Repeal of insurance mandate will unleash more financial pressures
Another day in Congress, another step toward financial uncertainty for healthcare organizations. That’s the likely result of deliberations to revise the tax code by a joint committee of House and Senate GOP members.
That the compromise tax bill proposal eliminates the mandate in the Affordable Care Act that individuals must purchase health insurance should not come as a surprise. It’s an easy way to continue efforts to bring about the demise of the ACA, which has been the stated aim of the GOP for the last seven years.
This is easier, because, unlike other failed repeal-and-replace efforts mounted by Republicans earlier this year, there’s no need to do that really hard “replace” thing. By pulling the requirement for individuals to have health insurance, it deincentivizes healthy people from getting insurance. Pulling them out of the risk pool means those remaining in insurance exchanges are likely to be sicker, forcing insurers to raise rates to cover expected costs of those who remain in the risk pool.
The Congressional Budget Office estimates that ending the mandate as of 2019 could cause 4 million people to choose to go without health insurance, with that total rising to 13 million by 2027. The impact on the risk pool would cause premiums to rise about 10 percent annually. It’s expected that the federal government will save an estimated $300 billion over 10 years by not having to pay subsidies for individuals who did not meet certain income levels and have needed federal help in paying for health insurance.
And so the GOP continues to play a game of Jenga with healthcare, with little concern for the impacts of actions on the economics of what happens to healthcare providers, patients or the economy in general.
Further uncertainty surrounds the Children’s Health Insurance Program—federal funding ran out at the end of September, and several states have announced that they are running out of money to continue it. Nationally, 9 million children receive coverage through CHIP, which had received bipartisan support—until this year. Now it, too, is a political football. An effort to extend funding for five years is stalling because Democrats oppose provisions of a November bill that would have cut funds for other public health programs and ended insurance coverage for several hundred thousand people who had failed to pay their share of premiums for insurance purchased under the Affordable Care Act. Some states are already contacting recipients about phaseouts of coverage in their states.
In the past, rising levels of uninsured people have had one of two effects on providers. First, individuals without insurance typically have delayed treatment because they would be on the hook for the expense, increasing the likelihood that those with chronic conditions won’t receive maintenance care and increasing the likelihood that they’ll need emergency or acute care, which is more expensive.
The second effect is that patients will be funneled to providers of last resort, such as safety net organizations. Some providers can and will refuse treatment of patients who won’t be able to pay—or they’ll treat them, because of legal requirements that they not turn away emergency patients, but will pass on those expenses to other payers. The cost of delivered medical care doesn’t vanish but eventually is shifted to other payers, and thus is borne by society at large.
Sadly, much progress has been made to restrain the rise in healthcare expenses. In 2016, overall growth in national spending on healthcare slowed, increasing 4.3 percent following 5.8 percent growth in 2015, according to a report by actuaries with the Centers for Medicare & Medicaid Services.
However, providers now are facing many economic forces that will put the squeeze on revenues. Programs like the ACA and CHIP are in doubt; value-based care incentives will pressure organizations to reduce costs and improve quality to do well; and consolidation on many fronts—such as the unknown impacts from deals such as the merger of CVS Health and Aetna—are likely to unleash yet unknown economic pressures and/or steer patients to different care settings.
These effects will increase the necessity for providers to use information technology to increase efficiency, improve treatment, optimize care, and streamline workflows and costs. But most providers are early in the process of using IT to achieve vast improvements.
To be sure, final passage of the tax compromise is not assured. The compromise legislation must still pass the House and Senate, and outside of complete Democrat opposition, some moderate GOP members may still find provisions objectionable. However, facing the likelihood that defeat of the tax bill would mean Republicans would be 0-for-2017, pressure to pass even a bill as widely despised as this tax legislation will be high.
At the best, then, providers have a year to prepare before full impact of the tax legislation, and the repeal of the individual mandate, start to hit home.