Proposed HHS Budget Has Good and Bad News for Providers

The administration has proposed an 18 percent cut in the FY 2018 budget for the Department of Health and Human Services (HHS).

 

Analysts have evaluated these proposed cuts for their impact on healthcare providers.

 

Proposed Increases (Good News)

 

$70 million increase in the FY18 budget for the Health Care Fraud and Abuse Control (HCFAC) program to “double down” on revamping federal antifraud efforts, shifting away from a “pay-and-chase” approach to a prepayment claim review.

 

HCFAC recouped $5 for every $1 it spent in 2014-16, according to the administration. One analyst noted, “The message to providers—particularly hospitals—is that, based on this [ROI], congressional testimony, and based on things HHS Secretary Tom Price has said, the goal is to get to a system that is more like commercial insurers use.”

 

 

The federal government has been moving toward the prepayment review approach using analytics to identify “bad actors.” Generally, this has been limited to individual advance reviews by Medicare administrative contractors (MACs).

 

 

“When you talk about Medicare, that would scare the heck out of a hospital because the MACs are so slow and they so lack the expertise to make judgments about whether a claim is appropriate,” the analyst said. The budget push “ultimately would be good news because the pre-claim approach that Medicare currently uses is not one that anybody is satisfied with.”

 

$3.5 billion more to the Veterans Choice Program, which pays providers outside of the U.S. Department of Veterans Affairs (VA) to care for VA patients when they face long waits or lengthy travel to a VA facility. This program was funded with $10 billion in 2014 and is scheduled to expire in August.

 

$500 million to increase opioid-misuse prevention efforts and access to treatment and recovery services.

 

Focusing mental health funding on high-performing entities and high-priority areas, such as suicide prevention, serious mental illness, and children’s mental health.

 

Proposed Decreases (Bad News)

 

$5.8 billion decrease for the National Institutes of Health (NIH). The budget also would consolidate the Agency for Healthcare Research and Quality within NIH. The reduction would have a significant impact on some academic centers. In FY 2016, an analysis of NIH funding showed that independent hospitals received $2.2 billion and medical schools received $12 billion.

 

$403 million decrease from healthcare professional and nurse training programs. The administration believes there is no evidence that the programs significantly improve the healthcare workforce. Some hospital advocates warned that the nurse-training cuts could undercut their efforts to expand state scope-of-practice laws for nurse practitioners to practice at the top of their licenses. Although the cuts could affect funding for medical school students, they are not expected to affect Medicare’s graduate medical education monies.

 

The administration plans to release the full budget in May, including specific mandatory spending and tax proposals, and it’s difficult to assess the approach Congress will take. So it’s wait-and-see for healthcare providers. The above analysis, however, shows the general direction of the administration with respect to HHS.

 

(Source for this information: “Hospitals Could See Antifraud Push Under Trump Budget,” HFMA Weekly News, March 24, 2017)

 

 

 

iProtean subscribers, the advanced Mission & Strategy course, When the Dust Settles, featuring Marian Jennings and Dan Grauman, is in your library. Marian and Dan discuss the complexities of moving to a value-based healthcare organization, key features necessary to ensure the board and leadership stay ahead of the curve, the importance of thoughtful and thorough assessment of options available to the organization, the risks inherent in new investments and changes in board recruitment and development.

 

 

 

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Summary and Reaction to American Health Care Act Bill

Note: iProtean’s newsletter/blog will not be published next week because of iProtean’s symposium

 

Last week, Republicans presented initial legislation as a redo of the Affordable Care Act (ACA), calling it the American Health Care Act (ACHA). A summary of the changes appears below, courtesy of the American Health Lawyers Association.

 

  • Phase out of Medicaid Expansion. Medicaid expansion would end December 31, 2019, including the state option to extend Medicaid coverage to adults above 133% of the federal poverty level, at which point federal Medicaid funding would transition to a “per capita cap” system that would give states a capped amount of Medicaid funds per enrollee.
  • Repeal of the individual mandate. The tax penalty imposed on individuals who fail to maintain minimum health insurance coverage would be repealed.
  • Premium surcharges for lapses in coverage. In lieu of the individual mandate, AHCA introduces a 30 percent penalty on premiums for lapses in insurance coverage in order to encourage continuous enrollment.
  • Repeal of the employer mandate. AHCA would also repeal the employer mandate—retroactively for 2016—the requirement that certain employers (generally those employing more than 50 FTEs) offer “minimum essential coverage” to employees.
  • Refundable tax credits in lieu of subsidies. ACA subsidies to assist qualifying individuals with the costs of insurance premiums would be replaced by a system of refundable tax credits based on age, which would phase out at certain income levels.
  • Repeal of various ACA taxes and fees. The bill would repeal certain ACA taxes and fees on health insurers, medical devices, branded prescription drugs (beginning in 2018) and tanning salons. ACA’s “Cadillac” tax on high-cost health insurance plans would remain, but be delayed until 2025.
  • Reversal of ACA’s cuts to DSH payments. AHCA would eliminate the ACA’s planned cuts to disproportionate share hospital (DSH) payments.
  • Defunding of certain organizations. The bill would bar certain nonprofit organizations that provide abortions from receiving Medicaid reimbursements.
  • Establishment of a “Patient and State Stability Fund.” The proposed $100 billion fund would go to states for providing financial assistance to high-risk individuals and stabilizing health insurance premiums in the individual market.
  • Increase in age variation in healthcare premium rates. AHCA would increase the permitted age band rating to a 5:1 ration from ACA’s current 3:1 ratio, allowing insurers to charge older patients five times as much as younger patients.

