BCRA spells trouble for providers as they weigh bill's Medicaid rollbacks

Story​ updated​ July​ 7,​ 2017.

Lawmakers return to Washington, D.C., this week following their July 4 holiday break. At the top of the agenda for Senate Majority Leader Mitch McConnell is tweaking the Better Care Reconciliation Act in hopes of shoring up "yes" votes from a handful of holdout Republicans.

Several senators balked at moving forward with a vote in late June, arguing that they hadn't been given enough time to study what was in the bill and how repealing parts of the Affordable Care Act would impact their states. As negotiations ramp up this week, providers remain concerned that, as originally crafted, the legislation would be bad not just for patients but for business, especially if projections that tens of millions of people would lose health coverage come to fruition.

"If Medicaid gets rolled back, there is no question there is going to be more uncompensated care," Cleveland Clinic outgoing CEO Dr. Toby Cosgrove said. "When up to 22 million people lose coverage, that becomes a substantial risk, particularly for safety-net and rural hospitals that are already losing money on patient care. But the implications go beyond patients and hospitals, they go to the communities, especially when their biggest employers are hospitals."

The bill would slash the ACA's financial assistance to families and individuals who couldn't otherwise afford healthcare, cap Medicaid spending and roll back the Medicaid expansion afforded to states' most vulnerable populations. The Congressional Budget Office projected that the Medicaid provisions would cause 22 million Americans to lose coverage, while a separate analysis suggested the bill would send insurance premiums surging.

States such as California could be hit particularly hard. California has been approaching universal healthcare coverage largely thanks to the Medicaid expansion under the Affordable Care Act. Only 3.5% of California's population is uninsured and 1 out of every 2 children are covered by Medi-Cal, according to Marin General Hospital CEO Lee Domanico.

"If that were to reverse itself, it would really be devastating for those people and tough for us because that reimbursement could go to zero," he said. "Bad debt would go up, which had gone down through the Obamacare plan with more people insured through the exchanges and expansion of the Medi-Cal program."

The Senate bill would leave states to fill the Medicaid funding gap or end coverage as the enhanced federal payments for expansion would be phased out over three years, starting in 2021. It would also cap the growth of federal Medicaid payments at the medical inflation rate, which is estimated to be 5.6% annually, beginning in 2020. Come 2025, the growth of those payments would be limited to the Consumer Price Index rate, which has averaged around 1.4% since the Great Recession.

The CBO found that Medicaid spending would be 26% lower in 2026 than it would be compared to current spending trends, and the gap would widen to about 35% in 2036.

The bill permits states to opt out of the ACA's mandated essential benefits, which would allow insurers to turn away patients who need maternity care, mental health treatment, chemotherapy and emergency care, among others.

"We will go back to the days where the uninsured showed up in the ER," said Michael Rodgers, senior vice president of advocacy and public policy at the Catholic Health Association. "Catholic hospitals would be in a tough position because of our commitment to the poor and vulnerable."

As uncompensated care rises, operating margins would shrink, especially among hospitals in expansion states. Hospitals in D.C. and the 31 states that expanded Medicaid are projected to see a 78% increase in uncompensated care from 2017 to 2026, an analysis from the Commonwealth Fund found. Eleven of those states would see costs at least double, including Kentucky and West Virginia, which would have 165% and 122% increases, respectively. Providers would also face credit downgrades if the bill becomes law, Moody's Investors Service and Fitch Ratings said.

Even though the proposed bill would bolster Medicaid disproportionate-share hospital payments, that will not offset the Medicaid cuts, researchers said. Hospitals in Medicaid expansion states could experience an average 14% decline in Medicaid revenue from 2017 to 2026, the Commonwealth Fund estimated.

The bill could also bring some unintended consequences as providers and physicians adapt and invest in infrastructure that supports new payment models. The majority of medical practice leaders are still not ready to comply with the Medicare Access and CHIP Reauthorization Act, and sweeping changes in healthcare policy may further slow that process, said Rebecca Altman of the Berkeley Research Group.

"I wonder if there isn't a tertiary effect on MACRA adoption when all of a sudden the volume of patients isn't there to make the return on managed-care teams efficient," she said.

For now, providers will have to wait.

"I haven't talked to any provider that supports the Senate bill," Cosgrove said. "The ACA has never been more popular."