Health Policy Report

The Week in Review

Health care developments dominated most of the week, as the Trump Administration asked for a continued hold in the House v. Price case on cost-sharing payments, the Congressional Budget Office (CBO) released its latest score of the American Health Care Act (AHCA), and the White House released its proposed 2018 fiscal year budget outlining significant cuts to Medicaid and health research. Details on all of those developments are included in our health policy roundup below.

Floor action in Congress was relatively muted as the Senate confirmed sub-Cabinet level nominees and the House worked on non-controversial legislation aimed at addressing child exploitation. The House Ways and Means Committee held hearings on its nascent plans for a comprehensive tax reform package, including on the border-adjustment tax (BAT), which has continued to divide Republicans as they search for revenue to offset tax cuts.

President Trump took his first trip overseas last week, visiting the Middle Eastern countries of Israel and Saudi Arabia, before heading to Europe for meetings of the North Atlantic Treaty Organization (NATO) and the Group of 7 (G7) industrialized nations. Aside from the pomp and circumstance that follows the American president abroad, President Trump made headlines by demanding fellow NATO members spend additional funds on defense and refusing to commit to the Paris Agreement on carbon emissions struck by a group of 195 countries in 2015.

The Week Ahead

Both chambers of Congress will be in recess next week in honor of Memorial Day. When they return, lawmakers will be left with just 31 legislative days before the August recess, with a number of priorities still pending. Senate negotiators will hope to make progress on their version of legislation to repeal and replace the Affordable Care Act, while the House will hope to put together a tax reform package in coordination with the White House. Additionally, Congress will likely need to consider raising the debt ceiling after Budget Director Mick Mulvaney suggested last week that the U.S. will exhaust its borrowing authority sooner than originally expected.

The Senate will return on Monday, June 5, with the House due to reconvene a day later. Floor consideration of the Financial CHOICE Act – a revamp of the post-crisis financial regulations enacted in 2010 – is expected in the House as early as June 7.

CBO: AHCA Would Save $119B with 23 Million Additional Uninsured by 2026

The Congressional Budget Office (CBO) released an updated cost estimate finding that the House-passed American Health Care Act (AHCA) (H.R. 1628) would save $119 billion over 10 years while 23 million individuals would lose insurance coverage over that period. That is a $32 billion decrease from the roughly $150 billion in savings projected in its March 23, 2017 estimate, while meeting the $2 billion in savings necessary for the bill to be taken up by the Senate. The House passed the AHCA on May 4, 2017 before CBO’s estimate was available. Last Wednesday’s score has important implications for ongoing health reform work in the Senate which is expected to release its own legislation sometime before the August recess.

CBO notes constraints on its ability to predict the fiscal impact of the AHCA. Under the so-called “McArthur Amendment,” the AHCA allows states to request waivers to opt out of Affordable Care Act (ACA) age rating, essential health benefit (EHB), and community rating provisions. Without knowing precisely which states will plan to seek such waivers, when they will seek to do so, market conditions, and which policies such states will seek to waive, CBO notes the changes made by the legislation are all difficult to predict, so the estimates reflect “the middle of the distribution of potential outcomes.”

Last Wednesday’s score adds to the challenge for the Senate, as their version of the bill may look to increase spending in effort to appease moderate Republicans concerned about the impact of substantial coverage cuts. While the Senate’s work remains preliminary, it may attempt to soften some of the cuts proposed in the House bill through more generous tax credits and tapering Medicaid funding reductions. Notably, President Donald Trump tweeted on Memorial Day that Congress should “add more dollars to Healthcare” [sic] – potentially suggesting that some of the $119 billion in estimated savings be used to increase the amount of insured under the GOP’s bill.

White House Unveils $4.1T Budget Proposal, Including $610B in Medicaid Cuts

Last week, the Trump administration unveiled its $4.1 trillion budget for the 2018 fiscal year (FY), dubbed “A Foundation for American Greatness.” Though the Budget aims to balance the budget over the customary 10-year window, the administration’s underlying economic grown assumptions have been questioned by critics. Increased investments in national defense and infrastructure, as well as enhanced border security and immigration policies, come at a sizable cost to domestic assistance programs serving low-income individuals, including the Supplemental Nutrition Assistance Program (SNAP) and Medicaid. The Budget includes $250 billion in deficit savings over 10 years attributed to repealing and replacing the Affordable Care Act (ACA), and calls for a two-year reauthorization of the Children’s Health Insurance Program, which helps families who make too much to qualify for Medicaid. Funding for CHIP currently expires Sept. 30.

Regarding Medicaid – while its sister program, Medicare, is left largely untouched – the administration proposes a net savings of $610b/10y to Medicaid – savings that are in addition to the $880b/10y in Medicaid cuts in the House GOP-backed American Health Care Act (AHCA). While the Budget does not go into further detail as to exactly how these additional Medicaid savings would be gleaned, Office of Management & Budget (OMB) Director Mick Mulvaney indicated that this would be accomplished by further ratcheting down the annual growth rate formula (medical CPI) for the Medicaid per capita cap.

