MACRA, Physicians, and “Big Med”

By: Rick Mayes, Ph.D.

Medicare Payment Policy Matters (a Lot)

MedicareMedicare is the most important player in the annual battles over who controls the manner in which medical care is paid for and how much it costs. As the single largest individual buyer of health care and the “first mover” in the annual payment game between those who provide care and those who pay for it, Medicare invariably drives – directly or indirectly – the behavior of medical providers and private payers. The program’s reimbursement rates for physicians are the only transparent ones; as such, they provide the benchmark for private payers in their negotiations with physicians. Granted, the details of payment reform are often mind-numbingly complex and arcane and the number of new acronyms can be soul-draining, but following major changes in Medicare payment policy is critically important for understanding who gets coverage for what and how most health care is financed, organized and delivered.

MACRA Basics and Physicians’ Options

In April 2015, in a very rare display of political bipartisanship, Congress voted overwhelmingly – 392 to 37 in the House and 92 to 8 in the Senate – to scrap Medicare’s system for reimbursing physicians that had existed since 1992 and to transition to a new physician payment system with the Medicare Access and CHIP Reauthorization Act (MACRA).[i] Frustration and disappointment with the previous system had reached a level among physicians and elected leaders of both parties that major change finally occurred after years of complaining. MACRA reflects the unavoidable reality that some models for paying physicians are better than others. “The three worst,” jokes James Robinson, “are fee-for-service, capitation, and salary. Fee-for-service rewards the provision of inappropriate services, the fraudulent upcoding of visits and procedures, and the churning of ‘ping-pong’ referrals among specialists. Capitation rewards the denial of appropriate services, the dumping of the chronically ill, and a narrow scope of practice that refers out every time-consuming patient. Salary undermines productivity, condones on-the-job leisure, and fosters a bureaucratic mentality in which every procedure is someone else’s problem.”[ii] MACRA is intended to encourage the development of models that blend the different payment approaches in order to mitigate the undesirable elements of pure fee-for-service, capitation, or salaried physician reimbursement.

Under MACRA, the majority of physicians will participate in one of two new Medicare payment models: a (1) Merit-based Incentive Payment System (MIPS) or an (2) advanced Alternative Payment Model (APM). MIPS retains the existing fee-for-service system but streamlines a number of current Medicare pay-for-performance metrics to calculate percentage bonuses or penalties, starting in 2019, for physicians based on their overall “quality” scores. The second option for physicians is to essentially join a large health care system that takes on some of the financial risk related to patient care in exchange for the possibility of earning bonus payments if higher quality care is provided at lower cost. Eligible advanced APMs could include: Medicare Shared Savings Programs, Next Generation ACO Models, Oncology Care Model Two-Sided Risk Arrangements, and Comprehensive End-Stage Renal Disease Care Models.[iii]

Concerns over MACRA’s Potential Acceleration of “Big Med”

A major concern related to MACRA is the potential harm that the Act could inflict upon smaller physician practices that will struggle to pay for the increased administrative costs associated with just participating in MIPS. Unless major changes are made this year to MACRA, many physicians will eventually be confronted with having to join a big, integrated health care system in the form of an APM. “Faced with MACRA’s complexity and the financial risk it introduces,” observes Larry Casalino, “many physicians are likely to throw up their hands, say ‘this is the last straw—I can’t take it anymore’.”[iv] Until recently, the majority of physicians chose to not even submit various quality data to Medicare and simply accept a 1.5% penalty in their reimbursement fees due to the expense and onerous work involved.[v] Physicians already report greater stress and frustration due to spending more time dealing with external quality measures.[vi] Their frustrations will only increase if MACRA accelerates the corporate transformation of American medicine, which it could likely to do.

In its current form, MACRA amounts to something of a gamble on the ability of big health care organizations to improve the quality of patient care and restrain cost growth. This gamble reflects a belief among many employers, elected officials, and members of the health policy community that pay-for-performance schemes for health professionals work and that Medicare must shift from a volume-to-value reimbursement model that moves away from fee-for-service payment. Yet the evidence for this belief is thin, mixed, and preliminary. Therefore, argues Robert Berenson, a major question is whether physician leaders will be able to actively guide the evolution of large APMs and other integrated health systems “to increase quality, reduce costs, and reaffirm a (perhaps updated) form of professionalism or, alternatively, passively accept a transformation in the body and soul of American medicine.”[vii]

 

[i]  G. Wilensky, “The ‘Doc Fix’ Is Over, but Unresolved Concerns Linger,” JAMA 313 (June 9, 2015):2211.

[ii]  J. Robinson, “Theory and Practice in the Design of Physician Payment Incentives,” 79 Milbank Quarterly (2001):149-77.

[iii]  See Centers for Medicare & Medicaid Services, Quality Payment Program Fact Sheet, (Washington D.C.: January 2017).

[iv]  L. Casalino, “The Medicare Access and CHIP Reauthorization Act and the Corporate Transformation of American Medicine,” Health Affairs 36 (May 2017):867.

[v]  See R. Berenson, D. Kaye, “Grading a Physician’s Value—The Misapplication of Performance Measurement,” New England Journal of Medicine 369 (2013):2079-81.

[vi]  See P. Miller, “The Medical Profession’s Future: A Struggle Between Caring for Patients and Bottom-Line Pressures,” Health Affairs 35 (March 2016):407-10.

[vii]  R. Berenson, “A Physician’s Perspective on Vertical Integration,” 36 Health Affairs (September 2017):1585-90.

THIS WEEK IN REVIEW: Monday, Jan. 15th – Friday, Jan. 19th

THIS WEEK IN REVIEW: Monday, Jan. 15th – Friday, Jan. 19th

At midnight tonight, the government has the potential to shutdown for the first time since 2013. It is still unclear whether GOP leaders will include funding for the Children’s Health Insurance Program as part of the new funding bill which is one main point of contention. The Committee Chairman, Orrin Hatch (R-Utah) has begged Senate Democrats to “stop holding CHIP hostage.” Currently there are 16 states (including Virginia) that are projected to run out of federal funding for CHIP by the end of this month.

Continuing on the state level, a recent statewide poll revealed that 83% of Virginians are in favor of expanding Medicaid. This support comes after years of opposition from a Republican-controlled legislature. After November’s elections left control of the house too close to call, Republican David Yancey eventually won the seat after his name was drawn out of a bowl to end the tie, maintaining control of the legislature in favor of Republicans. So, despite the widespread support, it remains unlikely that Virginia will expand its program as of yet.

Nine states are also in the midst of awaiting approval for requiring community engagement activities in order for able-bodied beneficiaries to be considered eligible for Medicaid. The Trump Administration’s decision to approve these “work requirements” for Kentucky’s Medicaid program has sparked concern that the program will leave behind Medicaid beneficiaries who are unable to find or keep work. While these “work requirements” may also impose administrative burdens that can cause Medicaid recipients to lose coverage, Kentucky officials argue that the changes will give beneficiaries “more dignity and promote personal responsibility.” However, current Senate Democrats are questioning the legality of these requirements.

