Manatt on Health Reform: Weekly Highlights

New repeal and replace legislation would shift some decisions on ACA reforms to states; President Trump signs an ACA executive order; and a Kansas legislator introduces a new Medicaid expansion bill.


New Replacement Proposal Would Shift Some Decisions on ACA Reforms to States

Senators Susan Collins (R) and Bill Cassidy (R) introduced the Patient Freedom Act of 2017, the first significant repeal and replace bill to be introduced in the new Congress. The bill would move much of the decision-making on the future of the ACA to states, and encourages greater use of health savings accounts and high deductible health plans.

Senate Confirmation Hearings for HHS Secretary Nominee Price Focus on Repeal and Replace and Investments

During confirmation hearings in the Senate Finance and the Senate Health, Education, Labor, and Pensions (HELP) Committees, Democratic Senators pushed HHS Secretary Nominee Tom Price on his plans for repeal and replace and asked extensive questions about his investment history. In the HELP hearing, Senator Susan Collins (R), a key player in repeal and replace, questioned Price on the individual market, his plan to provide coverage to more Americans and include more choices, and his commitment to reviewing and re-evaluating CMS reimbursement policies. In the Finance hearing, members asked questions about Price’s support of changes to the individual market, Medicaid, and Medicare. Price remained open to exploring alternatives to the ACA, but did not endorse a particular plan.

States Continue to Respond to Request for Input From House Republican Leadership

In response to a request from House Republican leaders for recommendations on new healthcare legislation, Republican governors have continued to caution against repeal without replace while asking for more state flexibility. Democratic governors continue to strongly oppose repeal.

  • Alabama. Governor Robert Bentley (R) called for enhanced flexibility for states, including the ability to impose “skin-in-the-game requirements” on Medicaid enrollees. Governor Bentley also urged against repeal without a clear replacement.
  • California. Governor Jerry Brown (D) highlighted the benefits of the ACA on insurance coverage and premiums in the State and strongly cautioned against repeal without a “real replacement.” Insurance Commissioner Dave Jones’s 23-page letter also warned against the potential consequences of repeal and questioned the effectiveness of replacement plans that rely on cross-state insurance sales and high-risk pools.
  • Massachusetts. Governor Charles Baker (R) highlighted the benefits of Medicaid expansion and said that Massachusetts “seeks flexibility” to implement healthcare reform in a way that meets the needs of the State.
  • New Hampshire. Governor Chris Sununu (R) asked Congress for state flexibility, though his letter does not comment on the future of the State’s Medicaid expansion.
  • New Mexico. Superintendent of Insurance John Franchini cautioned against “swift changes” to the ACA that could destabilize the insurance market or disrupt coverage, and argued against high-risk pools citing New Mexico’s own high-risk pool program.
  • Ohio. Governor John Kasich (R) called for simultaneous repeal and replacement that would include rolling back individual market insurance regulations and more flexibility in Medicaid. Governor Kasich also called for maintaining Medicaid expansion and the associated enhanced federal match.
  • Tennessee. Governor Bill Haslam (R) stated that Congress and the new Administration should provide states “as much flexibility as possible” to address policy benefits, rating rules, and timelines for developing policies and rates, among other items.

Washington: Insurance Commissioner and Carriers Send Joint Letter to Congress

State Insurance Commissioner Mark Kreidler and 14 Washington health insurance carriers sent a letter to the State’s Congressional delegation cautioning against ACA repeal without a replacement. The letter recounts Washington’s experience with health reform in the 1990s, in which the State mandated healthcare coverage and later repealed the mandate without mechanisms in place to prevent destabilization. As a result, premiums rose by as much as 78% and carriers eventually stopped offering individual coverage.


President Trump Issues ACA Executive Order

President Trump signed an executive order instructing HHS and other federal agencies responsible for enforcing the ACA to implement the law “efficiently” by minimizing regulatory and economic burdens of the law and preparing “to afford the States more flexibility.” The order does not make any immediate changes to the ACA nor does it give the agencies any new legal authority to take action that they do not already have, but it is widely viewed as a signal that the new Administration will be aggressively looking for ways to use its administrative authority to advance its healthcare agenda.

