Dec 13, 2016 | Juliette
Cubanski, Tricia Neuman Follow
@tricia_neuman on Twitter , Gretchen
Jacobson, and Cristina Boccuti
The 2010 Affordable Care Act (ACA) included many provisions affecting the Medicare program
and the 57 million seniors and people with disabilities who rely on Medicare
for their health insurance coverage. Such provisions include reductions in the
growth in Medicare payments to hospitals and other health care providers and to
Medicare Advantage plans, benefit improvements, payment and delivery system
reforms, higher premiums for higher-income beneficiaries, and new revenues.
President-elect Donald Trump, Speaker of the
House Paul Ryan, Health and Human Services (HHS) Secretary-nominee and current
House Budget Committee Chairman Tom Price, and many other Republicans in
Congress have proposed to repeal and replace the ACA, but lawmakers have taken
different approaches to the ACA’s Medicare provisions. For example,
the House Budget Resolution for Fiscal Year 2017,
introduced by Chairman Price in March 2016, proposed a full repeal of the
ACA. The House Republican plan, “A Better Way,” introduced
by Speaker Ryan in June 2016, proposed to repeal some, but not all, of the
ACA’s Medicare provisions.
This brief explores the implications for
Medicare and beneficiaries of repealing Medicare provisions in the ACA. The
Congressional Budget Office (CBO) has estimated
that full repeal of the ACA would increase Medicare spending by $802
billion from 2016 to 2025.1 Full
repeal would increase spending primarily by restoring higher payments to health
care providers and Medicare Advantage plans. The increase in Medicare spending
would likely lead to higher Medicare premiums, deductibles, and cost sharing
for beneficiaries, and accelerate the insolvency of the Medicare Part A trust
fund. Policymakers will confront decisions about the Medicare provisions in the
ACA in their efforts to repeal and replace the law.
What are the key Medicare provisions in the ACA and how would
repeal affect Medicare spending and beneficiaries?
The following discussion highlights several of
the key Medicare provisions in the ACA and assesses how repeal of these
provisions could affect Medicare spending and beneficiaries.2
Payments to Health Care Providers
The ACA reduced updates in Medicare payment
levels to hospitals, skilled nursing facilities, hospice and home health
providers, and other health care providers. The ACA also reduced Medicare
Disproportionate Share Hospital (DSH) payments that help to compensate
hospitals for providing care to low-income and uninsured patients, with the
expectation that hospitals would have fewer uninsured patients as a result of
the ACA’s coverage expansions.
Repealing the ACA’s sustained reductions in provider payments
would be expected to:
- Increase Part A and Part B
spending. CBO has estimated that roughly $350 billion3 of
the total $802 billion in higher Medicare spending over 10 years could
result from repealing ACA provisions that changed provider payment rates
in traditional Medicare. Repealing these provisions would increase
payments to providers in traditional Medicare. Additionally, some
hospitals would receive higher DSH payments, if these payments were
restored to their pre-ACA levels.
- Increase the Part A deductible and
copayments and the Part B premium and deductible paid by beneficiaries.
The Part A deductible and copayments would be expected to increase due to
an increase in Part A spending that would likely occur if payment
reductions are repealed. This is because the Part A deductible for
inpatient hospital stays is indexed to updates in hospital payments, and
the copayment amounts for inpatient hospital and skilled nursing facility
stays are calculated as a percentage of the Part A deductible. Similarly,
the Part B premium and deductible would be expected to increase if
payments to Part B service providers are restored. This is because Part B
premiums are set to cover 25 percent of Part B spending, and the Part B
deductible is indexed to rise at the same rate as the Part B premium.
Payments to Medicare Advantage Plans
Prior to the ACA, federal payments to Medicare
Advantage plans per enrollee were 14 percent higher than the cost of covering
similar beneficiaries under the traditional Medicare program, according to the Medicare Payment Advisory Commission
(MedPAC).4 The ACA
reduced payments to Medicare Advantage plans over
six years, which brought these payments closer to the average costs of care
under the traditional Medicare program. In 2016, federal payments to plans were
2 percent higher than traditional Medicare
spending (including quality-based bonus payments to plans).5
Repealing the ACA’s Medicare Advantage payment changes would be
expected to:
- Increase total Medicare spending
as a result of increasing payments to Medicare Advantage plans relative to
spending under traditional Medicare. CBO
has estimated that repealing the Medicare Advantage-related
provisions in the ACA would increase Medicare spending by roughly $350
billion6
(out of the $802 billion total increase) over 10 years.
- Increase the Part B premium and
deductible paid by beneficiaries. The Part B premium and deductible would
likely increase if the payment reductions for Medicare Advantage plans are
repealed because the Part B premium is set to cover 25 percent of Part B
spending, and the Part B deductible is indexed to rise at the same rate as
the Part B premium.