Yesterday, the Department of Health and Human Services announced a new policy that will protect the religious and moral freedoms of health workers. This includes a new division under the Office of Civil Rights that will investigate complaints pertaining to acts that violate employee’s religious rights or if the individual felt discrimination from their refusal of services. This decision to protect religious freedom is a big win for Trump’s Republican base, but reverses an Obama-era policy that allowed healthcare workers to refuse to treat people seeking abortions or transgender individuals. Following the recent contraception mandate, it is clear that the conversation surrounding the relationship between religious freedom and health will continue to be on the forefront of health policy legislation.

Finally, late last week, the Medicare Payment Advisory Commission (MedPAC) voted in favor of recommending Congress eliminate the Merit-based Incentive Payment System (MIPS). MIPS—one of two new Medicare payment models under the Medicare Access and CHIP Reauthorization Act (MACRA)—is an individual clinician-level payment adjustment based on quality, cost, advancing care information, and clinical practice improvement activities. MedPAC outlined concerns for MIPS stating it is “burdensome and complex” and “replicates flaws of prior value-based purchasing programs.” Instead MedPAC recommend the Voluntary Value Program (VVP), which would include an across-the-board withhold for fee schedule payments and performance assessment rooted in three specific categories. Be on the lookout for the CMS response to MedPAC’s recommendation.

With MIPS hanging in the balance, check out this week’s Viewpoints guest blog where Dr. Rick Mayes, Professor and Chair of the Healthcare Studies Program at the University of Richmond, discusses MACRA and its influence on physicians.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque, Virginia Wright


LAST WEEK IN REVIEW: Monday, Nov. 27th – Friday, Dec. 1st

LAST WEEK IN REVIEW: Monday, Nov. 27th – Friday, Dec. 1st

This week’s news cycle continued to center on efforts by Congress to overhaul the nation’s tax code, with many experts describing the different ways that the tax bill could substantially impact American health policy. While we discussed the first three impacts in our Viewpoints Spotlight last month on the tax bill, the last two are worth describing well. First, the House bill would change tax treatment for graduate students and those paying back student loans. For graduate student, those receiving stipends and tuition waivers for teaching would be required to pay taxes on the full value of tuition they were not required to pay. The House bill would also eliminate the deduction for interest paid on student loans, disproportionately affecting young doctors. Next, the House tax bill would eliminate a tax credit that encourages pharmaceutical companies to develop drugs for rare diseases. The National Organization for Rare Disorders reports that this would cause a huge loss in orphan drug tax credits for the drug industry, as well as leading to 33 percent fewer orphan drugs coming into the market.

In other news, the Children’s Health Insurance Program (CHIP) is running out of funding in nearly a dozen states (including Virginia). Some states have reported that their budgets are able to keep the program for a few more months, while others are at risk of running out of funding as early as late-December. Bearing that in mind, some states have been making preparations for funding to dry up. Even though legislation was introduced to fund the program for five years and Senate Finance Committee Chairman Orrin Hatch is committed to supporting the program, there still has yet to be a final action by Congress on CHIP. The National Governors Association has taken up the cause, as the health providers in states across the country deal with the growing uncertainty.

There was quite a bit of background news on the opioid front this week as well. The Centers for Medicare and Medicaid Services (CMS) introduced an updated version of the Medicare Part D opioid prescription mapping tool to display opioid prescribing rates across geographical areas and identify regions that may be at the highest risk. Meanwhile, President Trump pledged to donate all of his presidential income ($400,000/year) to charity, specifically pledging his third quarter salary of $100,000 to combat the opioid crisis. Finally, on the Hill, four House Democrats proposed a bill to provide $45 billion to the opioid crisis over the next ten years.

Building on that theme, be sure to stay tuned for this week’s Viewpoints guest blog, where Dr. Megan Tracci reviews the role and impact of legislation in addressing the opioid epidemic.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque, Virginia Wright


 

LAST WEEK IN REVIEW: Monday, Nov. 20th – Friday, Nov. 24th

LAST WEEK IN REVIEW: Monday, Nov. 20th – Friday, Nov. 24th

Despite the shortened news week due to the Thanksgiving Holiday, there were no shortage of updates on the health policy front. Around the states, anxiety continues to mount regarding the funding lapse and lack of reauthorization of the Children’s Health Insurance Program (CHIP). Even though the Centers for Medicare and Medicaid Services (CMS) sent millions of dollars to states in recent weeks to stem the tide, states at risk of a funding shortfall by the end of December include Oregon, California, Minnesota, Ohio, Washington and Arizona.

Speaking of Arizona, the Arizona Supreme Court unanimously upheld the constitutionality of the state’s Medicaid expansion last week, maintaining coverage for the 400,000 residents who gained insurance through the 2013 expansion. Also on the Medicaid front, Massachusetts made waves after submitting a new innovation waiver to CMS, proposing to negotiate Medicaid drug prices. Also in the Bay State, Massachusetts Governor, Charlie Baker, signed a law to ensure free birth control across the commonwealth—a response to the Trump Administration’s moves last month to relax the contraception mandate.

In the latest on the Affordable Care Act (ACA), health insurance sign-ups continued to defy expectations with more solid numbers for the third week of the open enrollment period. There is still a lack of clarity on whether or not enrollment numbers will be able to reach last year’s enrollment of 12.2 million. Meanwhile, community health centers across the country continued to advocate for reauthorization of the now-lapsed grant funding that allows them to care for 26 million Americans.

Most notably, though, Congress continued to consider changes to some of the key architecture of the ACA in the days leading up to Thanksgiving. Despite actuarial statements that repealing the law’s individual mandate would increase premiums, GOP efforts in the Senate to do so picked up key support when Senator Lisa Murkowski (R-Alaska) announced her support for the move. Meanwhile, the Alexander-Murray bipartisan effort to restore ACA subsidies for cost-sharing reduction payments may have found new life in the end-of-year spending package.

In the week ahead, stay tuned for the fate of the individual mandate in the Senate tax reform bill, the Hill’s response to increased pressure to address the health care crisis in Puerto Rico, and (hopefully) progress on reauthorization efforts for CHIP and community health centers.

LAST WEEK IN REVIEW: Monday, Nov. 13th – Friday, Nov. 17th

LAST WEEK IN REVIEW: Monday, Nov. 13th – Friday, Nov. 17th

It was a busy week at the Food and Drug Administration (FDA), with Commissioner Dr. Scott Gottlieb outlining a comprehensive new framework for the agency’s regenerative medicine policy and later detailing efforts to resolve the prescription drug and IV fluid manufacturing shortages caused by Hurricane Maria’s destruction in Puerto Rico. At the Centers for Medicare and Medicaid Services (CMS), premiums and deductibles for Medicare Parts A and B were announced,  and a new proposed rule was issued proposing significant policy changes to Medicare Advantage (Part C) and Part D—estimated to save nearly $1 billion over the next five years. Finally, the FDA, CMS and other agencies within the Department of Health and Human Services (HHS) received word early last week that their next boss may be former George W. Bush appointee and pharmaceutical executive, Alex Azar, who was nominated by President Trump for Secretary of HHS.

At midweek, CMS updated its open enrollment numbers to reflect the first week and a half of sign-ups on healthcare.gov. Nearly 1.5 million people have selected coverage plans on the exchanges through the first 11 days—continuing to outstrip the pace of last year’s open enrollment period. Still, it remains difficult to project if this pace can continue, with a range of theories as to the drivers of this year’s enrollment boom in the first few days.

