1

CHA EXECUTIVE BRIEFING

LATEST DEVELOPMENTS IN THE EFFORT TO REPEAL AND REPLACE ACA

June 30, 2017

CHA EXECUTIVE BRIEFING

LATEST DEVELOPMENTS IN THE EFFORT TO REPEAL AND REPLACE ACA

June 30, 2017

C. Duane Dauner, President & CEO, California Hospital AssociationAnne O’Rourke, Senior Vice President, Federal Relations

Presenters

C. Duane Dauner was appointed President/CEO in 1985 of CHA, the statewide leader representing the interests of nearly 400 hospitals and health systems in California. He has been active in national hospital and health care issues, serving on numerous American Hospital Association and American College of Healthcare Executives boards and committees. Duane has authored numerous articles and a book, and is a nationally known leader on health issues.

2

2

Anne O’Rourke is the senior vice president for Federal Relations for CHA. Based in Washington, D.C., Anne manages CHA’s Federal Relations office and represents the CHA membership before Congress and the White House. Before joining CHA, Anne spent 10 years as a senior lobbyist for the American Hospital Association.

3

Presenters

Program Overview

● Update on repeal, replace, repair effort

● Complex legislation that will impact every aspect of health care delivery

● CHA remains engaged – member advocacy vital

● Senator Feinstein and Senator Harris

● Not only voting “No,” but rallying the troops

● Conference call on Friday June 23

4

3

State of Play

● May 4 AHCA passes the House, 217-213

● June 22 Senate GOP releases discussion draft –Better Care Reconciliation Act of 2017 (BCRA)

● June 26 CBO releases score – 22 million uninsured

● June 27 Senate vote delayed until Post July 4th recess

● July 1 House and Senate adjourn for recess

● July 11 House and Senate return to Washington

● July 29 House and Senate adjourn for August recess5

Overview of BCRA

The Senate’s plan would strike the biggest parts of the Affordable Care Act (ACA): it ends Medicaid as an open-ended entitlement and give states the ability to waive the ACA’s insurance requirements and eliminates or reduces taxes.

● Many similarities to AHCA

● Major Medicaid reform –

● Per capita cap or Block Grant

● “Equity” adjustments for high and low spend states

● 26% reduction in federal spending

● Significant shift of risk and responsibility to state

● Complex formulas

● Provider Fee phase down to 5% by 2025

● Significant differences for expansion and non-expansion states6

4

SENATE PROPOSALAFFORDABLE CARE ACT WHAT’S CHANGED FROM HOUSE BILL

Individual mandate

Requires everyone to purchasehealth insurance or pay a penalty.

Eliminates penalties for going without insurance.

Insurers would be allowed toimpose a 30 percent premium surcharge on consumers who let their previous coveragelapse.

Employer mandate

Requires larger companies to offer affordable coverage to theiremployees.

Eliminates the requirement for mid-sized and large companies to provide coverage to workers.

Same as Senate bill.

Cost-sharing subsidies

The law provides payments to insurers to cover medical bills for most low-income customers on ACA’s exchangemarketplaces. Republicans say Congressnever properly appropriated the payments, worth $7 billion this year.

Payments are extended fortwo years, then eliminated.

These payments would end in2020, however, President Trump could end them sooner.

BCRA vs. AHCA

7

SENATE PROPOSAL WHAT’S CHANGED FROM HOUSE BILL

AFFORDABLE CARE ACT

Pre-existing conditions

Insurers are banned from charging people more or denying coverage based on an existing medical condition.

That requirement remains. But states could waive other insurance rules that could weaken protections for medical conditions, such as what benefits insurers must cover and the minimum payments insurers must make toward medical bills.

The House bill would let states opt out of the requirement requirement that insurers must charge everyone the same, regardless of pre-existingconditions.

Medicaid expansionStates were encouraged to expand their Medicaid programs and received enhanced federal payments to cover more people.

Enhanced federal payments to states that expanded their programs to low-income adults would continue for three years. The Senate bill will gradually roll back enhanced federal funding over three years starting in 2021.

The rollback would begin in 2020 for people who come off the Medicaid rolls and new enrollees wouldn’t receive enhanced funding.

Traditional Medicaid

There is no correspondingprovision in the ACA.

The Senate plan dramatically overhauls the traditional Medicaid program covering low-income children, pregnant women, the elderly and people with disabilities. Instead of receiving open-ended funding from the federal government, states will receive a set amount per enrollee and have new flexibility to run their programs. Blind and disabled children are excluded from the cap. States would have the option to add work requirements for able-bodied adults.

Starting in 2025, the Senate version uses a slower annual growth rate for payments made to states.

BCRA vs. AHCA

8

5

SENATE PROPOSAL WHAT’S CHANGED FROM HOUSE BILL

AFFORDABLE CARE ACT

Insurance tax credits

The law subsidizes premiums on insurance marketplaces for people who don’t get coverage through work or qualify for other government programs. Income-based subsidies are available to people earning up to four times the federal poverty level.

Starting in 2020, eligibility for subsidies will be scaled back to 350 percent of the federal poverty level. Like the ACA, the subsidies would be tied to a benchmark plan, but the base coverage level would be below the bronze plan. Similar to the ACA, the subsidies would be pegged to income. But the benchmark plan for determining subsidies would be less generous than under the ACA.

The House bill linked financial assistance primarily to age. Theamount would not increase when premiums increased. Consumers living in higher-cost areas would not receive additional funds.