- Improve benefits and lower
out-of-pocket costs for beneficiaries enrolled in Medicare Advantage
plans. Payments that Medicare Advantage plans receive in excess of their
costs to provide Part A and Part B benefits are required to be used to
provide benefits not covered by traditional Medicare, to reduce cost
sharing, premiums, or limits on out-of-pocket spending, or both. Thus, if
the ACA’s reductions in Medicare Advantage plan payments were repealed,
plans could provide extra benefits to Medicare Advantage enrollees and/or
reduce enrollees’ costs.
Medicare Benefit Improvements
The ACA included provisions to improve
Medicare benefits by providing free coverage for some preventive benefits, such
as screenings for breast and colorectal cancer, cardiovascular disease, and
diabetes, and closing the coverage gap (or “doughnut hole”) in
the Part D drug benefit by 2020. These benefit improvements increased Medicare
Part B and Part D spending.
Repealing the ACA’s Medicare benefit improvements would be
expected to:
- Reduce Medicare Part B spending
for preventive services and reduce Part D spending on costs in the
coverage gap.
- Increase beneficiary cost sharing
for Part B preventive benefits.
- Increase beneficiary cost sharing
by Part D enrollees who have drug spending high enough to reach the
coverage gap. According to MedPAC, in 2013, roughly 25
percent of the 37.8 million Part D enrollees (or around 9 million
beneficiaries) had drug spending high enough to reach the coverage gap.7,8
- Reduce Part D premiums, on
average, since Part D premiums are set to cover 25.5 percent of program
costs, and reinstating the Part D coverage gap would lower Part D
spending.
Revenues to the Medicare Trust Funds
The ACA established new sources of revenue
dedicated to the Medicare program, including a 0.9 percentage point increase in
the Medicare Part A payroll tax on earnings of higher-income workers (incomes
more than $200,000/individual and $250,000/couple), and a fee on the
manufacturers and importers of branded drugs, which has generated additional
revenue for the Part B trust fund, including $3 billion in 2015 alone.9
Repealing the ACA’s Medicare revenue provisions would be
expected to:
- Reduce revenues to Medicare’s Part
A and Part B trust funds.
- Reduce Part A payroll taxes for
Medicare beneficiaries (and other taxpayers) with earnings greater than
$200,000/individual or $250,000/couple.
Medicare Part B and Part D Premiums for Higher-Income
Beneficiaries
The ACA froze the income thresholds for the Part B income-related premium beginning at
$85,000/individual and $170,000/couple through 2019, which subjected a larger
share of Medicare beneficiaries to the higher Part B income-related premium
over time.10 The
law also added a new surcharge to Part D premiums for higher-income
enrollees, using the same income thresholds as Part B premiums.
Repealing the ACA’s income-related premium provisions would be
expected to:
- Reduce the number of higher-income
Part B enrollees paying income-related premiums.
- Reduce Part D premiums for
beneficiaries with incomes above $85,000/individual and $170,000/couple.
Payment and Delivery System Reforms and New Quality Incentives
Through a new Center for Medicare &
Medicaid Innovation (CMMI, or Innovation Center) within the Centers for
Medicare & Medicaid Services (CMS), the ACA directed CMS to test and implement new approaches for Medicare to
pay doctors, hospitals, and other providers to bring about changes in how
providers organize and deliver care. The ACA authorized the Secretary of Health
and Human Services to expand CMMI models into Medicare if evaluation results
showed that they either reduced spending without harming the quality of care or
improved the quality of care without increasing spending. CMMI received an
initial appropriation of $10 billion in 2010 for payment and delivery system
reform model development and evaluation, and the ACA called for additional
appropriations of $10 billion in each decade beginning in 2020.
The ACA also created incentives for hospitals
to reduce preventable readmissions and hospital-acquired conditions, and
established new accountable care organizations (ACO) programs. Research has shown declines in Medicare patient
readmissions since the Hospital Readmission Penalty Program provisions were
introduced.
Repealing these ACA’s payment and delivery system reform
provisions would be expected to:
- Increase Medicare spending due to
elimination of CMMI and other quality incentive programs. On net, CBO
has estimated that CMMI’s operations will generate savings of
$34 billion over the 2017-2026 period, with gross savings of $45 billion
over this period. These savings are attributed to the expansion of
successful payment and delivery system reform models into Medicare. In
addition to eliminating the savings generated from CMMI, Medicare spending
could also increase if the incentives to reduce preventable readmissions
and hospital-acquired conditions are included in proposals to repeal and
replace the ACA.