While Americans continue to sign up for health insurance, policymakers continue to debate whether or not they should be required by law to do so. The Senate decided to include a repeal of the Affordable Care Act’s (ACA) individual mandate in its version of a tax reform bill, which will be released in the coming weeks. Meanwhile, the House of Representatives voted Thursday to approve their own version of a tax bill, which did not include a repeal of the individual mandate. The House version of the bill did, however, include the controversial elimination of deductions for medical expenses (which we discussed in our Spotlight two weeks ago).

But the most shocking news of the week came with a revelation that Charlottesville, VA was home to America’s most expensive plans in the ACA’s marketplace. With insurers and policy experts weighing-in to try to explain this unsettling finding in our own back yard, we decided to use this week’s Spotlight to review expert opinions on the unique drivers of insurance premiums in ACA individual health insurance marketplace.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque


Medicaid’s future: Follow the Maine road or buy into Verma’s vision?

By: B. Cameron Webb, MD, JD

SPOTLIGHT: Medicaid’s future: Follow the Maine road or buy into Verma’s vision?

Last week offered some conflicting omens for those trying to read the tea leaves on Medicaid. First, on Tuesday morning, CMS Administrator Seema Verma presented the framework for her vision of resetting the federal-state partnership and guiding the Medicaid program into a more flexible future. Hours later, the people of Maine defied their Governor at the ballot box—voting to expand their Medicaid program consistent with the goals of former President Barack Obama’s Affordable Care Act (ACA). The stark contrast between these happenings left both diviners and data scientists uncertain of the nation’s path forward in providing health insurance to the nation’s most vulnerable citizens. It also prompted us to explore the underpinnings and the overtures of both events in this week’s Spotlight.

The extremely abridged history of Medicaid

Just to make sure we’re all on the same page, we’ll begin with an extremely brief overview of today’s Medicaid. Notionally, Medicaid is a joint federal and state program to provide free or low-cost health care coverage for some of the most vulnerable Americans. Created in 1965 as one of President Lyndon Johnson’s “Great Society” initiatives, the Medicaid program is administered day-to-day by the states, while operating within broad federal guidelines.

By design, the states were meant to have significant flexibility in structuring their Medicaid programs. The federal Medicaid statute requires that eligibility be limited to U.S. citizens who are residents of the state in which they are applying, and who also fall into one of the specified coverage groups (“categorical eligibility”): children, pregnant women, adults in families with dependent children, individuals with disabilities and the elderly. Beyond categorical eligibility, the program also requires that individuals be in financial need (“income eligibility”) and that they have limited resources (“resource eligibility”). Within these parameters, though, the states have the latitude to further determine the eligibility, benefits, and provider payments of their programs.

Though Medicaid is a partnership between the states and the federal government, it is not an equal partnership in financial terms. The federal matching percentage (FMAP) for the costs of covered services varies significantly from state to state—ranging from 50 percent in states like Virginia, Massachusetts and New York, to just over 75 percent in Mississippi.

Starting in 2014, the program underwent a significant change due to the Medicaid expansion provision of the ACA. Thirty-one states and the District of Columbia opted to expand their Medicaid programs, increasing income eligibility to include all Americans with an income up to 138 percent of the federal poverty level (FPL). After the Supreme Court’s 2012 decision in National Federation of Independent Business v. Sebelius made Medicaid expansion non-compulsory, 19 states chose not to expand their Medicaid programs—each of whom had a Republican governor or Republican-led legislature (or both).

Since the expansion, Medicaid enrollment increased by nearly 30 percent—adding 16.7 million Medicaid enrollees nationwide since the ACA’s implementation. With the federal government promising to cover at least 90 percent of the expansion through 2020, the federal contribution to spending increased by over 30 percent—up to 349.8 billion in 2015. States similarly increased Medicaid spending, although the aggregate change was a roughly 6 percent increase from the 2013, pre-ACA baseline.

Despite the increased spending and enrollment, there was an unfortunate side effect of the Supreme Court’s determination that states were not required to expand their Medicaid programs. In states that did not expand, residents continued to qualify for Medicaid only at the pre-existing, state-determined income threshold. This created “coverage gaps” for these lower income individuals, leaving them without Medicaid eligibility and with no access to subsidies from their pre-existing state income threshold (e.g., 18 percent of FPL in Alabama and Texas) all the way up to 138 percent of FPL. Additionally, these same individuals in the coverage gap—2.37 million people in 2016—remained subject to the ACA’s individual mandate for coverage and its associated tax on individuals who did not maintain health insurance during the year.

…and then there were 33: Maine’s unusual path to Medicaid expansion

Maine MedicaidWith that as our backdrop, Mainers took an unprecedented step on last Tuesday’s election day when they voted by ballot referendum to become the 32nd state (plus the District of Columbia) to expand their Medicaid program. Where childless adults were previously not eligible for the program, this expansion would extend Medicaid eligibility to all Maine adults with incomes up to 138 percent of FPL—standing to add an estimated 80,000 to the state Medicaid rolls. The vote became the latest chapter in the state’s efforts to care for their most vulnerable citizens.

Though the Maine legislature voted in 2013 to expand the state’s Medicaid program in accordance with the ACA, that measure was vetoed by Republican Gov. Paul LePage. The legislature has since passed Medicaid legislation four additional times, only to be vetoed by Gov. LePage each time. Based on his economic analysis—as well as lingering misgivings regarding the impact of Maine’s 2002 expansion of the program—Gov. LePage felt that expansion consistent with the ACA would create unsustainable spending increases for the state.

Mainers for Health Care, a coalition of over 60 organizations, led the efforts to get Question 2 on the ballot for the November 7th election. With a strong grassroots campaign, they made an argument for a Medicaid expansion’s potential to improve health for over 70,000 people, to create 6,000 jobs, and to support Maine’s community hospitals and health centers. When the last of the votes was counted, over 59 percent of the electorate voted “Yes on 2” and Maine became the first state in the country to use voter referendum to expand its Medicaid program.

Still, the battle for Maine’s Medicaid program may not be over quite yet. While the governor has no authority to veto the outcome of the election, Gov. LePage could attempt to delay implementing the expansion in his remaining year in office. In fact, as the week went on, he remained steadfast in his opposition to the expansion. Estimating that the expansion will cost the state roughly $50 billion per year (compared to an infusion of $500 million annually in federal funding for the program), he vowed to not implement the expansion unless the Legislature funds the state’s contribution without raising taxes or using the state’s rainy day fund. And so, even though the people of Maine voted for Medicaid expansion, there may be quite a bit of political maneuvering yet to come.

Make Medicaid Great Again: The Vision from the Trump Administration

Just hours after the polls opened in Maine, CMS Administrator Seema Verma sparked a very different Medicaid conversation with her remarks at the National Association of Medicaid Directors (NAMD) Fall Conference. Nearly eight months into her appointment as the nation’s top official for Medicaid, her speech outlined a vision for the program that draws on her prior experience with Medicaid in Indiana—a vision she began crafting on her first day on the job.