Taxes

ACA imposed excise taxes on individuals without adequate coverage and on employers who do not offer adequate coverage. An excise tax was imposed on high-cost health plans. Other taxes included those imposed on high-income families, health insurers, pharmaceutical companies and medical devices.

The bill would eventually repeal most of the ACA’s taxes, including the surtax on high earners investment income and a Medicare Hospital Insurance surtax on higher incomes. It would also end some industry taxes, such as those on medical devices and health insurers.

The House bill would eliminate nearly all of the ACA’s taxes, including taxes on medical devices, pharmaceutical manufacturers and health insurers.

Opioid funding

There is no correspondingprovision in the ACA.

The Senate provides $2 billion to states in 2018 to address the national opioid crisis.

The House bill provided $15 billionover 10 years for substance abuse, mental health and maternity care.

BCRA vs. AHCA

9

Reducing the Federal Deficit

CBO Score: AHCA and BCRAChanges to the Baseline (in billions)

House Bill (AHCA) Senate Bill (BCRA)

Spending Reductions -$1,111 -$1,022

Revenue Reductions +$992 +$701

Medicaid -$834 -$772

Tax Credits and Selected Coverage Provisions

-$276 -$408

Funds to State and Insurers

+$117 +$107

Penalty Payments +$210 +$210

Non-Coverage Provisions(e.g., Taxes)

+$664 +$541

Total Deficit Reduction -$119 -$321

10

6

Changes to Coverage

2026 Baseline (current law)

CBO Score: AHCA and BCRAExpected Coverage Changes in 2026

House Bill (AHCA) Senate Bill (BCRA)

Total Uninsured 28M Uninsured

51M Uninsured (+23M)

49M Uninsured*(+22M)

Moving from MedicaidCoverage to Uninsured

Not included in score

+14M Uninsured +15M Uninsured

Moving from Nongroup, ESI, Other Coverage to Uninsured

+9M Uninsured +7M Uninsured

*Note: Numbers do not add up due to rounding.

11

Impact in California

12

Coverage

Coverage 2018 By 2026

Medicaid -851.1 K -2.7 M

Employer, Individual and Marketplace

-1,318.3 K -1,000.4 K

Total Uninsured 2.2 M 3.7 M

Federal Spending for Medicaid and Marketplace Subsidies

2018 By 2026

Change in FederalMedicaid Spending

-$1,893.4 M -$124,415.6 M

Net Change in Tax Credits/Federal Marketplace Subsidies

-$820.7 M -$4,752.2 M

Source: American Hospital Association

7

Additional BCRA Provisions

● Option to cover mental health and substance use disorder services for Medicaid beneficiaries ages 21-65 in Institutes of Mental Disease (IMD) with a match of 50%

● Permits states to opt out of 6 mo. redetermination requirement; allows more frequent redetermination

● Ends requirements for retroactive coverage

● Lowers minimum income eligibility for children older than 6 from 133% FPL to 100% FPL as of Dec. 31, 2017

● Permits states to condition Medicaid eligibility on work requirements

● Prohibits states from using Medicaid funds for service provided by Planned Parenthood for one year

● State Waivers for Essential Health Benefits, but not community rating

● Provides $50 billion for arrangements between the federal government and insurers to respond coverage and access disruption; primarily to reduce premiums for those not eligible for tax credits 13

Per Capita Cap Calculation

14

Source: Cindy Mann, Manatt

8

“Equity” Redistribution

● Aggregate caps will be adjusted if their per capita spending is +/- 25% of the national mean

● 0.5 – 2% budget neutral, nationwide

● FFY 2020 and 2021 adjustments will be on average per capita spending for all eligibility groups

● FFY 2022+ adjustments will be for each eligibility group

● Adjustments are based on spending relative to other states

15

Sample Redistribution

16

9

Sample Redistribution

17Source: Manatt

Benefits to Non-Expansion States

● No Medicaid DSH cuts for non-expansion states

● Expansion states retain 8 years of Medicaid DSH Cuts

●$4.3 billion cut to CA in the federal DSH allotment over 8 years

● DSH Equity — allotments increase (FFY ’20-’23) for states below the average DSH per capita allotment

● $2 billion in additional supplemental payments

18

10

Even Guestimates are Challenging

● Variables & Interactions

● Base year choice

● House Bill: 2016

● Senate Bill: 8 consecutive quarters between Q1 FY 2014 and Q3 FY 2017

● Interaction with other states’ spending

● CMS data sources

● Changes in the CPI, CPI-M

19

CHA Advocacy Efforts

● Alert

● Flyer for employees with Twitter sheet

● Sacramento Bee Ad

● Our Health California

● Facebook

● Twitter

● CHA Web Resources

20

11

Questions

Online questions:Type your question in the Q & A box, hit enter

Phone questions:To ask a question, hit *1

Contact Us & Resources

22

Anne O’RourkeSenior Vice PresidentFederal Relations(202) 488-4494aorourke@calhospital.org

Anne McLeodSenior Vice PresidentHealth Policy & Innovation(916) 552-7536amcleod@calhospital.org

Alyssa KeefeVice PresidentFederal Regulatory Affairs(202) 488-4688akeefe@calhospital.org

http://www.calhospital.org/aca-repeal-replace-delay-resources

C. Duane DaunerPresident & CEO(916) 552-7547cddauner@calhospital.org

12

Thank You and Evaluation

Thank you for participating in today’s Executive Briefing. An online evaluation will be sent to you shortly.

For education questions, contact Liz Mekjavich at (916) 552-7500 or lmekjavich@calhospital.org.