Norris Cochran and Patrick Conway Assume Leadership Posts at HHS and CMS

Norris Cochran, who previously served as the deputy assistant secretary for budget at HHS, is now the acting secretary of HHS. Additionally, Patrick Conway has assumed the role of acting director of CMS, replacing Andy Slavitt, who held the position since March 2015. Conway was previously the head of the Center for Medicare and Medicaid Innovation.

CMS Finalizes Rule Prohibiting New or Increased Medicaid “Pass-Through Payments”

CMS finalized a November 2016 proposed rule that will prevent states from adding new or increased ”pass-through payments” into contracts with Medicaid managed care plans beyond those that were established as of July 5, 2016. However, implementation of the rule has been put on hold for review by the new Administration.


Kansas: House Introduces New Medicaid Expansion Bill

State Representative Susan Concannon (R) introduced a bill, authored by the Kansas Hospital Association, to expand the State's Medicaid program up to 138% of FPL, which would extend Medicaid eligibility to about 150,000 Kansans. The proposed expansion program, called “Bridge to a Healthy Kansas,” would be implemented through a Section 1115 waiver and is similar to bills that failed to pass the Legislature in June 2016. Like previous bills, the bill includes a work referral requirement for some adults, but drops a requirement that some enrollees pay premiums. The bill was introduced following recent wins in the Legislature by pro-expansion Republicans and Democrats. Committee hearings on the bill will begin in February.

Kansas: CMS Denies Medicaid Managed Care Waiver Extension

CMS rejected a one-year extension of Kansas's Section 1115 waiver that authorizes the State’s Medicaid managed care program, known as KanCare, citing inadequate State oversight of its Medicaid managed care organizations (MCOs), a lack of meaningful responses to public comment on the waiver, and an absence of sufficient information about MCO provider networks. The waiver is set to expire on December 31, 2017, though the State is expected to submit a revised waiver extension application in the coming months.

Oregon: CMS Approves Waiver Extension Without Requested Funding Increase

CMS has approved Oregon's request for an extension of its 1115 waiver authorizing the continuation of the Oregon Health Plan, the expansion of various quality-based incentive payment programs, and the incorporation of dually eligible beneficiaries into coordinated care organizations (CCOs); CMS did not approve the State’s request for an additional $1.3 billion to help fund CCOs. The State had hoped the additional funding would partially fill a projected $1.8 billion budget shortfall. At the same time, the Oregon Legislature proposed $882 million in cuts to the Oregon Health Authority to help close the budget shortfall.

Tennessee: Bill Introduced to Expand Medicaid Under Block Grant Funding

State Senator Richard Briggs (R) introduced a bill directing State Medicaid officials to submit a waiver application to CMS to expand Medicaid eligibility to those earning up to 138% of FPL, if the federal government converts Medicaid funding to a block grant model. Briggs was a member of the Legislature's 3-Star Healthy Task Force, which last summer proposed an expansion of Medicaid eligibility to military veterans and individuals with behavioral health conditions with incomes up to 138% of FPL.

Washington: State Secures CMS Approval for Medicaid Transformation Waiver

CMS issued final approval for $2.3 billion in funding for Washington’s Medicaid transformation initiatives under a Section 1115 waiver. Under the waiver, nine regional "Accountable Communities of Health" composed of Medicaid managed care organizations, providers, and community organizations will implement a five-year Delivery System Reform Incentive Payment (DSRIP) program focused on building health system capacity, redesigning care delivery, and advancing prevention measures. The waiver also includes reforms to the provision of long-term care services and supports and aims to help qualified Medicaid enrollees gain access to housing and employment.


