The Trump administration will likely chip away at healthcare reform through administrative actions to reduce subsidies and weaken health insurance exchanges.
The American Health Care Act (AHCA) may have been scrapped, but that doesn't mark the end of efforts to repeal the Affordable Care Act (ACA).
Instead, opponents will likely take a piecemeal approach to dismantling the ACA through administrative action, analysts said.
The Trump administration is unlikely to renew its push to repeal and replace the ACA through a single bill like the AHCA, but may attempt to water down elements of healthcare reform through administrative actions designed to reduce federal subsidies and weaken health insurance exchanges.
The War Isn't Over
"This is an enormous, significant defeat, but I don't think the war on the ACA is over yet," said Gerald Kominski, PhD, director of the UCLA Center for Health Policy Research.
"Of course, the White House can disrupt the Affordable Care Act by issuing regulations that destabilize the market and make it more difficult to renew [coverage] or enroll for the first time."
In January, the Trump administration took actions along those lines when it cut federal funds designed to help state health exchanges advertise and reach consumers with notices about the annual deadline for open enrollment.
The Trump administration could attempt to reduce or eliminate federal subsidies and take other actions to weaken state and federal health insurance exchanges, said Micah Weinberg, president of the Bay Area Council Economic Institute.
"First, the Trump administration needs to decide whether they want to burn down the house we're all living in through regulatory actions that will end the viability of the exchanges," said Weinberg. "If they want to destroy the thing, they can. So the ACA is very much not out of the woods."
One potential problem for the ACA is a pending lawsuit that could significantly reduce or eliminate cost-sharing funds for low-income consumers.
The lawsuit filed by House Republicans in 2014 alleges that the Obama administration was "unconstitutionally spending money that Congress had not formally appropriated" to provide subsidies for "working poor policyholders."
A district court judge in Washington, D.C. ruled in favor of the GOP lawsuit in a May 2016 decision. The ruling has since been appealed.
Anthony Wright, executive director of advocacy group Health Access California, said low-income residents in the state stand to lose an estimated $900 million in subsidies if the decision stands.
"Losing that $900 million would not just raise deductibles and copayments for hundreds of thousands of Californians, but also spike premiums and potentially crash our individual insurance market," said Wright.
Health Access California estimates that eliminating cost-sharing subsides would raise annual deductibles for someone making under 150% of the poverty level from $75 per year to $2,500 and "take a wrecking ball" to the health insurance market in the state.
'A Fine Line'
Analysts say there are limits to how far the Trump administration can go in dismantling the ACA without Congressional action.
Health & Human Services Secretary Tom Price, MD, "risks being sued for failure to implement the ACA if they go too far," said Kominski. "So there is a fine line."
The GOP can also pursue reforms to Medicaid that would cap federal funding to states but those kinds of changes would require Congressional action—something lawmakers may not wish to pursue after the defeat of the AHCA.
"Even if they can get to yes in the House, it's not clear that there is anything in the middle of the Venn diagram between the House Freedom Caucus (HFC) and the moderates in the Senate unless the HFC decides to allow almost all of the Medicaid expansion to remain in place," said Weinberg.
A new bill would abolish what it calls "anti-competitive" practices among large health systems in the state by creating new rules for how health systems contract with health plans.
Senate Bill 538, authored by Bill Monning (D-Carmel), would prohibit health systems from requiring health plans to include all of a health system's hospitals in a contract.
"SB 538 will help address the issue of pricing fairness and access to affordable healthcare in the state as well as help ensure California consumers are not subjected to unfair business practices that increase healthcare costs," said Monning.
The goal is to "protect the rights of patients in terms of affordability and access in an ever-changing marketplace," he added.
As written, SB 538 would also prohibit health systems and health plans from setting payment rates for affiliates of hospitals not included in an agreement.
Currently, large providers can "tie inflated prices in certain regions to their entire network of hospitals, even in more price-competitive regions," Monning said.
Curbing Copays
The bill would also prohibit health systems from requiring health plans to provide coverage to enrollees at the same level of copayment or deductible at all affiliate hospitals.
In addition, it would ban health systems from requiring health plans to submit to binding arbitration for antitrust claims.
Monning pointed to a 2016 study from the University of Southern California that estimates healthcare costs have grown faster at the state's two largest health systems—Dignity Health and Sutter Health—than at hospitals in the rest of the state.
Between 2003 and 2014, prices increased an average of 114% at Dignity Health and Sutter Health hospitals compared to a 70% increase at all other hospitals in California, the study estimated.
A separate study released in February by the Bay Area Council Economic Institute found that healthcare costs in Northern California are nearly 30% higher on average than in Southern California due in part to market consolidation and the presence of several large, dominant health systems.
"These studies show that, with consolidation of networks, prices are going up, not down," said Monning, adding that large health systems are able to "monopolize cost and cost-settings" in health plan contracts.