Verma

(C) Victoria Sarno Jordan

The basic elements of Verma’s vision were built around a goal of resetting the federal-state relationship, restoring a true partnership, and focusing the Medicaid program on delivering improved outcomes for its recipients. She further outlined her approach through three areas of focus: efforts to increase the state flexibility that states have in executing their programs, a promise of greater accountability to a higher standard of Medicaid health outcomes, and a commitment to ensuring the highest levels of integrity in state administration of the programs.

By word count, Verma devoted over 40 percent of her remarks to her vision for facilitating greater flexibility for states in their Medicaid programs. With 16 percent and 6 percent of her statement, respectively, devoted to accountability and integrity, it seemed that the true focus of her speech was to outline a plan to increase state flexibility in executing their Medicaid programs. The Administration would aim to add such flexibility through three primary thrusts:

Promoting “community engagement activities”
Invoking an obligation of social support programs to help recipients “move up, move on, and move out,” Verma declared that the Trump Administration will approve proposals from states that promote “community engagement activities.” She provided examples of such activities, which include requirements that Medicaid recipients are working, volunteering, going to school or obtaining job training. Calling on states to help recipients break the chains of poverty and live up to their fullest potential, she also went as far as to say that the absence of such requirements in the Obama administration were tantamount to “the soft bigotry of low expectations.”

Reducing administrative burden
Envisioning a Medicaid program more focused on improving health outcomes than negotiating waivers, plan changes and expenses, Verma’s goal of reducing the burden of program administration was a second major focus. From fast-tracking approvals for routine and prior approved proposals to expediting approvals for ideas that have been proven to work in other states, the emphasis was on efficiency in processing paperwork. Moreover, the Administration plans to decrease the frequency of required reporting, as well as approving waivers for successful programs for up to a decade at a time.

Responding to emerging health threats
As a final component of the vision for program flexibility, the ability to respond quickly to emerging health threats was the third focus. Specifically, Verma referenced the need to modernize the program to respond to the opioid epidemic, and quickly mobilize needed resources to Medicaid beneficiaries suffering from substance abuse disorders. Examples like this illustrate the belief that the program has the potential to serve a critical role in responding to the evolving health needs of the nation.

Throughout her remarks, the Administrator mentioned her experience working at the state level. She described how she worked side by side with states to help them reform and strengthen their programs, how she never designed the same program twice and how she observed states deferring to the federal government’s vision rather than feeling empowered to innovate. In response, her vision seemed to draw substantially from the successes she touted as a health policy consultant working with then-Indiana Governor and now-Vice President Mike Pence designing Indiana’s Medicaid Program, the Healthy Indiana Plan (HIP) and its successor, HIP 2.0. Even still, while Verma and many conservatives hail HIP 2.0 as a model of innovation in expansion, others were not as convinced that the program was such an unqualified success.

Verma’s vision for Medicaid flexibility is one that contrasts with the Obama Administration in that it does not place the same emphasis on insurance status, but rather on allowing states to determine need and having the federal government ensure performance within the program. She paints a picture of a future for the program where states still meet the core objectives of the program, but do so with fewer directives, requirements, and prohibitions from the federal government. While the Administrator’s remarks were noteworthy as her first true elaboration of her vision for Medicaid, it was her commentary about community engagement activities—read by most as “work requirements”—that made national headlines.

Why community engagement activities sound and awful lot like work requirements

Though she went to lengths to provide a more expansive concept of community engagement as a lever in state Medicaid innovation, her depiction couldn’t escape harkening back to the notion of requiring beneficiaries to have, or to actively seek, employment. Work requirements have previously been implemented in federal social assistance programs—such as in the Temporary Assistance for Needy Families (TANF) cash-assistance program—with mixed reviews. So, when Verma encouraged states to consider incorporating something akin to work requirements into their Medicaid programs, the suggestion was met with a mixture of enthusiasm, resistance.

Medicaid Work Requirements

SOURCE: Kaiser Family Foundation

Beyond the theory of encouraging work as a condition of receiving social supports, there are several questions about the execution and the utility of such programs in Medicaid. First, the majority of the able-bodied adults subject to the work requirement would still be likely to have major barriers in their lives to employment. Next, getting people into the labor system quickly also does not translate into long-term benefits. Without additional federal funding to states for work training or placement programs for Medicaid recipients, achieving even the relative success of the TANF program’s work requirements seems unlikely. Finally, there would likely be significant and burdensome reporting and tracking requirements for states to assume in order to manage a work requirement program of this size and throughput demanded by the Medicaid program.

All told, there is significant disagreement between policymakers and pundits alike over the moral imperative to require work for Medicaid recipients as well as over the potential benefit of such requirements in driving sustainable employment. One point of agreement, however, is that such a program would surely result in fewer people receiving benefits through the Medicaid program. With fewer individuals having health insurance to help them afford increased access to medical services, there would certainly be some form of cost to society from their dis-enrollment.

Medicaid’s outlook: toward more standardization or more flexibility?

Although last week’s developments in the Medicaid discussion are presented as opposing concepts, they really speak to a broader discussion of federalism and flexibility. As the ACA’s Medicaid expansion sought to standardize the income eligibility criteria for the program as part of a broader effort to expand access, it effectively raised the floor for coverage eligibility among vulnerable Americans. In contrast, the flexibility championed in Verma’s remarks draws on the idea that states are closer to the needs of their residents and should be trusted to design the program that meets their needs. If those needs are not met, residents can use the political process to empower those who more effectively advocate for their needs.

Even though this conversation about health care coverage for vulnerable populations often is expressed in terms of moral imperatives, the economic impact of these respective approaches is similarly important. Implicit in the rallying cry for state flexibility is an advocacy for the ability of states to more broadly decide how and where to spend their Medicaid dollars in the interest of their populations. Despite the program’s hefty, $553 billion price tag, there continue to be significant differences in the value, accessibility and sustainability of Medicaid programs across the nation.

Ultimately, the cries for greater standardization or increased flexibility need not be seen as mutually exclusive. Through the existing Medicaid waiver processes, innovation could be encouraged and states could tailor the program to their needs. In the era of the ACA’s Medicaid expansion, such innovation would take place with an enhanced income-related baseline for coverage. It is possible that all states would be well-served with the combination of expanded Medicaid eligibility and state-specific innovation through waivers—both coupled with Verma’s calls for reduced administrative burden and emphasis on accountability to outcomes.

The vote in Maine highlights how those affected in the states are hungry to voice their perspective on the existing needs. With the success of their ballot initiative, other states like Idaho and Utah are considering following suit for their 2018 elections. States like Kansas, South Dakota, Tennessee, Virginia and Wyoming have similar discordance between the state executive and the state legislature that seem ripe for voter input. We will have to stay tuned for the impact of Administrator Verma’s call for innovation to see whether it affords states the flexibility to design the Medicaid programs they truly need, or whether voters will come to the polls next year determined to chart their own courses forward.

