Health Care ReformThe American Health Care Act and

Health Care Reform-The American Health Care Act and its Impact for the Nation and Wisconsin: A briefing and synopsis of plans and legislation H. J. Waukau Policy and Population Health Specialist Wisconsin Medical Society Wisconsin Health Care Financial Managers Association Annual Meeting – Sheboygan, WI Thursday, May 18, 2017 1 © 2017 Wisconsin Medical Society

Common Themes of Pre-AHCA Plans American Health Care Act based on: • Better Way Health Plan – Speaker Paul Ryan • Empowering Patients First Act – HHS Sec. Tom Price • Patient CARE Act – Sens. Hatch & Burr, Rep. Upton Common Themes of Plans • Affordable Care Act (ACA) repeal • Consumer-directed care • Health savings accounts (HSAs) • Employer-sponsored insurance reforms • Medicaid reform • Medicare reform • Increased state flexibility 2 © 2017 Wisconsin Medical Society

American Health Care Act (AHCA) Summary Initial bill was proposed in two parts: 1. Reconciliation (Ways and Means) 2. Core policy (Energy and Commerce) Five Amendments 1. First Manager’s Amendment 2. Second Manager’s Amendment 3. Federal Invisible Risk Sharing Program (FIRSP) Amendment 4. Mac. Arthur Amendment 5. Upton Amendment 3 © 2017 Wisconsin Medical Society

AHCA History & Status 4 Introduced March 6 Ways & Means, Energy & Commerce committees hold “Mark -up” sessions March 8 “Managers Amendment” released March 20 “FIRSP Amendment” released April 6 House vote pulled March 24 Second “Managers Amendment” March 23 “Mac. Arthur Amendment” April 24 “Upton Amendment” May 3 Passed House 217 -213 May 4 © 2017 Wisconsin Medical Society

Reconciliation Process • Process is determined by Congressional Budget Act of 1974 • All actions must have a direct effect on spending; either mandatory or discretionary • “Byrd Rule” § § Changes must be germane to spending Senate Parliamentarian plays key role • House and Senate must reconcile their respective reconciliation bills • ACA passed using reconciliation 5 © 2017 Wisconsin Medical Society

AHCA Reconciliation Bill • Repeal of individual and employer mandates § ACA penalties changed to $0 • Shift to Age-based tax credits § § ACA tax credits were based on income and location No location adjustment in AHCA • Repeal series of ACA taxes • Increase limits/use of HSAs 6 © 2017 Wisconsin Medical Society

Age-Based Tax Credits Ø Ø 7 Age Credit Individual Cap/Limit Joint Cap/Limit Under 30 $2, 000 $95, 000 $170, 000 30 -39 $2, 500 $100, 000 $175, 000 40 -49 $3, 000 $105, 000 $180, 000 50 -59 $3, 500 $110, 000 $185, 000 60+ $4, 000 $115, 000 $190, 000 Advanceable, refundable tax credit, distributed on a monthly basis Reduces by $100 for every $1, 000 increase in income Will grow annually based on inflation: standard inflation +1% (CPI-U) Capped at $14, 000/year for a single family © 2017 Wisconsin Medical Society

AHCA Tax Measures Tax Provision ACA AHCA Effective Medical device tax 2. 3% repealed 2017 Income threshold for medical care deduction 10% 7. 5% 2017 Medicare tax 0. 9% repealed 2017 repealed reinstated 2017 limit of $500, 000 repealed 2017 $4. 1 billion in 2018 repealed 2017 $2. 8 billion in 2019 repealed 2017 Health insurance tax percentage of net insurance premiums relative to all insurer premiums repealed 2017 Net investment income tax 3. 8 % on net investment income for individuals making more than $125, 000 or couples making $250, 000 repealed 2017 Premium tax credit dependent on income and location repealed 2020 50% tax on non-elective contributions for employee premiums for businesses with <25 employees repealed 2020 35% tax on non-elective contributions for employee premiums for tax exempt organizations repealed 2020 10% tax on all services repealed 6/30/2017 Medicare Part D deduction Health insurer CEO salary tax Prescription medications Small business tax credit Tanning tax 8 © 2017 Wisconsin Medical Society

