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AHA Report: ACA Repeal without a Replacement Could Cost Hospitals Billions

December 6, 2016
by Heather Landi
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A new report from the American Hospital Association (AHA) and the Federal of American Hospitals (FAH) outlines the impact a potential repeal of the Affordable Care Act (ACA) would have on hospitals and health systems.

Dobson DaVanzo & Associates, a healthcare economics firm, was commissioned by the AHA and FAH to estimate the financial impact on hospitals of repealing the ACA without any implementation of a replacement for the ACA. The two hospital groups are raising concerns that repeal of the ACA would cause hospitals and health systems to lose billions of dollars if, the organizations say, Congress doesn’t reverse cuts to hospital payments.

Additionally, the study authors estimate that if the ACA is repealed, “the number of uninsured would increase by 22 million people by 2026, from a projected 28 million under the ACA to 50 million with repeal.”

For the report, the study authors based its analysis for ACA repeal on H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act over the period of 2018-2026. That bill passed Congress under budget reconciliation rules and was vetoed by the President.

In modeling the repeal of ACA as laid out in H.R. 3762, the study authors concluded that hospitals would face a net negative impact of $165.8 billion from 2018-2026 after accounting for the restoration of the Medicaid Disproportionate Share Hospitals (DSH) payment cuts that H.R. 3762 contemplates. The report also found that hospitals would experience a loss of $289.5 billion in Medicare inflation updates if the payment reductions in the ACA are not restored. And, the study authors calculated that the impact of retaining the Medicare and Medicaid DSH reductions would amount to $102.9 billion.

The findings suggest that any repeal bill that does not replace coverage also should reverse hospital payment reductions, particularly those for the Medicare and Medicaid DSH programs as well as those in the inflation updates, the study authors wrote.

In a press release about the report, the organizations stated that “it appears Congress is moving to reconsider the ACA in the early days of the new year without enacting accompanying legislation specifically guaranteeing similar coverage for those who will lose it.” If that approach is taken, the organizations asked that any repeal legislation prospectively restore key hospital reductions included in the ACA to offset the cost of providing coverage.

Rick Pollack, AHA president and CEO, and Chip Kahn, FAH president and CEO, sent letters to President-elect Trump and Congressional leaders highlighting the report and stated, “We respectfully urge you to also include in such legislation the prospective repeal of funding reductions for Medicare and Medicaid hospital services for patient care that were included in the ACA for purposes of helping fund coverage for the insured. Specifically, we seek your support for the restoration of the Medicare hospital inflation update, as well as Medicare and Medicaid DSH payments that support those facilities that take care of high volumes of uninsured, poor and disabled Americans. Restoring these cuts for the future is absolutely essential to enable hospitals and health systems to provide the care that the patients and communities we serve both expect and deserve,” Pollack and Kahn stated.

In the report, the study authors wrote, “Our estimates of ACA repeal are based on the premise that the Medicaid expansion, premium tax credits, cost-sharing subsidies and penalties established under the ACA were the primary drivers of the reduction in the number of uninsured, which is projected by Congressional Budget Office (CBO) to be 24 million people by 2026. Individuals moving from their existing commercial plans into subsidized Marketplace coverage or the Medicaid expansion that was adopted in 31 states and the District of Columbia also played a role. Therefore, if these provisions are repealed, we assume that health insurance coverage would return to near pre-ACA levels, resulting in a loss of coverage for a large number of individuals who had only recently gained coverage under ACA implementation.”

The study authors further concluded that lost revenue associated with ACA repeal "could well be counter-productive to the overarching goal of ‘bending the cost curve’ in order to reduce the impact of the Medicare program on the federal deficit going forward." And, the study authors wrote, "Moreover, CMS’s Office of the Actuary has cautioned that ACA’s reductions to hospitals on their own could create access issues for Medicare’s beneficiaries."

Pollack and Kahn concluded the letter to Congressional leaders by committing to work with the President-elect Trump and Congress and reiterating the importance of properly funding hospital services.

“We strongly believe that any repeal legislation must be accompanied by provisions that protect the coverage for those currently receiving such protection. However, if that is not the legislative path to be pursued, then it is vital that such legislation provide a true clean slate and also include repeal of the reductions in payments for hospitals services embedded in the ACA – specifically the substantial reductions to hospitals’ annual inflation updates and the cuts to Medicare and Medicaid DSH payments. If the coverage associated with the ACA disappears, the importance of these payments would be heightened – they are vital in helping defray the costs of treating our most vulnerable patients,” Pollack and Kahn wrote.


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