The Budget follows the administration’s “skinny budget” – or budget blueprint, that was released last March – and has already been met with a cool reception on Capitol Hill. Some top Republicans – including Senate Majority Whip John Cornyn (R-TX) – noted that the President’s Budget is “basically dead on arrival” in Congress. Thirty-year House Appropriations Committee veteran and immediate past chairman, Rep. Hal Rogers (R-KY), suggested “[i]t’ll face a tough sled here.” Nevertheless, the Budget provides a detailed glimpse into the administration’s policy and spending priorities and will serve as a basis for subsequent spending deliberations.

In Status Report on CSR Case, House and Trump Administration Request Continued Hold

Last Monday, the Trump administration and House of Representatives filed a joint status report requesting that the Federal appeals court continue to keep the Cost-Sharing Reduction (CSR) subsidy case, House v. Price, on hold. If the request in last week’s status report is granted by the court, the case would effectively be on hold for another 90 days until August 20, 2017, with another status report due at that time. In the meantime, the decision to fund the approximately $7 billion in payments to insurers remains in the hands of the Trump administration, and without any certainty on future remittances, could cause insurers to increase their rates by as much as 20 percent in 2018.

After initially putting the case on hold in December 2016, the appeals court on March 2, 2017 granted a joint motion, submitted by the House and Trump administration, which requested an extension of the hold period with status reports due every three months, beginning May 22, 2017, to allow time for a non-judicial resolution to the case. Last week’s status report asks the court to allow the case to stay on hold as the parties “continue to discuss measures that would obviate the need for judicial determination of this appeal, including potential legislative action.”

The federal deadline for insurers to file rates in the ACA-created Exchange market is June 21, 2017 (final rates are due on August 16, 2017), and uncertainty surrounding the continued availability of CSR subsidies has become a major factor in many carriers’ decision to participate. Assuming the court grants the request, and without a formal appropriation of the CSR subsidies which would resolve this issue completely, it is likely that insurers will not know whether CSRs will continue before they have to make a decision on Exchange participation. The administration has been paying out the subsidies thus far but has sent mixed signals about whether it intends to continue paying them beyond this month. Democratic lawmakers criticized the parties’ request for a continued delay.

Senate to Draft Health Care Bill Over Recess 

Senate leadership staff will huddle this week with their colleagues on three key committees to begin drafting the chamber's legislation to repeal and replace the 2010 health care law. Sen. John Thune (R-SD) confirmed that the Senate had enough gathered enough input and direction to begin drafting the bill around the “main issues.” The drafting efforts will include Senate staffers from the Budget Committee, the Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee, according to multiple senators. Lawmakers also declined to put any deadlines on the drafting process or their broader efforts to vote on a repeal and replace package, and said they are still far from an agreement.

A central sticking point, after last week’s CBO report, is the waivers that would be allowed under the House bill that will let some states opt out of certain insurance requirements like the ACA’s essential health benefits. CBO suggested people with pre-existing conditions who live in those states could face much higher health insurance premiums or ultimately be priced out of coverage. Sen. Dean Heller (R-NV) suggested the CBO report "makes everything harder," pointing to the coverage losses and those pricing issues for people with pre-existing conditions who live in states that might take waivers. Most senators who attended the working group were noncommittal about whether a similar waiver idea would be in the Senate's version of the legislation.

BCBS Plan Exits Missouri, Potentially Leaving Parts of the State Without an Insurer 

Twenty-five counties in Missouri may have no insurers on the ACA Exchanges next year after Blue Cross Blue Shield (BCBS) of Kansas City (Blue KC) announced last Wednesday it will no longer participate.  Blue KC cited losses and uncertainty as a reason it decided to exit the individual markets both on and off the Exchanges. The move comes as insurers are deciding whether to offer plans in the ACA marketplaces next year and are asking Congress and the administration for certainty that they’ll continue to get crucial payments from the federal government.

Blue KC was the only insurer selling plans in around 25 western Missouri counties, according to industry advocates. The move also leaves two counties in Kansas with only one insurer on the ACA exchanges. The announcement affects about 67,000 people, but doesn’t affect those who purchased plans on or before Oct. 1, 2013, according to a Blue KC press release.

Insurers are facing a June 21 deadline to tell the government if they want to sell plans on the exchanges for 2018. There hasn’t yet been a scenario where an area didn’t have any carrier offering a healthcare plan. Last year, it seemed as if Pinal County, Ariz., might become the first – but BCBS of Arizona swooped in. Earlier this month, BCBS of Tennessee announced it would enter Knoxville’s exchanges, averting a potential crisis after Humana – the only insurer on the exchanges at the time – said it was exiting. Missouri’s situation is uniquely challenging, as BCBS plans have previously been the ones to participate when no other insurers have been willing.