26 Days: Congress and Health Care as FY 2017 Comes to a Close

September 5, 2017Client Advisory
Perspectives on Health Care and Life Sciences

Congress returns from August recess today, facing a daunting workload to complete before the end of the current fiscal year (FY) on September 30. Big picture issues include raising the national debt ceiling and passing a federal budget for FY 2018. Multiple significant health coverage issues also loom in the shortened month. Health care providers and insurers—especially those serving lower-income populations—have a lot at stake. We expect Congress to be sympathetic, but the current political climate makes predicting outcomes a risky proposition.

CHIP Reauthorization

The current authorization for funding the Children’s Health Insurance Program (CHIP) expires September 30. Reauthorization of the politically popular program, covering 5.8 million children, is seen as must-pass legislation. That makes it a vehicle to which other initiatives could be attached. For example, in 2015, CHIP reauthorization served as the medium for enacting major reforms to Medicare physician payment—the bill known as MACRA (the Medicare Access and CHIP Reauthorization Act of 2015).

It is likely that Congress will pass CHIP reauthorization on time, but conservatives may demand that federal funding be reduced. CHIP funding is similar to that for Medicaid— a federal match to accompany a state contribution. Though, the federal share is 23 percentage points higher than for Medicaid—93 percent on average. If Congress lowers the enhanced matching rate, states would be forced to fill the gap.

Medicaid DSH Cuts

The Affordable Care Act (ACA), contemplating big reductions in the uninsured population that would lessen hospitals’ uncompensated care burden, included provisions to cut disproportionate share hospital (DSH) funding. The Centers for Medicare & Medicaid Services issued a proposed rule in July 2017 to implement the DSH cuts, removing $2 billion in FY 2018 out of an estimated $12 billion in expected payouts. Cumulative cuts through 2025 are projected at $43 billion.

Safety net hospitals, particularly those in the 19 states that did not expand Medicaid and, as a result, still have comparatively large uninsured populations, are trying to rally support for delaying the cuts and/or reducing the amounts to be cut. Watch for the CHIP reauthorization bill to include provisions aimed at easing the DSH cuts, with a tilt in favor of the non-expansion states.

ACA Market Stabilization

Congress will not resume “repeal and replace” efforts in September but this does not mean the ACA marketplaces are alright. President Trump continues to dangle the threat of stopping funding the cost-sharing reductions (CSRs) that make coverage affordable to about seven million lower-income individuals. This leaves issuers of exchange plans uncertain of how to frame their bids for 2018, which are due today.

The Congressional Budget Office (CBO) has estimated that halting the CSRs would lead issuers to raise premiums by 20 percent. The added cost would be borne almost entirely by taxpayers, since the ACA requires the federal government to subsidize premiums for low-income individuals. CBO projects federal outlays would rise by $194 billion between 2017 and 2016 as a consequence, drowning out any savings from ending the CSRs.

The Senate Health, Education, Labor, and Pensions (HELP) Committee will hold two days of hearings this week, with the aim of finding bipartisan solutions to the most pressing issues threatening ACA individual market coverage. Five governors, plus state regulators, are due to testify. The committee is expected to propose stopgap legislation to keep the program functioning at least through 2018.

The committee very likely will look to a plan released on August 31 by Governors John Kasich (R-OH) and John Hickenlooper (D-CO). That plan recommends the following: providing federal funding for reinsurance for marketplace plans; continuing the individual mandate absent passage of a substitute that gets to the same objective of keeping younger and healthier people in the risk pool; and easing the process for states to get waivers to innovate stabilization efforts and to, among other things, loosen the essential health benefits requirements.

Conclusion

A common thread running through all three of these issues is bipartisan support at the state level. So, perhaps with sufficient prodding by governors and other state stakeholders, enough Republicans and Democrats in Congress will come together to pass legislation that helps keep the health care safety net from unraveling.

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For additional information about the issues discussed above, please contact the Epstein Becker Green attorney or EBG Advisors consultant who regularly assists you, or the author of this advisory:

Robert F. Atlas
Washington, DC
202-861-1834
[email protected]