LAST WEEK IN REVIEW: Monday, Nov. 6th – Friday, Nov. 10th

LAST WEEK IN REVIEW: Monday, Nov. 6th – Friday, Nov. 10th

From legal battles to administrative rules to elections, the heat was all the way up last week in health policy. Following up on the Trump Administration’s roll backs of the Affordable Care Act’s (ACA) birth control mandate, attorneys general in five states (including Virginia) filed an injunction last Thursday to halt the implementation of the new rules. All five states were recently on the losing end of another lawsuit two weeks ago, where they filed suit to compel the Administration to continue making the cost-sharing subsidy payments for low-income enrollees through the ACA health insurance exchanges.

Speaking of the exchanges, we made it through the first week of the six-week open enrollment period, and the results were surprising to many. Rather than the predicted decreases in enrollment due to a reduced healthcare.gov marketing budget and uncertainty surrounding the marketplace, Americans actually showed up to sign up for coverage en force. With approximately 600,000 people enrolling in the first week, it was the biggest start to open enrollment to date.

Among the more controversial matters this week, the Centers for Medicare and Medicaid Services (CMS) published its 2018 Medicare Outpatient Prospective Payment System (OPPS) final rule. In addition to increasing payment rates to providers and updating hospital quality reporting measures, the rule notably reduces payments to hospitals for certain Medicare Part B drugs purchased through the 340B drug program—an estimated $1.6 billion cut. Created in 1992 to provide outpatient drugs to eligible health care entities at discounted prices, the changes to the 340B program would result in payments to providers that are 22.5 percent less than the average sales price (ASP) for drugs, rather than the current rate of ASP plus 6 percent. While the Medicare Payment Advisory Commission (MedPAC) has long proposed this rate change, a strong coalition of health care organizations is coalescing to fight the rule. Led by the American Hospital Association and the Association of American Medical Colleges, opponents of the rule fear that it will threaten access to healthcare for many patients.

Finally, last week’s election yielded some exciting developments with implications for the future of American healthcare. First, exit polls from the Virginia election—which resulted in the election of Democrat Ralph Northam as Governor—found that four out of 10 Virginians felt healthcare was their top issue. Also, Maine voters became the first state to successfully use a ballot referendum to expand their Medicaid program. This last development leads us to our focus for tomorrow’s Spotlight: the prospects for Medicaid’s future.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque


 

Health and taxes: Tracking tax reform’s potential impact on health care

By: B. Cameron Webb, MD, JD

LAST WEEK IN REVIEWMonday, Oct. 30th – Friday, Nov. 3rd

Following the Trump administration’s new classification of the opioid epidemic as a bona fide public health emergency, the President’s bipartisan opioid commission, led by Gov. Chris Christie, issued its final recommendations to combat the epidemic. Though heavy on recommendations—56 in total—the report put the onus on Congress to determine what would constitute sufficient funding of a federal response. The Centers for Medicare and Medicaid Services (CMS) also made moves on opioids, issuing a new Medicare policy to facilitate the development state demonstration projects to expand access to treatment for opioid use disorder.

With the start of the fifth wave of the Affordable Care Act’s (ACA) Open Enrollment, many experts anticipate sharp declines in ACA enrollment for 2017. While the Department of Health and Human Services (HHS) significantly decreased the marketing budget for Open Enrollment this year, some insurers responded by increasing their marketing efforts by running their own television advertisements and hosting webinars to inform potential enrollees and navigators about their coverage offerings.

Disaster relief efforts continued as Hurricane Maria’s effects still cripple Puerto Rico, with power outages significantly impacting access to healthcare for patients across the island. Additionally, hospitals across the United States continue to face drug shortages related to pharmaceutical products made in Puerto Rico—roughly 10 percent of all drugs consumed by Americans.

The House of Representatives had a busy week, finally passing a reauthorization bill for the Children’s Health Insurance Program—though prospects for the bill in the Senate are grim given the significant opposition from Democrats over its funding. But the House really made a splash on Thursday with the release of a first look at their tax-reform legislation. We break down the tax bill—and its health policy implications—in this week’s Spotlight.

SPOTLIGHTHealth and taxes: Tracking tax reform’s potential impact on health care

“…but in this world nothing can be said to be certain, except death and taxes.”

tax reformThough it admittedly comes across as hyperbole, Benjamin Franklin’s 1789 quote takes on a new context when considering Republican tax reform in the wake of unsuccessful efforts to repeal and replace the ACA. Introduced on Thursday by Rep. Kevin Brady (R-Texas), H.R. 1—the Tax Cuts and Jobs Act (TCJA)—is the first step by the majority party in Congress to fulfill President Trump’s promise of delivering the “biggest tax cut…in the history of our country.” But beyond the impact on tax brackets, corporate tax rates, and standard deductions, we thought it would be worthwhile to dive into the health care implications of GOP-led tax reform in the 115th Congress.

What’s in the proposed tax reform (so far)?

On October 26, House Republicans narrowly passed budget legislation that would cut federal revenue by up to $1.5 trillion over the coming decade. This move was made to help allow the party to pass a new tax plan. With the TCJA being the House’s first proffer on tax reform–and just days after the bill’s introduction—it is fair to say that we are a long way from what will be the final tax bill. Still, the bill provided some critical insights into the direction the GOP ultimately plans to go.

Pushing to the limit of the budget authorization, the TCJA proposed to cut taxes by $1.51 trillion, with $1 trillion from business tax cuts, a net of $300 billion from individual tax cuts, and the ultimate repeal of the estate tax accounting for the final $200 billion. While government often speaks in terms of trillions, the number should hit you as a pretty unimaginable abstraction. Here’s a great article I like to use to help put a trillion dollars in perspective.

In business tax cuts, the main thrust is a reduction of the corporate tax rate from 35 percent down to 20 percent. This move—a key Trump talking point on the campaign trail—would reduce federal revenues by $1.5 trillion. It should be noted that while the United States currently has the highest corporate income tax rates among G20 nations (at 35 percent), it has the fourth highest marginal effective corporate tax rate (at an average of 18.6%), which takes into account the variety of special deductions. These deductions—and the corresponding marginal effective corporate tax rate—vary by industry. The health care sector sees some of the highest marginal effective tax rates, estimated at 54.5% for taxed hospitals and 38 percent for health care support services.

At the individual level, the TCJA offsets roughly $3.0 trillion in tax increases with $3.3 trillion in tax cuts. The bill repeals personal exemptions, eliminates certain exclusions, and reforms itemized deductions (which we’ll come back to) as well as higher education tax benefits. At the same time, it consolidates and reduces individual income tax rates (from seven brackets to four), roughly doubles the standard deduction, repeals the Alternative Minimum Tax (AMT), increases the child tax credit and creates a new filer and dependent credit.

On the whole, the $1.5 trillion in tax cuts amounts to an addition of $1.5 trillion to the federal debt. This impact has been projected to cause the nation’s debt to exceed the size of our economy by 2028, which would be…bad. By Friday, the proposed bill had been amended to cut $81 billion from the tax cuts to individual tax payers (that’s 5.4 percent of the total cost of the tax reform) in an effort to soften the blow.

An overview on the recent history of taxes and health care

Although the Affordable Care Act (ACA) was not passed as a primarily tax reform package, much of the law was, indeed, operationalized through the tax code. In fact, the ACA was full of tax provisions that impacted individuals and employers, as well as major (and minor) players in the health care industry.

