Analysis: FY20 appropriations bills passed – lessons for potential future healthcare legislation

• The House and Senate passed a year-long appropriations package to fund the federal government for FY20.
• The bill protects the ACA’s insurance markets in several ways but does not address surprise billing.
• The deal prevents the administration from ending the practice of automatically re-enrolling individuals in exchange plans if they don’t actively choose a health plan for the coming year.
• The legislation also delays Medicaid DSH cuts until May 22.

Just in time for folks to head out of town for the holidays, the House and Senate passed a FY20 appropriations package to fund the federal government. The Affordable Care Act looms large in the bill, which protects the ACA’s insurance markets in several ways.

First, it prevents the administration from unilaterally ending a workaround called “silver-loading,” which helps insurers compensate for the loss of key funding for cost-sharing reduction subsidies for individuals with incomes less than 250% of the federal poverty level and who purchase silver plans on the exchange. These payments have the effect of giving greater financial assistance to many exchange enrollees. However, the lack of federal funding, and the resulting increase in premiums to compensate, have increased costs for those who do not qualify for subsidized coverage.

Second, the deal will also prevent the administration from ending the practice of automatically re-enrolling individuals in exchange plans if they don’t actively choose a health plan for the coming year.

The bill also:

• Eliminates an estimated  $373B over 10 years in taxes that were intended to fund the ACA’s coverage expansion. These include the 40% excise tax on high-cost health plans (a.k.a., the Cadillac Tax – $197B), the 2.3% medical device tax ($25.5B) and the Health Insurance Tax ($150.8B).
• Delays the Medicaid Disproportionate Share Hospital (DSH) cuts through May 22, 2020 and extends many other healthcare programs.

What’s not in the package? Legislation related to surprise bills. Lawmakers seeking to pass surprise bill legislation are now hoping the May 22 expiration of the DSH cut moratorium, as well as a number of other healthcare related extenders, will create a legislative avenue that can also be used to pass language preventing surprise bills in emergency situations and when the patient receives care from an out-of-network provider at an in-network facility.

Takeaway

A couple of thoughts for potential lessons to extract from this and apply it to any future debate over “Medicare for All” (or smaller scale attempt to expand coverage).

How we pay for it — raise new revenue

Approximately half of the ACA was paid for with taxes on individuals and the industry. With the passage of the FY20 appropriations package, the only remaining ACA taxes on the books, at least of significance, are the two that target high net worth individuals that are projected to raise approximately $200B over 10 years.

Repealing these taxes had bi-partisan support. So, the same folks that will be voting on tax increases to fund a future coverage expansion just voted to unwind a large chunk of the taxes funding the ACA’s coverage expansion. In the current political environment, it’s hard to imagine a situation where tax increases used to fund future coverage expansion stick, which means future coverage expansion will lead to more deficit spending. At some point the bill will come due.

How we pay for it — reduce costs

Based on a recently published Health Affairs study, surprise bills cost American’s approximately $40B per year in increased insurance premiums. While it’s not a complete pass through, assuming the analysis is correct, it’s a good ballpark for the provider-revenue impact of eliminating the two most common scenarios where someone is billed out of network. And despite the fact that eliminating surprise bills in emergency situations and when a patient is treated by an out-of-network provider at an in-network facility has bi-partisan support (conceptually), Congress still can’t pass legislation due to concerns about what it will do to providers’ incomes for a relatively small number of specialties (e.g., emergency department physicians, anesthesiologists, radiologists, pathologists).

So the idea of bringing all physicians down to a lower percentage of Medicare (in the case of the two single payer Medicare for All proposals) — for a legislative package that is contrary to one party’s views on the proper role of government in society — will likely draw significantly more political pressure than the surprise bill legislation, making it far less likely to actually pass than the surprise bill legislation that keeps getting kicked down the road.