TRUMP HEALTH CARE 11/17/16

Client Advisory on what we know so far.

Our Team has sat through several sessions including with members of the Trump transition team, Deloitte, McDermott, Will, and reviewed as many blogs from experts as we could find on both sides of the aisle. While there is definitely an advantage for Trump to not answer definitive questions there are some strategies now moving forward that will change the ACA.

Our conclusion is that Trump will try to repeal the ACA using Reconciliation instead of a vote. A vote requires 60 members of the Senate to agree and the GOP, while dominate, does not have the votes. Reconciliation requires 51 and they already have experience getting this process through the Senate with HR 3752, but it was vetoed by Obama. This represents a blueprint for what will happen. Reconciliation has its limits however, and that is the points in the law that would be changed can only be changed if they are items of current or future revenue.

The first targets may be subsidies in the exchanges. This has been fought over and a lawsuit has been on appeal saying that the money to subsidize the premiums is not what Congress intended and therefore illegal. Once Obama leaves and the suit goes through, these subsidies could be removed leaving 21 million people with no subsidy of their premium. It is believed they could be moved to a similar program the Republicans set up, but that’s a 700 million dollar replacement proposition and would take at least 18 months for the IRS to get its data gathered and transition people to this new program, a challenge, to say the least.

Eliminate the tax for those who have no insurance. This sounds reasonable but will create adverse selection for the pool, meaning that with no consequence to not buy into the pool, people would only get insurance when they need it, making actuarial analysis impossible. There will need to be some consequence of not signing up for the plans during open enrollment but there will also need to be an elimination of some 30 different Open Enrollment dates beneficiaries can use to sign up for exchanges and other plans.

Eliminate medical device tax. This has been on the chopping block from the beginning.

Eliminate Medicaid expansion which would put the states under the microscope in a year when many Republican governors come up for election, so this could be delayed. Block grants are being discussed as a means to delegate this to the states. We would speculate that working with a fixed sum of dollars, states will likely bid their Medicaid out to Managed Care Companies, as is being done in Florida and other states. Watch for a huge expansion of Medicaid and Medicare Managed Care Companies and strategies with a strong move to the dual eligible markets that will remain profitable.

Eliminate the Cadillac tax. Employers have been whining about this for quite a while as it was just a means to raise revenue for the other programs and can be eliminated, but it will show up in a tax elsewhere.

This means no market reforms can be touched, such as denying insurance for preexisting conditions, guarantee issue, fair pricing without considering health status and 26 year olds covered by family insurance. Recent Trump interviews and memos are confirming this.

Where would money come from to replace this tax? Through other Republican expenditures? (i.e., tax credits, selling insurance across state lines which are supposed to create savings through competition). See our comments below.

Reducing essential benefits from all insurance packages. Under Obamacare, many of the skinny insurance plans were required to meet a minimum standard of coverage. Although there was much complaining, many employees and employers discovered they had been overpaying for minimal coverage.

This reconciliation can happen very fast as a means to repeal Obamacare and then picking up the other non-reconciliation pieces in a new law or, as some are thinking, put it in a sidecar package of legislation with the reconciliation so it looks like it’s all done at once despite the fact it may take three years to fully amend the law.

Medicare Advantage

Some of you are asking if Medicare Advantage would be changed. We are seeing no change in the blueprint nor any change in the direction of Trump’s plan to single it out.

MACRA

CMMI, the Center for Medicare and Medicaid Innovation, continues to have deep pockets and subsidizes many bundled payment programs, bone and joint, and soon cancer and cardiac bundled payments. These should not be affected as the funding for MACRA also comes out of CMMI. This means doctors who will enter into their first performance year in 2017 to 2018 want to get paid in 2019. 2018 is an election year so cuts are probably not on the agenda.

ACO

Accountable Care Organizations are not addressed in the blueprint nor discussed with the panel except to say the Alternative Payment Method connected to MACRA is desired by both Republicans and Democrats. They have seen what care coordination can do to lower costs and see the consumers who obtain patient engagement are happier, so, unless this changes, ACOs will be here for a while and, with any luck, may, if they can demonstrate savings, obtain further financial assistance to cover their costs.

Several of the ACO models do have a payment corridor for administrative costs so this could actually be expanded.

Ryan Plan

We are still researching the Ryan Plan which promises to create a series of exchanges for Medicare eligibles to buy their insurance and supplemental coverages. This sounds like a long, hard mountain to climb but is going in the direction of the Republican plans to reduce the cost or privatize Medicare. The plan to implement these Medicare changes would once again be reconciliation. There are concerns as to whether 2 reconciliations can be done in one year .The last word we heard is that those over 55 would be exempt from this new Medicare plan.More on this topic as we get closer to January.

According to the Trump for President website:

“Congress must act. Our elected representatives in the House and Senate must:

  1. Completely repeal Obamacare. Our elected representatives must eliminate the individual mandate. No person should be required to buy insurance unless he or she wants to.
  2. Modify existing law that inhibits the sale of health insurance across state lines. As long as the plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state. By allowing full competition in this market, insurance costs will go down and consumer satisfaction will go up.
  3. Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system. Businesses are allowed to take these deductions so why wouldn’t Congress allow individuals the same exemptions? As we allow the free market to provide insurance coverage opportunities to companies and individuals, we must also make sure that no one slips through the cracks simply because they cannot afford insurance. We must review basic options for Medicaid and work with states to ensure that those who want healthcare coverage can have it.
  4. Allow individuals to use Health Savings Accounts (HSAs). Contributions into HSAs should be tax-free and should be allowed to accumulate. These accounts would become part of the estate of the individual and could be passed on to heirs without fear of any death penalty. These plans should be particularly attractive to young people who are healthy and can afford high-deductible insurance plans. These funds can be used by any member of a family without penalty. The flexibility and security provided by HSAs will be of great benefit to all who participate.
  5. Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.
  6. Block-grant Medicaid to the states. Nearly every state already offers benefits beyond what is required in the current Medicaid structure. The state governments know their people best and can manage the administration of Medicaid far better without federal overhead. States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources.
  7. Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

The reforms outlined above will lower healthcare costs for all Americans.