Hospital Organizations Address ACA Repeal Concerns to President Trump
The American Hospital Association (“AHA”) and Federation of American Hospitals (“FAH”), on December 6, 2016, wrote a letter to President-elect Donald J. Trump and Vice President-elect Michael R. Pence addressing the fact that “Congress is moving to reconsider the Affordable Care Act in the early days of the new year without enacting accompanying legislation specifically guaranteeing similar coverage for those who will lose it” (“Letter”).
In an effort to understand the potential financial impact on hospitals of a repeal of the ACA with no replacement, AHA and FAH commissioned the firm of Dobson DaVanzo & Associates (“DDA”), a healthcare economics consulting firm, to prepare a report. DDA submitted a report to AHA and FAH entitled “Estimating the Impact of Repealing the Affordable Care Act on Hospitals” (“Report”).
The Letter
The Letter reflects the fact that parity is needed by hospitals in order to enable them to continue to provide quality healthcare to patients and communities. AHA and FAH urged that, if the ACA is repealed, legislation would need to be introduced to repeal of reductions in funding for Medicare and Medicaid services provided by hospitals. AHA and FAH state in the Letter that “In addition, restoring these cuts is consistent with Congressional action aimed at repealing a variety of ACA-related taxes that were imposed to help fund coverage expansion. It stands to reason that, if the funding and cost of the ACA is repealed, all sources of funding for that legislation, including cuts to payments for hospital services, should be rolled back as well.”
The Letter notes that, in its Report, DDA stated that, if the ACA was repealed, hospitals would stand to lose approximately 100% more than the hospital reductions that occurred as a result of the Balanced Budget Act of 1997. To date this has been the largest reduction if federal payments for hospital services. DDA states in the Report that “this magnitude of cuts would threaten hospitals’ ability to serve their patients and communities.”
AHA and FAH also addressed in the Letter a second analysis performed by DDA that estimated total reductions in federal payments to hospitals for services imposed by the federal government which are separate and distinct from the ACA. Potential reductions in this area amount to an additional $148 billion.
The Report
DDA based its analysis of the financial impact of a repeal of the ACA on H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act (“Bill”), for the period 2018 through 2026. This Bill was passed by Congress in 2015 and subsequently vetoed by President Obama. DDA noted that the Bill proposed the following measures be taken in an effort to repeal the ACA:
- Repeal individual tax penalties for not keeping qualifying health coverage;
- Repeal tax penalties for employers that do not offer qualifying health coverage;
- Repeal premium tax credits;
- Repeal cost-sharing subsidies;
- Repeal the transitional reinsurance program;
- Repeal Medicaid expansion:
- Restore the Medicaid DSH payments that were reduced under the ACA; and
- Repeal other taxes specified in the ACA (i.e. medical device excise tax, prescription drug tax, over-the-counter medication tax, deduction for expenses allocable to Medicare Part D subsidy, taxes on employee health insurance premiums and health plan benefits, limitations on contributions to flexible spending accounts, reduced tax treatment of health savings accounts from 20% to 10%, reduction in chronic care tax from 10% to 7.5%, tax on high-cost insurance plans, and Medicare tax increase on individual wages).
In order to calculate estimates of the financial impact of the repeal of the ACA, DDA used a number of key studies to formulate its model including, but not limited to, the Congressional Budget Office estimates of budgetary and economic effects of repealing the ACA.
In the Executive Summary of the Report, DDA found that, for the period 2018 through 2026:
- The loss of coverage would have a net impact on hospitals of $165.8 billion with the restoration of Medicaid DSH reductions;
- The ACA Medicare reductions are maintained and hospitals will suffer additional losses of $289.5 billion from reductions in their inflation updates; and
- Full restoration of Medicare and Medicaid Disproportionate Share Hospital (“DSH”) payment reductions embedded in ACA would amount of $102.9 billion.
DDA states in the Report that a repeal of Medicaid expansion, premium tax credits, cost-sharing subsidies and penalties would result in a reduction of hospital revenues of $399.8 billion for the period 2018 through 2016 due to the fact that individuals would lose coverage or opt for other types of coverage. Since the number of individuals with insurance would decrease and, in effect, reduce their utilization of hospital services, DDA estimated a reduction of approximately $139.4 billion in hospital costs during this time period.
Additionally, DDA noted that there are potential increases in hospital revenues anticipated. DDA also states in the Report that, as the scheduled reductions in state DSH allotments are restored, hospitals would see increased Medicaid DSH payments of $45.0 billion. There would also be an increase in Medicare DSH payments of $49.5 billion for hospitals.
Conclusion
AHA and FAH caution President-elect Trump and Vice President-elect Pence that “the cuts detailed above will create challenging and potentially unsustainable financial circumstances that could ultimately reduce patients’ care options. And they highlight only part of the problem.” AHA and FAH estimate that 40% to 50% of hospitals will suffer negative margins in the future if the ACA is repealed.
A copy of the Letter can be accessed here.
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