Manatt on Health Reform: Weekly Highlights

Republican governors react to passage of the AHCA in the House; insurers begin to make Marketplace rate filing decisions despite continuing uncertainty; and expansion waiver evaluations in Indiana and Iowa find many enrollees are accruing penalties—including disenrollment.

FEDERAL HEALTH REFORM UPDATES AND ANALYSIS:

House Passes AHCA

The House of Representatives passed the AHCA on Thursday by a 217-213 vote. The bill was unanimously opposed by Democrats, but a last-minute amendment providing $8 billion intended to reduce out-of-pocket costs for patients with pre-existing conditions generated sufficient support from Republican moderates. The bill now moves to the Senate, where Republicans hope to advance the legislation through the reconciliation process, which requires only a simple majority vote. A number of Republican Senators have expressed skepticism toward the proposal, with several indicating that the Senate will craft its own bill. Also of note, the Congressional Research Service released a detailed legal summary of the AHCA as passed and a timeline of when key AHCA provisions would go into effect.

Governors React to House Passage of the AHCA

Democratic governors unanimously disapproved of the House's passage of the AHCA, while reactions from Republican governors were mixed, with some praising the Administration and Congress, and others expressing reservations.

  • Alaska: Governor Bill Walker (I) noted that Alaska "would be the most negatively affected [state] if the proposed legislation is signed into law as is."
  • Arkansas: Governor Asa Hutchinson (R) said the AHCA would provide states with "more flexibility to manage health care systems, but [would] still result in a cost shift to the states," and asked the Senate to ensure sufficient Medicaid funding and Marketplace subsidies.
  • Georgia: Governor Nathan Deal (R) noted that complicated legislation such as the AHCA will not "have everything that everybody wants in it."
  • Illinois: Governor Bruce Rauner (R) said the passage of the AHCA "continues to be of deep concern to our administration" and noted that "recent changes did not address fundamental concerns about the bill's impact on the 650,000 individuals that are part of [Illinois'] Medicaid expansion population, nor have those changes eased the concerns of the 350,000 people in the individual market who are dealing with skyrocketing premiums and fewer choices."
  • Massachusetts: Governor Charlie Baker (R) stated that he was "disappointed by [Thursday's] vote as this bill would significantly reduce critical funds for the Commonwealth's health care system" and urged Congress to "reject this bill in its current form."
  • Nevada: Governor Brian Sandoval (R) said he remains opposed to the AHCA because of concerns about cuts to the Medicaid expansion.
  • New Hampshire: Governor Chris Sununu (R) supports the AHCA, praising Congress and the President for "listening to the American people" and "moving the ball forward."
  • Ohio: Governor John Kasich (R) called the AHCA "woefully short on the necessary resources to maintain health care" coverage for Americans, and stated that he is "committed to working with like-minded governors and senators on a more practical, sustainable solution."
  • Oklahoma: Governor Mary Fallin (R) issued a statement congratulating House Republicans on passing the AHCA, while highlighting the struggling individual market in Oklahoma and urging the Senate to act.
  • Vermont: Governor Phil Scott (R) expressed concerns regarding the AHCA, stating that "if it was passed the way that it's been portrayed," that it would be "detrimental to Vermont."
  • Wisconsin: Governor Scott Walker (R) initially said that he would consider opting out of ACA pre-existing conditions provisions using the new waiver authority in the AHCA, but hours later appeared to backtrack, saying that the State would "not [look] to change pre-existing conditions."

Per Capita Caps Would Lock in Disparities in State Spending for Seniors and People With Disabilities

Capped per capita Medicaid funding, as proposed in the AHCA, could lock in historical spending and coverage disparities between states for seniors and disabled adults—for whom per capita spending is substantially higher—and negatively impact those enrollees, according to a Kaiser Family Foundation brief. The brief notes that state variation on spending for these enrollees is due in part to differences in state policy choices, such as whether to cover optional Medicaid coverage pathways or offer home and community-based long-term care services as an alternative to institutional care.