AHCA Health Savings Account Provisions HSA Tax Provision Maximum contribution to HAS ACA AHCA $2, 250 for invidual $6, 550 $4, 500 for family $13, 100 Over-the-counter (OTC) ACA exempted OTC from HSA- medications qualified medical expenses Taxes on HSAs Limitations on HSAs Catch-up contributions 60 -day window 9 Effective 2018 repealed 2017 20% 10% 2017 Archer MSA at 20% 10% 2017 $2, 500 repealed 2017 can only contribute to one account both can contribute 2018 N/A allowed to use HSA funds 2018 © 2017 Wisconsin Medical Society

AHCA Policy Changes • • Repeal of Medicaid Expansion (2020) Medicaid shifting to per capita payments (2020) Continuous coverage (2018) Patient and State Stability Fund (PSSF) (2018) § $100 billion for 2018 -2026 • Age-rating ratio (2018) § Shifting from 3: 1 to 5: 1 • Repeal of cost-sharing subsidies (2020) • Repeal of Prevention and Public Health Fund (2018) 10 © 2017 Wisconsin Medical Society

AHCA Amendments First Manager’s Amendment Technical Component § Clarifies language on tax credits, Medicaid baseline, and details that were missing Policy Component § § § 11 State option to expand Medicaid ends in 2018 Block grant option for states for Medicaid State option for Medicaid work requirement Medical Services Inflation +1% (CPI-M +1) for elderly and disabled for Medicaid $1 billion for AHCA implementation Repeals ACA taxes retroactively in 2017 © 2017 Wisconsin Medical Society

AHCA Amendments (cont. ) Second Manager’s Amendment § Adds $15 billion to PSSF for maternal coverage and newborn care § Delays repeal of 0. 9% Medicare Tax to 2023 § Sunsets essential health benefits (EHBs) requirements for all insurance FIRSP Amendment § Would add $15 billion to PSSF for an “invisible risksharing program § Based on Maine and Alaska models 12 © 2017 Wisconsin Medical Society

AHCA Amendments (cont. ) Mac. Arthur Amendment § State waivers for: o o o Increasing age-rating ratio Essential health benefits Community-rating provisions § Waivers will have to demonstrate how: o o reduce premiums, increase enrollment, stabilize coverage, stabilize premiums, increase choice of plans Passive review: approval after 60 days Upton Amendment § Adds $8 billion to PSSF to compensate for preexisting conditions 13 © 2017 Wisconsin Medical Society

AHCA Medicaid Provisions • Medicaid expansion under ACA repealed effective in 2020 § § • • Safety net funding for non-expansion states § $10 Billion over five years for non-expansion states Removal of essential health benefits for Medicaid programs Work requirements as a condition of eligibility for childless adults Reducing Medicaid costs § • 14 States that expanded can keep enhanced match provided member maintains continuous eligibility Accelerated to 2018 under manager’s amendment Income determinations, hardship exemptions, retroactive eligibility, among others Repeal of disproportionate share hospital (DSH) cuts © 2017 Wisconsin Medical Society

Medicaid Per Capita Funding Structure • • AHCA proposes a fundamental shift in how Medicaid is paid to the states Groups eligible for per capita payments: Ø Elderly, blind and disabled, children, expansion enrollees, other “non-elderly, non-disabled” enrollees • Exempted eligibility groups Ø CHIP, IHS, breast and cervical cancer-eligible individuals, partialbenefit enrollees 2020 “targeted cost” baseline will be based on 2016 Medicaid costs, adjusted for inflation for medical services (CPI-M) • States that exceed “targeted cost” baseline will incur a penalty • Manager’s Amendment makes this default option for states • 15 © 2017 Wisconsin Medical Society