 

The bill retains the following:

 

  • Children can stay on parents’ health insurance until 26.
  • Insurance plans cannot deny coverage for pre-existing conditions.
  • Insurance exchanges will remain, although many of the changes may bring their continued viability into question.

 

Industry Reaction

 

The response from the healthcare/provider industry has been across-the-board opposition. Hospital advocacy organizations sent letters to Congress this week expressing concerns about “a range of adverse financial effects” from the bill.

 

The American Hospital Association (AHA), America’s Essential Hospitals (AEH), the Association of American Medical Colleges, the Catholic Health Association of the United States (CHA), the Children’s Hospital Association, the Federation of American Hospitals (FAH), and the National Association of Psychiatric Health noted in a March 8 letter to Congress the reasons for their opposition, including “tremendous instability for those seeking affordable coverage,” changes to Medicaid, and the proposed continuation of the ACA’s cuts to Medicare provider payments. (“Seven National Hospital Groups Oppose ACA Replacement Bill,” HFMA Weekly, March 10, 2017)

 

“As a result, we cannot support the American Health Care Act as currently written,” they wrote. For a link to this letter, click here.

 

These organizations generally backed the passage of the ACA.

 

Congressional Budget Office Weighs In

 

The Congressional Budget Office (CBO) reported earlier this week that AHCA “would drive up the number of uninsured Americans by 24 million over the next decade, largely because of the bill’s Medicaid changes . . . but would reduce the federal deficit by $337 billion over the coming decade by cutting Medicaid spending and eliminating the Affordable Care Act’s premium subsidies.” (“24 million would lose coverage under GOP’s Obamacare repeal plan,” Modern Healthcare, March 14, 2017)

 

As a result of changes to Medicaid eligibility, the CBO report said that “some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped.” The end result would be a big drop in enrollment and also a big drop in spending—$880 billion over ten years.

 

“By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law,” the report says.

 

The drop in spending on Medicaid partially explains why the CBO estimated that the GOP reform would reduce the deficit by $337 billion. However, the CBO added that Medicaid spending would decrease by $880 billion. So it’s difficult to explain the discrepancy. Some analysts noted the legislation would abolish the 3.8 percent Medicare tax on investment income and the 0.9 percent surtax on ordinary income that the ACA applied to people who make more than $250,000. The CBO report said that getting rid of these taxes and some annual fees that the ACA imposed on insurers would reduce revenues by $592 billion over 10 years.

 

 

iProtean subscribers, the advanced Mission & Strategy course, When the Dust Settles, featuring Marian Jennings and Dan Grauman, is in your library. Marian and Dan discuss the complexities of moving to a value-based healthcare organization, key features necessary to ensure the board and leadership stay ahead of the curve, the importance of thoughtful and thorough assessment of options available to the organization, the risks inherent in new investments and changes in board recruitment and development.

 

 

 

For a complete list of iProtean courses, click here.

 

 

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Majority of CEOs Want to Keep Major Provisions of ACA in Place

Republican plans to repeal and replace the Affordable Care Act (ACA) with their own design have put healthcare CEOs in a state of “high anxiety,” according to a recent survey conducted by Modern Healthcare.

 

The first-quarter survey of Modern Healthcare’s CEO Power Panel received 81 responses from 110 of the CEOs contacted. It also included interviews with some of the respondents.

 

Of CEOs responding to the survey, 77.9 percent oppose repealing the ACA, even with the promise of a replacement plan and a transition period. And 79.2 percent favor keeping the law’s expansion of Medicaid coverage to low-income adults, which would be eliminated or phased out in the current Republican proposal.

 

Nearly two-thirds want to preserve generous premium subsidies so no one pays more than a set percentage of income for health insurance. That contrasts with the House GOP plan to base premium tax credits on age rather than income. About the same percentage prefers to keep the ACA’s minimum essential benefits, which would be erased under Republican plans.

 

Specifically, the survey results showed that:

  • Only 2.6 percent of the respondents said that individual health plans sold on the insurance exchanges should not be a required purchase for the uninsured (the individual mandate).
  • 4 percent said that individual health plans sold on the insurance exchanges should be subsidized so no individual or family pays more than a set percentage of income in premiums.

 

Healthcare leaders are more open to Republican proposals to give states greater autonomy to custom-design their own Medicaid programs by converting Medicaid into a program of federal block grant or per-capita payments to the states; 55.7 percent said they would support that model.  But they would back it only on the condition that current funding levels are maintained. The current GOP proposal includes major reductions over time in federal payments to the states for Medicaid and the Children’s Health Insurance Program, which together cover 74 million Americans.

 

The CEOs want details of the Republican plan regarding federal Medicaid payments, and how each state would be affected, whether or not it had expanded Medicaid. “How people will function under a block grant is entirely dependent on how much money they get,” one hospital CEO said. “What’s the base level of funding, and how is that indexed going forward? That’s the whole deal.”

 

“If we’re going to use the restructuring of Medicaid as a vehicle to achieve big budget reductions, leaving lots of people uninsured, that’s not a productive discussion,” said Rick Pollack, CEO of the American Hospital Association.
(Source: “High anxiety: Healthcare execs want coverage continuity,” Modern Healthcare, March 4, 2017)

 

 

 

 

iProtean subscribers, the advanced Mission & Strategy course, When the Dust Settles, featuring Marian Jennings and Dan Grauman, is in your library. Marian and Dan discuss the complexities of moving to a value-based healthcare organization, key features necessary to ensure the board and leadership stay ahead of the curve, the importance of thoughtful and thorough assessment of options available to the organization, the risks inherent in new investments and changes in board recruitment and development.

 

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.