Independent Payment Advisory Board
The ACA authorized a new Independent Payment Advisory Board (IPAB), a
15-member board that is required to recommend Medicare spending reductions to
Congress if projected spending growth exceeds specified target levels, with the
recommendations taking effect according to a process outlined in the ACA. To
date, no members have been appointed to the Board. Many policymakers have
expressed opposition to IPAB, and there have been several legislative attempts
to eliminate it. The CMS Office of the Actuary has estimated that the IPAB
process will first be triggered in 2017, based on its most recent Medicare spending growth rate projections.11
Repealing IPAB would be expected to:
- Increase Medicare spending over
time, in the absence of the Board’s cost-reducing actions. CBO projects Medicare savings of $8 billion
as a result of the IPAB process between 2019 and 2026.12
How would ACA repeal affect the solvency of the Medicare
Hospital Insurance trust fund?
Fully repealing the ACA would accelerate the
projected insolvency of the Medicare Hospital Insurance (HI) trust fund, out of
which Part A benefits are paid. This would result from higher spending for Part
A services due to higher payments to Part A service providers (such as
hospitals) and Medicare Advantage plans for services provided under Part A,
along with reduced revenues, if the additional 0.9 percent payroll tax on high
earners is repealed. As a result, Medicare would not be able to fulfill its
obligation to pay for all Part A-covered benefits within a shorter period of time
if the ACA is repealed than if the law is retained.
Prior to enactment of the ACA in 2010, the
Medicare Trustees projected that the Part A trust fund would not have
sufficient funds to pay all Part A benefits beginning in 2017. Following
enactment of the law, the insolvency date was extended. The current insolvency date is projected to be 2028.
Repealing the ACA is expected to push up the insolvency date.
Discussion
The Medicare provisions of the ACA have played
an important role in strengthening Medicare’s financial status for the future,
while offsetting some of the cost of the coverage expansions of the ACA and
also providing some additional benefits to people with Medicare. Savings were
achieved in part by reducing payments to providers, such as hospitals and
skilled nursing facilities. Medicare provider payment changes in the ACA were
adopted in conjunction with the ACA’s insurance coverage expansions, with the
expectation that additional revenue from newly-insured Americans would offset
lower revenue from Medicare payments. In addition, Medicare savings were
achieved through lower payments to Medicare Advantage plans.
Congressional action to repeal the ACA appears
imminent, but it is not yet clear whether Congress will repeal the ACA in its
entirety or keep certain provisions in place. Previous Congressional proposals
have taken different approaches. For example, the House Budget Resolution for Fiscal Year 2017,
introduced by Chairman Price in March 2016, proposed a full repeal of the ACA.
The House Republican plan, “A Better Way,” introduced
by Speaker Ryan in June 2016, proposed to repeal some of the ACA’s Medicare
Advantage payment changes, along with repealing IPAB and CMMI, the additional
Medicare payroll tax on high earners, and certain other tax and revenue
provisions, but appears to retain other Medicare provisions, including changes
to provider payment updates and the benefit improvements.13
A majority of Americans have expressed support for some of the ACA
provisions that affect Medicare, including the elimination of out-of-pocket
costs for many preventive services, closing the Part D coverage gap, and the
higher Medicare payroll tax for higher-income workers.14 Some
industry stakeholders have expressed concern about the implications of
retaining the ACA’s savings provisions, yet repealing the ACA’s coverage
expansions.
Aside from uncertainty about whether any of
the ACA’s Medicare provisions will be retained, questions have arisen as to
what changes policymakers could advance through the legislative process known
as “reconciliation.” Policymakers are considering repealing the ACA as part of
budget reconciliation legislation, which requires only a simple majority in the
Senate to pass. Senate rules (the so-called “Byrd Rule”) limit the scope of
reconciliation legislation to provisions with budgetary effects, including
spending and revenues. Most of the Medicare provisions in the ACA have
budgetary effects, according to CBO, so would likely be considered in order in
the context of a reconciliation bill.
As a result of the Medicare provisions
included in the ACA, Medicare spending per beneficiary has grown more slowly
than private health insurance spending; premiums and cost-sharing for many
Medicare-covered services are lower than they would have been without the ACA;
new payment and delivery system reforms are being developed and tested; and the
Medicare Part A trust fund has gained additional years of solvency. Full repeal
of the Medicare provisions in the ACA would increase payments to hospitals and
other health care providers and Medicare Advantage plans, which would likely
lead to higher premiums, deductibles, and cost sharing for Medicare-covered
services paid by people with Medicare. Full repeal would also reduce premiums
for higher-income beneficiaries, and reduce payroll tax contributions from
beneficiaries (and other taxpayers) with high earnings. Repealing the ACA would
have uncertain effects on evolving payment and delivery system reforms. Partial
repeal of the law could also have implications for Medicare spending, the Part
A trust fund solvency date, and beneficiaries’ costs. Policymakers who seek to
repeal the ACA may need to address the implications for Medicare,
beneficiaries, and other stakeholders.
No comments:
Post a Comment