Medicaid Block Grant Funding Structure • • Block grants would be granted to the states for a 10 -year period 2 types of possible grants: 1. Must provide eligibility for either children and non-expansion adults 2. only non-expansion adults Ø Disabled populations are exempt from block grant coverage • States must outline services • Block grants must cover: Ø Hospitals, surgery, medical, obstetrics, prescription drugs and prosthetics, medical supplies and services, health care for children under 18 • Calculation made using same baseline as per capita formula and trended forward for standard inflation (CPI-U) 16 © 2017 Wisconsin Medical Society

Medicaid Spending Projections 2011 -2026 $1, 100 $1, 000 Dollars (Billions) $900 $800 $700 $600 $500 $400 $300 2011 2012 2013 2014 2015 Medicaid Spending-Historical 2016 2017 2018 2019 Year 2020 Medicaid Spending-CPI Medical 2021 2022 2023 2024 Medicaid Spending-CPI Standard Medicaid Spending-Historical spending CMS Projection for 2016 -2025; 2026 estimate based on 2001 -15 growth rate (NHE Data) Medicaid Spending-CPI Medical Services spending projection based 2000 -2015 growth rate of 4. 0% (St. Louis Fed; CPI-M) Medicaid Spending-CPI Standard spending projection based 2000 -2015 growth rate of 2. 2% (St. Louis Fed; CPI-U) 17 © 2017 Wisconsin Medical Society 2025 2026

Medicaid Cost & Enrollment Trends 2001 -2015 $9, 000 6. 0% $8, 000 5. 0% $7, 000 4. 0% $6, 000 3. 0% $5, 000 2. 0% $4, 000 1. 0% $3, 000 0. 0% $2, 000 -1. 0% Medicaid person Rate* Medicaid Cost per enrollee (Dollars)* Data: * All figures from National Health Expenditures data (CMS. gov) 18 © 2017 Wisconsin Medical Society 2015 2014 2013 2012 2011 Year 2010 2009 2008 2007 2006 2005 $0 2004 -3. 0% 2003 $1, 000 2002 -2. 0% Person Medicaid Cost ($1000 s) 7. 0% 2001 Y/Y Growth of person Medicaid Cost Growth and Person Trend for Medicaid (2001 -2015)

Medicaid Cost & Enrollment Trends 2001 -2015 Cost Growth and Enrollment (2001 -2015) 7. 0% $9, 000 $8, 000 5. 0% $7, 000 4. 0% $6, 000 3. 0% $5, 000 2. 0% $4, 000 1. 0% $3, 000 0. 0% $2, 000 -1. 0% $1, 000 -2. 0% -3. 0% 2001 2002 2003 2004 2005 2006 2007 Medicaid Enrollees * 2008 Year 2009 2011 Medicaid Person Rate* Data: * All figures from National Health Expenditures data (CMS. gov) 19 2010 © 2017 Wisconsin Medical Society 2012 2013 2014 2015 $0 National Medicaid Enrollment (Millions) Y/Y Growth of person Medicaid Cost 6. 0%

Continuous Coverage • Designed as replacement for the ACA’s “individual mandate” • Can’t have gap of more than 63 continuous days in previous 12 months • Automatic penalty of 30% regardless of health condition § Penalty applies for next 12 months of premiums • Provision can be waived under Mac. Arthur Amendment contingent with state community rating waiver 20 © 2017 Wisconsin Medical Society

Patient and State Stability Fund • Provides $100 Billion over 9 years to the states for: 1. High-risk pools 2. Cost support § Stabilize premiums, high utilizers, direct payments, out-ofpocket costs 3. Increasing insurance options 4. Preventive, dental, behavioral/mental health services • States must apply for funds • $138 billion is PSSF including amendments 21 © 2017 Wisconsin Medical Society

• • 22 Cost Sharing Reductions (CSRs) Payment from federal government to insurers to offset costs for patients 100% to 250% of federal poverty level House successfully challenged the CSRs under President Obama, but was appealed Future of payments are uncertain, but continuing for now Premiums would rise by 19% (17% in Wisconsin) if permanently repealed © 2017 Wisconsin Medical Society