To help facilitate insuring more Americans, the ACA offered a series of tax incentives to individuals and businesses. The premium tax credit, options for tax-free health coverage for older children, and even the small business health care tax credit were are implemented through the tax code to help make health care more affordable.  Still, to pay for the law—with ten-year cost estimates ranging from $800 billion to $2 trillion—somewhere between one- to two-dozen new taxes on individuals, employers and businesses were included in the ACA.

healthcare taxWhile the most notorious ACA-related taxes include the individual mandate, the employer mandate, and taxes on high-cost health plans (the “Cadillac” tax), a number of other taxes are important as well. Excise taxes (totaling an estimated $19 billion by 2020) were levied on health insurance providers, pharmaceutical manufacturers and importers, and medical device manufacturers and importers. Additionally, high-income surtaxes beyond payroll taxes and net investment income (NII) taxes for the top five percent of earners (individuals with incomes exceeding $200,000 and couples with incomes exceeding $250,000) were projected to raise an additional $35 billion by 2020. Finally, who could forget the 10 percent excise tax on indoor UV tanning services.

Importantly, the ACA also increased the threshold for the medical expense deduction available to taxpayers. Prior to the ACA, taxpayers could deduct medical expenses exceeding 7.5 percent of their income. After the ACA, only medical expenses exceeding 10 percent of income were eligible for deduction. This increased limit was projected to increase federal tax revenue by $3 billion in 2020, bringing the total expected federal deficit reduction to $46 billion if the ACA’s tax provisions were fully implemented.

Potential health care-related effects of the GOP’s current tax reform efforts

The individual mandate. Known as the “individual shared responsibility provision” in the tax code, the ACA required taxpayers to either have minimum essential coverage for each month, qualify for an exemption, or to make a payment when filing their federal income take return. The mandate was expected to reduce the number of uninsured Americans, lower health insurance premiums and also reduce the cost of government subsidies—all while reducing the federal deficit by an estimated $3 billion. After its first few years of implementation, the individual mandate tax penalties amounted to $1.7 billion in tax year 2014 (TY 2014) and $3.1 billion in TY 2015. No data from TY 2016 are yet available from the Internal Revenue Service (IRS).

While the TCJA did not initially take aim at the individual mandate, President Trump personally set it on the menu for tax reform with a tweet last week.

Trump Tweets

Even though, by week’s end, Congressional leaders responded by saying that the individual mandate repeal was under consideration, they also acknowledged that revisiting health care via the tax reform bill could be politically problematic. While the Congressional Budget Office estimates that repealing the individual mandate could save $416 billion over 10 years through decreased federal subsidies for health insurance, it would also result in as many as 15 million more uninsured Americans, as well as premium increases of approximately 20 percent. With multiple failed attempts at repealing and replacing the ACA, some in the Senate are wary of bringing health care into an already difficult tax reform process.

Medical expense deductions. While the ACA raised the threshold for medical expense deductions, the TCJA proposes to eliminate the deduction altogether. Instead of a total impact of $3 billion, eliminating the deduction would increase tax revenue by an estimated $10 billion per year.

As it is currently constructed, the medical expense deduction allows individuals to deduct preventive care, treatment, surgeries and dental and vision care as qualifying medical expenses. Importantly, it can also be used for long-term care expenses for chronically ill patients. An estimated 8.8 million Americans claimed this deduction on their 2015 taxes, with $87 billion in deductions claimed.

While the number of taxpayers claiming the medical expense deduction is relatively small, the repeal of the deduction would have major implications for households with extremely high health-care costs. Nearly half of those who took the medical expense deduction had incomes less than $50,000, and taxpayers with less than $75,000 in income deducted an average of $8,990—a more significant deduction than the $6,384 for the home mortgage interest (HMI) deduction or the $2,768 for charitable contributions claimed by taxpayers with similar incomes. The AARP strongly opposed the provision, noting its effect as a “new health tax” on middle income seniors with high medical costs.

Budgetary offsets (Medicaid and Medicare). In order to pay for $1.5 trillion in tax cuts over the next decade without increasing the federal deficit, federal spending would have to decrease, as well. In its budget blueprint released last month (which authorized the $1.5 trillion in tax cuts), Senate Republicans also planned to reduce spending by $5 trillion over the next 10 years in order to reduce the deficit. Democrats on the Senate Budget Committee, however, published their breakdown of where the 2018 budget planned to reduce that spending, with significant implications for Medicaid and Medicare.

Specifically, Senate Democrats contended that the Republican budget would reduce federal contributions to Medicaid by more than $1 trillion over the next year. Citing the CBO’s June 2017 baseline, and assuming that Medicaid would receive its proportional share of budget function 550 mandatory cuts, they estimated that Medicaid would see a 5.0 percent cut in 2018, gradually increasing to a 29.6 percent cut in funding by 2027 (relative to 2017 funding levels).

Additionally, the budget reportedly includes $473 billion in budget cuts over ten years from Medicare. More immediately, the 2010 pay-as-you-go rule (PAYGO) necessitates certain mandatory cuts, which would amount to $28 billion cut from Medicare between January and September 2018.

The road ahead

This week, the House Ways and Means committee begins its markup of the bill, offering the first glimpse at changes to increase its likelihood of passing. The Speaker of the House, Rep. Paul Ryan (R-Wisconsin) has expressed his goal of having the tax reform passed in the House by Thanksgiving. The Senate, led by its Senate Finance Committee, is also launching a parallel process in the next few weeks. Both chambers have expressed that they hope to resolve any differences and pass a final bill before 2017 comes to a close.

President Trump and several key Republican legislators continue to advocate for action on the individual mandate, with others in the GOP still hesitant about the potential political impact of reinvigorating the health care debate in the new efforts for tax reform. With Republicans in the 115th Congress committed to success in this latest effort at executing their agenda, there will likely be significant debate to come regarding the political merits of intended and unintended health care effects flowing from current tax reform efforts.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque


Could labels actually matter in America’s Opioid “Emergency”?

By: B. Cameron Webb, MD, JD

LAST WEEK IN REVIEW: Monday, Oct. 23rd – Friday, Oct. 27th

Early last week, Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ways and Means Committee Chairman Kevin Brady (R-Texas) announced a bicameral agreement to pair Affordable Care Act (ACA) reforms with a temporary two-year funding extension for the health law’s cost-sharing reduction (CSR) program, which could provide Americans with more certainty and choice. This would not only delay the ACA’s individual and employee mandate, but also expand tax-free Health Savings Accounts (HSRs) to allow Americans to put aside more of their hard-earned income for health costs. With open enrollment beginning on Wednesday this week, the need for bipartisan legislation to stabilize the marketplace is higher than ever before. While it may be too late for a stabilization measure to bring down premiums in states for the 2018 coverage year, there are still hopes to add $106 million for outreach and enrollment in 2019.

In the realm of disaster relief, about 10 percent of drugs manufactured for US consumers are from Puerto Rico which has taken a hit since hurricane Maria. Healthcare systems in the US are suffering from certain drug shortages due to the aftermath of the hurricane. Also, after the Governor of California declared a public health emergency earlier this month due to the wildfires, Centers for Medicare & Medicaid Services (CMS) has also taken action. Through the public health emergency, CMS is able to waive or modify certain Medicare, Medicaid and Children’s Health Insurance Program (CHIP) requirements if necessary to provide health services.