New Mexico: Analysis Finds AHCA Would Shift Medicaid Costs to State, Burden State Economy

An analysis from the New Mexico Center on Law and Poverty found that federal funding reductions in the AHCA would shift $427 million of Medicaid costs to New Mexico each year and cost the State $11.4 billion in federal revenue. Federal Medicaid cuts would also cost New Mexico roughly 31,800 jobs, $1.6 billion in wages and salaries, and $759 million in State tax revenues. The federal reductions would also eliminate coverage for more than 250,000 New Mexicans and dramatically increase uncompensated care costs.

Insurers Begin Making 2018 Market Decisions

Amid continuing uncertainty on federal policy regarding 2018 Marketplace funding, insurers have begun to announce their decisions on state Marketplace participation, including requests for significant rate increases in some states.

  • Connecticut: Initial rate filings ask for premium increases in the individual market ranging from 15.2% to 33.8%, and increases of 3.6% to 31.6% in the small group market.
  • Iowa: Medica, the last insurer selling Marketplace plans in most counties in Iowa, announced that it may stop selling individual policies in 2018 and will make a final decision by the June 19 filing deadline. Medica's departure would leave 94 of 99 counties and more than 70,000 residents without a Marketplace option. Medica officials cited Wellmark and Aetna's announced departures in April as the reason for its exit, saying it cannot afford to cover the tens of thousands of Iowans from the other two carriers.
  • Tennessee: Blue Cross Blue Shield will offer 2018 Marketplace plans in the Knoxville area, ending concerns that the 16-county region would be without any Marketplace insurers in 2018. The region's previous lone Marketplace insurer, Humana, announced it was pulling out of the Marketplace in March.
  • Virginia: Citing financial losses, Aetna will cease offering individual plans in 2018, leaving many counties with only one Marketplace option. Aetna's ACA Marketplace participation has declined in recent years, from 15 states in 2016 to four in 2017.
  • District of Columbia, Maryland and Virginia: CareFirst Blue Cross Blue Shield, the largest insurer in the mid-Atlantic region, requested premium increases of greater than 50% in Maryland, 35% in northern Virginia and 29% in the District of Columbia.

MEDICAID EXPANSION UPDATES AND ANALYSIS:

New Health Affairs Issue Reviews Impact of Medicaid Expansion

The May 2017 issue of Health Affairs features several studies on how Medicaid expansion improved access to care for the uninsured, while preserving access to services for individuals who maintained pre-ACA insurance. Among other findings, the studies report that Medicaid expansion reduced uninsurance rates without crowding out private insurance, though wait times for healthcare appointments remained slightly higher for Medicaid patients than privately insured individuals.

Hospitals Experienced Greater Decreases in Uncompensated Care in Expansion States

Uncompensated care costs as a percentage of hospital operating budgets decreased 1.6 percentage points in expansion states between 2013 and 2015 (from 3.9% to 2.3%) but decreased only 0.3 to 0.4 percentage points in non-expansion states over the same period, according to a new brief published by The Commonwealth Fund. The authors estimate that uncompensated care savings across all hospitals in the 31 expansion states and the District of Columbia totaled $6.2 billion, noting that the AHCA's proposal to phase out Medicaid expansion funding would likely result in large cost increases to safety-net hospitals.

Arkansas: Governor and Legislature Approve Plans to Amend Medicaid Expansion Waiver

Governor Asa Hutchinson (R) signed a bill authorizing proposed changes to the State's Medicaid expansion waiver, including lowering eligibility for expansion adults from 138% of FPL to 100% of FPL, and instituting work requirements. The Arkansas Department of Human Services (DHS) estimates that 60,000 of the 320,000 adults enrolled in the State's expansion waiver would lose Medicaid eligibility due to the income eligibility reduction, saving the State between $66 million and $93 million from FY 2018 to FY 2026. The Governor said DHS would work with insurers to facilitate a "smooth transition" for these enrollees from Medicaid to Marketplace coverage or employer-sponsored insurance. The State plans to submit the waiver amendment for CMS review in June with the new requirements going into effect as early as January 1, 2018.