• • 23 Additional Core Policy Items Additional $422 million for Federally Qualified Health Centers Repeal of the Public Health Prevention Fund Prohibition of payments to states for nonprofits that primarily provide family planning services Repeal of actuarial value standards for insurers © 2017 Wisconsin Medical Society

Policy Items not in AHCA 1) Employer-sponsored insurance • • Cadillac tax delayed until 2026 Tangential impacts due to waivers 2) Sale of insurance across state lines 3) Medicare largely untouched 4) Patient protections of ACA maintained • • 24 Pre-existing conditions, lifetime limits, coverage to 26, guaranteed issue Source of debate surrounding the final House bill and the possibility of state waivers © 2017 Wisconsin Medical Society

Impacts of the AHCA • Congressional Budget Office Score Ø Will save $337 billion between 2017 -2026 o Adjusted to $150 Billion after first manager’s amendment Ø 14 million individuals will lose coverage in 2018, 24 million by 2026 Ø Markets will remain stable under both ACA or AHCA Ø Premiums will rise in 2018 -2019, before declining in 2020 • Questions regarding the funding of the PSSF • Questions regarding impact on premiums and insurance networks 25 © 2017 Wisconsin Medical Society

Impacts for Wisconsin 1) Gov. Scott Walker • Medicaid 1. 2. State/DHS currently pursuing a waiver to include work requirements for childless adults Per Capita/Block grant decision 2) Premiums • • Assumptions that AHCA will only affect the non-group markets More rural, lower-income and older populations will likely see higher premiums 3) Coverage • 26 Unclear as no Wisconsin-specific analysis has been done © 2017 Wisconsin Medical Society

High-Risk Pools • • • Non-group insurance for high-cost/high-risk patients 35 states had high-risk pools in 2011 PSSF would fund high-risk pools along with other policy items § § • Health Insurance Risk-Sharing Plan (HIRSP) § § • 27 Milliman estimates costs at $3. 3 - $17 billion in first year Center for American Progress estimates $32. 7 billion annually Ended in 2014 with the creation of ACA Model for nation for high-risk pools 21, 770 members in 2012 Lifetime cap of $2 million Wisconsin estimated to have 852, 000 people with preexisting conditions © 2017 Wisconsin Medical Society

Congestive Heart Failure Heat Map Total Resource Avg. Resource Gender Members Use 4, 08 Female 5 $293, 001, 418 $71, 726 5, 40 Male 2 $365, 019, 884 $67, 571 9, 48 Total 7 $658, 021, 301 $69, 360 HEAT GRAPH QUINTILES Powered by WHIO Datamart version 16; Current Period (4/1/2015 -3/31/2016); Member Region filtered to Wisconsin only; Complete episodes only All Payers; Ages 64 and under 28 © 2017 Wisconsin Medical Society

Diabetes Heat Map Gender Members Total Resource Use Avg Resource Use F 64, 300 $1, 245, 545, 477 $19, 371 M 60, 628 $1, 117, 903, 823 $18, 439 Total 124, 928 $2, 363, 449, 300 HEAT GRAPH QUINTILES Powered by WHIO Datamart version 16; Current Period (4/1/2015 -3/31/2016); Member Region filtered to Wisconsin only; Complete episodes only All Payers; Ages 64 and under 29 © 2017 Wisconsin Medical Society $18, 918

Pending Health Care Reform Items • Senate has yet to weigh in Ø Reconciliation may not allow parts of House bill • American Health Care Act as “Phase 1” Ø Phase 2: regulation Ø Phase 3: regular order legislation • Change is constant and appears to happen daily • Numerous groups opposed to AHCA Ø American Medical Assoc. , American Hospital Assoc. , American Nurses Assoc. and others Ø Insurer groups have not explicitly supported the AHCA • Large parts of health care untouched • Other possible versions of health care reform 30 © 2017 Wisconsin Medical Society

THANK YOU HJ Waukau Policy Specialist-Wisconsin Medical Society hj. waukau@wismed. org 608. 442. 3807 31 © 2017 Wisconsin Medical Society