changes in the costs per enrollee beyond the growth limit, according to Kaiser Family Foundation. 

Either approach could pose funding challenges for the states, or it has been speculated that revising Medicaid could face strong opposition. Limited funding could create financial barriers to care, reduce Medicaid enrollment and cause some of the more frequent Medicaid users to go without appropriate coverage. These program structures also provide limited flexibility to adjust to changing needs, such as rising drug costs.

It’s too early to tell the fate of the ACA and, more specifically, Medicaid. In the coming weeks, this may start to look clearer as the new administration continues its transition and we edge closer to the inauguration. In the meantime, the ability to be nimble, flexible and agile will be invaluable to any health care organization as we “wait and see” what the future holds for the ACA.