Indiana: Expansion Evaluation Finds Many Lost Coverage Due to HSA Requirements

An independent evaluation conducted by the Lewin Group found that nearly 55% of individuals eligible for the State's Medicaid expansion did not make required contributions to their POWER account, a health savings-like account; as a result, 286,914 people earning below 100% of FPL were enrolled in a more limited benefit plan, and 59,696 people earning above 100% of FPL were either disenrolled or not enrolled at all. As of November 2016, 11% of those that were disenrolled and 53% of those that were never enrolled had either reenrolled in expansion (after a mandatory 6-month disenrollment period) or in another Medicaid category. The study also looked at access to care for those who fail to make POWER account contributions and reasons for nonpayment, which include not knowing a payment was required or confusion about the payment process. The evaluation, which is required by the waiver, reviews data from the February 2015 program launch to December 2016; a final evaluation will be submitted to CMS in 2018. Supporters of the waiver, which was designed by now CMS Administrator Seema Verma, cite it as a model for other states, though other analyses have challenged the model's successes.

Iowa: Few Medicaid Expansion Enrollees Completed Wellness Exam and Health Risk Assessment

Less than 20% of Medicaid expansion enrollees completed the wellness exam and health risk assessment required under the State's Medicaid expansion waiver to avoid premium penalties of $5 and $10, according to a study published in Health Affairs. Non-white, younger enrollees residing in rural areas completed these "healthy behavior" activities at lower rates than other enrollees. Researchers also found that despite State outreach and education efforts, most providers were unaware of the program and, as a result, failed to educate and encourage members to complete the wellness exam and health risk assessment.

OTHER FEDERAL AND STATE MEDICAID NEWS:

Medicaid Provides Critical Services During Public Health Emergencies and Natural Disasters

A new brief for the State Health Reform Assistance Network, prepared by Manatt Health, finds that Medicaid serves as a critical response tool during natural disasters and public health crises by granting states timely access to federal matching funds, which can be used to efficiently deploy emergency and preventive health services. States can modify Medicaid program rules or pursue waivers to more effectively launch response efforts without waiting for Congress or other federal agencies to act. The brief highlights Medicaid's critical role in addressing a range of health emergencies, from the opioid and HIV/AIDs epidemics to Hurricane Katrina, and notes that changes to federal funding for Medicaid, such as the per capita caps or block grant options in the AHCA, could diminish states' ability to leverage Medicaid as a response tool.

GAO Report Highlights Spending Growth Under Medicaid 1115 Waivers

A new Government Accountability Office report finds that federal spending on Medicaid 1115 waivers increased from $29 billion in 31 states in 2005 to $109 billion in 40 states in 2015, with spending on waivers growing from 15% to 33% of total federal Medicaid spending over that period. Waiver spending increased due to CMS approval of high-cost waivers that implement Medicaid expansion, managed care, or home and community based services, and an increase in the overall number of approved requests. To better manage spending on waivers, the report recommends that CMS standardize reporting requirements and monitoring procedures across states and issue additional guidance on its revised budget neutrality policy, which reduces state access to unspent waiver funds from prior years.

Florida: Legislature Passes Budget With $521 Million in Medicaid Hospital Cuts

The 2017 State budget passed by the Legislature last week cuts $521 million in State and federal Medicaid hospital funding, though some legislators maintain the cuts will be offset by federal Low Income Pool (LIP) funding, which is currently being negotiated with CMS as part of the State's 1115 waiver. Final CMS approval of the LIP funding is expected this summer; Governor Rick Scott (R) announced last month that CMS had committed to $1.5 billion in LIP funding. The budget now awaits the Governor's signature.

STATE STAFFING UPDATE:

Rhode Island: Governor Announces Choice for Head of BHDDH

Rebecca Boss was recommended as the new Director of Behavioral Healthcare, Developmental Disabilities and Hospitals (BHDDH), where she had previously served as Acting Director. The Governor's recommendation was submitted to the Senate for confirmation.