State Deficits Would Increase Under ACA Repeal, New State-Based Studies Find

ACA repeal would increase the fiscal burden on states, reduce coverage levels, and lead to job losses, according to new reports from Maryland, Iowa and Pennsylvania.

  • Maryland. Maintaining coverage for Maryland’s Medicaid expansion population under ACA repeal without enhanced federal funding would cost the State an additional $6.9 billion from 2018 to 2022, a report from the Maryland Department of Legislative Services finds. The report also considers the impact of ACA repeal on the State’s coverage rates and access to care.
  • Iowa. Repeal without replacement would result in loss of insurance for approximately 230,000 Iowans, and hospital uncompensated care costs would triple from $345 million to $1.2 billion in the first year following repeal, according to a report by the Iowa Fiscal Partnership.
  • Pennsylvania. More than 1.1 million Pennsylvanians would lose their health insurance, 137,000 would lose their jobs, and more than $1.4 billion would be added to the State's deficit under ACA repeal, according to a report from the Pennsylvania Budget and Policy Center. The State's rate of uninsured children would increase from 3.4% to 7.2%, and the State's GDP would be reduced by over $75 billion. The report’s projections do not consider any potential ACA replacement.

California: Citing New Administration, State Withdraws 1332 Waiver Request to Offer Unsubsidized Marketplace Coverage to Undocumented Individuals

California officially withdrew its 1332 waiver application that would have allowed undocumented individuals to purchase unsubsidized health coverage through Covered California, the State-based Marketplace. State Senator Ricardo Lara (D), who led the effort to pass the legislation authorizing the waiver application, requested the application be withdrawn due to concerns that information gathered under the waiver could be used by the new Administration to deport undocumented immigrants.

New York: Governor Mandates Commercial Coverage of Contraceptive Drugs and Services

Governor Andrew Cuomo (D) signed a series of regulatory actions to maintain New Yorkers' access to contraceptives without copays, make contraceptives available in three-month supplies, and require insurers to cover medically necessary abortion services without cost-sharing. These executive actions come shortly after the New York Assembly took action to codify many of the same measures.

Out-of-Pocket Premium Costs Drive Marketplace Plan Selection

Marketplace consumers made 2016 plan selections based primarily on their total out-of-pocket premium costs, inclusive of tax subsidies, as opposed to unsubsidized premium costs, according to an analysis from HHS’s Assistant Secretary for Planning and Evaluation (ASPE). The analysis found that consumers switch plans at a “substantially higher” rate when out-of-pocket premiums increase, compared to when pre-subsidy premiums increase. Despite this, ASPE notes that media reports on Marketplace premium increases often do not take into account the “countervailing effect” of premium tax subsidies.

ACA Improved Community Health Centers’ and Safety-Net Hospitals’ Finances, Reports Find

The Kaiser Family Foundation and HHS’s Assistant Secretary for Planning and Evaluation (ASPE) released reports on the ACA’s impact on community health centers and safety-net hospitals, respectively. The Kaiser report found that, following ACA implementation, the 24.3 million patients served by community health centers had higher insurance rates, and health centers in expansion states had higher total operating revenues and served 40% more patients compared to those in non-expansion states. ASPE’s expansive report found that the increase of insured patients in expansion states improved safety-net hospitals’ finances, while hospitals in non-expansion states typically experienced increased financial challenges as their patient mix remained steady.


Arkansas: Marketplace Executive Director Stepping Down

Cheryl Gardner, executive director of the Arkansas Health Insurance Marketplace (AHIM) since 2014, is leaving the position to pursue opportunities out of state, according to the Arkansas Democrat-Gazette. AHIM regulates plans on Arkansas’s Marketplace and administers the State’s Small Business Health Options Program (SHOP). Angela Lowther, AHIM’s director for policy and compliance, will serve as interim executive director.

Delaware: Secretary for Department of Health and Social Services Confirmed

The Delaware Senate confirmed Dr. Kara Odom Walker as Secretary of the Department of Health and Social Services. The Department oversees public health and social services, including the State's Medicaid program.



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