Finally, the opioid epidemic continued to lead headlines around the country last week. Officials are cracking down on opioid prescribers for engaging in questionable practices that contribute to the widespread availability of these drugs. Local experts met at the University of Virginia to discuss the crisis, while Food and Drug Administration (FDA) Commissioner, Dr. Scott Gottlieb, called for expanded use of medication-assisted treatment for opioid addiction. But the biggest news came from the White House on Thursday, when the Trump Administration officially declared the opioid epidemic a public health emergency. This week’s Spotlight will break down the opioid epidemic and how this declaration will direct efforts to address it.

SPOTLIGHT: Could labels actually matter in America’s Opioid “Emergency”?

Opioids in AmericaLast Thursday, at the instruction of President Trump, Acting Health and Human Services (HHS) Secretary Eric Hargan declared a nationwide public health emergency regarding the opioid. Around the country, responses to the announcement ranged from enthusiasm to apathy, with most curious about how the declaration would substantively impact the American opioid crisis that leads to an average of 91 deaths and over 1,000 people requiring emergency room treatment each day. While there have been some really solid reviews on the rise of the opioid epidemic (e.g., from CNN, Vox and—most recently—the New York Times), we’ll begin with a fly-over of how we got here.

Origins of an epidemic

It all began with the cultivation of opium poppy in lower Mesopotamia back in 3400 B.C. Skipping a few details, by the early 1980s, physicians were wary of using opioid derivatives (such as morphine and oxycodone) in the treatment of pain—particularly given widespread awareness of the disease of addiction and dependence that accompanied the use of these medications. In the mid 1990s, though, the focus shifted to an epidemic of untreated pain in American hospitals. Around the same time that newer, long-acting opioid formulations became available and were being aggressively marketed by drug manufacturers, various groups began championing the idea of pain as the “fifth vital sign”. New guidelines for pain management followed, and a new opioid epidemic was off to the races.

Previous federal efforts to combat the opioid epidemic

While 76 million prescriptions for opioids were written in the United States in 1991, that number had doubled by 2002 and nearly tripled 10 years later. By 2010, just over a year into his first term, President Obama released his first National Drug Control Strategy. This plan emphasized a need for action to address opioid use disorders and overdose, while still ensuring adequate treatment of individuals with pain. A year later, the Obama Administration released its national Prescription Drug Abuse Prevention Plan, outlining goals for addressing prescription drug abuse and overdose. The Administration focused on supporting and expanding community-based efforts to prevent drug use, pursuing ‘smart on crime’ approaches to drug enforcement, improving prescribing practices for pain medication, increasing access to treatment, working to reduce overdose deaths and supporting the millions of Americans in recovery.

By October 2015, the Obama Administration created its plan to combat the epidemic, focusing on prescriber training and improving access to treatment. Additionally, President Obama, himself, requested $1.1 billion in funds in his budget to combat the epidemic. Still, as the 2016 election came and went, the opioid epidemic continued onward—dramatically impacting communities across the country, with opioid overdose, abuse and dependence exerting an estimated economic burden of $78.5 billion on the United States.

Defining an opioid public health “emergency”

With opioid deaths surpassing automobile accidents as the most common cause of accidental death in the United States—and with the typical descriptors of an opioid crisis or epidemic—most Americans already perceived that “emergency” status had long since been reached. In fact, in the 2017 fiscal year (from October 1, 2016 through September 30, 2017), HHS invested almost $900 million in opioid-specific funding. This included supporting state and local governments—as well as community-based organizations—to support treatment and recovery services, to target the availability of treatment for overdose, and to train first responders.

Instead of merely signaling the obvious, the Trump Administration has stated that it is using the declaration of an emergency as a mechanism to rally additional resources and support for communities across the country that have been ravaged by addiction and abuse. By asking his Acting Secretary of HHS, Eric Hargan, to declare a public health emergency, the Trump Administration empowers HHS to act beyond last year’s $900 million investment.

Under Section 319 of the Public Health Service Act, the determination of a public health emergency permits the federal government to engage in activities such as assisting state and local governments, suspending or modifying certain legal requirements, and expending available funds to address the public health emergency. This Section 319 determination will remain in effect for 90 days, with the option to renew the determination for additional 90-day periods if the Secretary of HHS determines that the emergency persists.

Specifically, the Trump Administration notes that the declaration of a nationwide public health emergency will enable HHS to accelerate temporary appointments of specialized personnel to address the emergency, will help expand access for certain groups of patients to telemedicine for treating addition, and will provide new flexibilities in HIV/AIDS programs.

Opioid epidemicExperts have suggested that this designation could grant HHS significant latitude in addressing the epidemic. Using the example of naloxone, the reversal agent for opioid overdose, several options have been suggested regarding efforts to expand access. First, under this new emergency status, HHS could consider negotiating reduced pricing for naloxone. Additionally, the agency could facilitate equipping first responders with naloxone in public spaces with frequent overdoses. Moreover, HHS could allow pharmacies to distribute naloxone over the counter. With increased latitude in the arenas of treating opioid abuse with medication, or even addressing provider prescribing practices, the designation does widen the field with regard to federal options for impacting the epidemic.

Importantly, though, there remains the issue of money. In terms of the funds available under Section 319 of the Public Health Service Act, these typically would come from the Public Health Emergency Fund—a fund created by Congress in 1983 that was funded with as much as $45 million in 1990. Today, however, the Public Health Emergency Fund currently sits at only $57,000. Congress would need to reauthorize and fully fund the effort in order to make a meaningful impact. While some in Congress—on both sides—have requested $45 billion over the next decade, some experts have suggested that the true cost of necessary services to combat the opioid crisis would be over four times that amount: roughly $190 billion.

In conclusion…and looking forward

While much ado was made in the press over the President’s decision to ask the Secretary of HHS to declare a public health emergency under the Public Health Service Act rather than pursuing a different emergency status (e.g. under the Stafford Act), most experts agree that the use of the Section 319 of the Public Health Service Act best equips the administration to swiftly and creatively assist states and localities in curbing the opioid epidemic. The substance of such interventions, however, remains to be seen. Stay tuned this week, as the President’s Commission on Combating Drug Addiction and the Opioid Crisis—led by Governor Chris Christie—is poised to submit their final report on November 1st. This could provide some important clues on where the Trump Administration goes from here to try to address this opioid emergency.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque


Congress Leaves all the CHIPs on the Table

By: B. Cameron Webb, MD, JD

LAST WEEK IN REVIEW: Monday, Oct. 16th – Friday, Oct. 20th

Expectedly, last week’s biggest story remained the outpouring of responses to the Trump Administration’s Health Care Executive Order (EO) and decision to discontinue cost-sharing reduction (CSR) payments. Eighteen states and the District of Columbia filed a multi-state lawsuit in an effort to stop the President from discontinuing the CSR subsidies. The Administration’s actions also reverberated through Wall Street, with several health insurance stocks taking a hit after the decision was announced. Finally, the Senate Health, Education, Labor and Pensions (HELP) Committee also responded by striking a bipartisan deal to stabilize individual health insurance marketplace and extend CSR subsidies for two more years.

While the end of the CSR subsidies made the most noise, there was still plenty of action in other aspects of health policy. In the wake of Hurricane Maria, the health of Puerto Rico’s 3.4 million residents remains a concern, with increased rates of diarrhea, pink eye, skin rashes and mental trauma being reported. Two bills are being considered by Congress to add $1 billion to Puerto Rico’s Medicaid program and provide millions of dollars in disaster relief.

Finally, In the midst of the nation’s ongoing opioid epidemic, the White House announced that their candidate to lead the Office of National Drug Control Policy (ONDCP) withdrew his name amidst scandal. But while there has been a flurry of executive branch activity in the health insurance space over the past few weeks, we turn our attention in this week’s Spotlight to the legislative branch and the discussions in the House and Senate around ensuring healthcare access for children.

SPOTLIGHT: Congress Continues to Leave all the CHIPs on the Table

For weeks, Republicans and Democrats have both pledged their commitment to funding the popular Children’s Health Insurance Program (CHIP). Still, with federal CHIP funding expired as of September 30, the discussions—and even preliminary actions—in both houses of Congress have yet to result in an outcome that protects coverage for some of America’s most vulnerable children. As October comes to a close, states across the nation nervously watch both the Hill and their budgets, with several states just weeks away from running out of CHIP funding.

What is CHIP?

CHIP was enacted in 1997 as a partnership between federal and state governments to cover uninsured, low-income children with incomes above Medicaid income eligibility thresholds. Through the program, states have the option of using their federal CHIP funds to expand their Medicaid program beyond the federal minimum for children under 18 (i.e., cover children with incomes greater than 138 percent of the federal poverty line), to create a CHIP program that is separate and distinct from the state Medicaid program, or to use a combined approach.

In 2016, CHIP programs across the 50 states and in the District of Columbia covered 8.9 million children. Since CHIP’s enactment, the number of uninsured children in the United States has decreased from nearly 14 percent in 1997 to less than 5 percent in 2015. CHIP was last reauthorized at a cost of $39.7 billion as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

When is it due for the next reauthorization?

When was it due, you ask? The deadline came and went on September 30, 2017—the end of the federal government’s 2017 fiscal year (FY 2017).

If the federal funding is already expired, what does that mean for CHIP as of now?

Again, the CHIP program is a partnership between federal and state governments. To encourage state participation—and investment—the federal government offers a rather generous matching rate for CHIP. While already considered an “enhanced” matching rate for CHIP relative to Medicaid, the Affordable Care Act (ACA) further increased the match by 23 percentage points, resulting in an 88 to 100 percent federal match across the states. This means that, for every dollar a state puts toward its CHIP program, the federal government will put up between $0.88 and the full dollar as a matched contribution.

While the funding technically expired on September 30, states can still use any remaining FY 2017 CHIP funds to continue operating their programs. Anticipating the issue with extending CHIP, the Medicaid and CHIP Payment and Access Commission (MACPAC) estimated how long each state would last before exhausting their CHIP funds. Four states (Arizona, the District of Columbia, Minnesota and North Carolina) are projected to exhaust funds by December 2017. An additional 27 states (including Virginia) are expected to run out of federal CHIP funds by March 2018.

So, within the next six months, most states would not have the financial support from the federal government to continue providing their current levels of access to healthcare for low-income children. As you can imagine, that sentence–and its underlying reality—does not sit well with any American of conscience, nor does it serve the interests of any of the 469 members of Congress up for reelection in 2018.

Current CHIP Activity in the Senate

The Keeping Kids’ Insurance Dependable and Secure (KIDS) Act was introduced on September 18th by Sen. Orrin Hatch (R-Utah) and referred to the Senate Finance Committee. Sen. Hatch is no stranger to CHIP, having co-sponsored the original legislation in 1997 that led to its creation. The Senate Finance Committee, chaired by none other than Sen. Hatch, advanced the measure on October 4. In brief, the KIDS Act would extend CHIP funding through FY 2022, maintain the federal matching rate at current statutory levels (as they were “enhanced” under the ACA) through FY 2019 before decreasing it to a traditional CHIP matching rate by FY 2021 and FY 2022, and would create protections and flexibility under the ACA’s maintenance-of-effort provision.

Meanwhile, in the House of Representatives

The Helping Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable Act of 2017 (“HEALTHY KIDS Act”) was introduced on October 3rd by Rep. Michael Burgess (R-Texas) and was referred to both the Energy and Commerce Committee as well as the Ways and Means Committee. While the Energy and Commerce Committee passed a bill extending funding for the program on October 4, they did so with no Democratic support within the Committee.

Similar to the KIDS Act in the Senate, the HEALTHY KIDS Act in the House would reauthorize CHIP for five years, extend state maintenance of effort for children below 300 percent of the federal poverty line, transition down from the enhanced match to a regular CHIP match by FY 2021, and would extend a number of demonstration and outreach programs. The HEALTHY KIDS Act went a step farther, delaying cuts in Medicaid Disproportionate Share Hospital payments by one year and providing $1 billion in Medicaid financing to Puerto Rico and additional relief to the U.S. Virgin Islands. Among the outlined offsets for these expenditures was an increase in Medicare premiums for beneficiaries making over $500,000 per year.

So what’s the holdup?

According to most reports, Democrats on the House Energy and Commerce Committee requested that the Committee delay sending the HEALTHY KIDS Act to the floor for a vote of the entire House of Representatives. At particular issue were the nature of the offsets in both the HEALTHY KIDS Act and a separate measure—the CHAMPION Act (H.R. 3922)—which was also introduced on October 3rd to reauthorize community health centers through FY 2019. While the HEALTHY KIDS Act would increase Medicare premiums for high-income beneficiaries, of greater concern to House Democrats was the CHAMPION Act’s cutting of $6.35 billion in future appropriation to the Prevention and Public Health Fund (PPHF), which was created by the ACA. With such a large and important source of public health funding on the line, it seems House Democrats are unwilling to move forward with either piece of legislation until, at the very least, the PPHF funds issue was resolved.

A look ahead on CHIP reauthorization

While House Democrats hoped to renew bipartisan negotiations, House Republicans on the Energy and Commerce Committee contend that no counteroffers were ever provided. As the House of Representatives reconvenes today after its district work period, the Energy and Commerce Committee plans to immediately move forward with presenting the HEALTHY KIDS Act for a full vote of the House.

Even if the House passes the HEALTHY KIDS Act, the KIDS Act will still need to be debated and voted on by the Senate, and the respective chambers would need to resolve any differences between the bills—either through a conference committee (which would require a second vote on the bill reached through compromise) or a back-and-forth that would yield consistent language on which both chambers could vote. Finally, that bill would need to go to President Trump for his signature or veto.

There remains a long road ahead to get CHIP reauthorized. In many states, there is a race against the clock, with statutory requirements in some states necessitating a freeze of the program as soon as federal funds from FY 2017 expire. With stakes this high, Congress will need to finally succeed in working together to make sure that America’s children don’t bear the brunt of their dysfunction.


Student Contributors on this Article:
Marissa Alvarez, Chad Fletcher, Shaina Haque