Groups supporting SB 538 include the Silicon Valley Employers Forum, the California Labor Federation, and the Pacific Business Group on Health.
Although the bill does not name specific health systems, the provisions of SB 538 would apply to Dignity Health and Sutter Health, the two largest health systems in the state.
"It's premature for us to comment on SB 538, since we've not evaluated the final language of the bill," said a Dignity Health spokesperson.
Sutter Health declined to comment on the bill and referred inquiries to the California Hospital Association (CHA).
A new website launched this month rates physicians on how well they administer preventive care and manage chronic health conditions.
The website, established by the California Healthcare Performance Information System (CHPI), includes data on more than 10,000 California physicians.
The site rates physicians on a one- to four-star system in eight specialties using a system with more than a dozen metrics that measure how well physicians manage chronic health conditions.
"CAqualityratings.org is a first-of-its-kind consumer resource that can empower the consumer's ability to talk with the physician and compare how other providers are rated throughout California," said Liz Helms, president and CEO of the California Chronic Care Coalition in a statement.
"Access to physician information will help equip California consumers with the tools they need to make good health choices and be effective advocates for their own care."
Focus on Prevention
Unlike other physician rating sites, CAqualityratings.org focuses specifically on preventive care and how physicians manage chronic conditions for patients.
Physicians rated on the website include primary care physicians, cardiologists, pediatricians, and pulmonologists. Consumers can search for physicians by name or search by city name or ZIP code.
The clinical quality measures on which physicians are rated include screening patients age 50–69 for breast cancer and monitoring diabetes patients for neuropathy and hypertension.
Primary care physicians are also rated on how well they follow protocols for monitoring blood sugar levels and kidney function for diabetes patients and for diabetes care in general.
For pediatricians, clinical measures include testing children for pharyngitis and conducting annual well-child visits.
"The system rates physicians on 13 separate quality measures," said David Lansky, president and CEO of the Pacific Business Group on Health and a member of the CHPI board of directors.
"It's unique in that it rates physicians on how they care for patients with chronic conditions and screen patients for cancer and other ailments."
Anthem Blue Cross, Blue Shield of California, UnitedHealthcare of California, and the Centers for Medicare and Medicaid Services (CMS) provided data for the ratings and helped create the website.
Data from more than 10 million patient files was used to compile the ratings, Lansky said.
CMS certified the criteria used to rate physicians and the process that allows physicians to review and correct their results, according to CHPI officials.
If passed, the American Health Care Act's (AHCA) proposed changes to Medicaid would result in an additional $5.8 billion in costs to California by 2020 and more than $24 billion by 2027, a state analysis estimated.
The state Department of Health Care Services (DHCS) and the Department of Finance analyzed the impact of several changes proposed under the AHCA.
Those changes include funding Medicaid on a per-capita basis, freezing Medicaid expansion in 2020, and reduce funding for programs such as In-Home Supportive Services (IHSS). House leadership withdrew the AHCA last week because the legislation lacked the votes to pass.
In a March 21 letter to California Secretary of Health & Human Services Diana Dooley, DHCS director Jennifer Kent said the analysis used current Medi-Cal spending levels to measure the impact of the spending cuts proposed under the AHCA.
The largest spending cut would result from the proposal to end new enrollment for Medicaid expansion and to shift 50% of funding for Medicaid expansion to states, down from the current federal share of 90%, according to the analysis.
California has added more than 3.8 million enrollees to Medi-Cal under Medicaid expansion.
"This change represents the most significant costs to states, especially those that have expanded their Medicaid programs," Kent wrote. "We estimate this will cost $4.8 billion in 2020 and grow to over $18.5 billion in 2027."
The DHCS did not offer proposals for how the state would be able to pay for the additional costs.
The analysis also estimates the proposal to shift more costs to states by funding Medicaid on a block grant model based on per-capita spending would add more than $5 billion in costs by 2027.
"In spite of continued efforts to run a cost-effective program, we expect Medi-Cal expenditures to exceed expenditures allowed under the proposed cap," said Kent.
"Consequently, we estimate California will be responsible for a state share of approximately $680 million in 2020, growing to $5.3 billion by 2027."
'Devastating Effect'
The proposed changes would have "a devastating and chilling effect" on provider or plan rate increases, Kent added.
"Additional costs will almost always exceed the allowed trend factors and require states to fund those additional costs at 100%."
The AHCA's proposals will increase the burden on state safety net health providers, which could potentially see uncompensated care costs increase by "hundreds of millions, if not billions," of dollars annually, the analysis stated.
The AHCA's proposed reductions in IHSS contributions, freeze in federal payments to providers that offer abortion services, and reduced allocations to hospitals through the elimination of the presumptive eligibility program would further burden the state, the analysis showed.
'Not a Viable Alternative'
The additional costs would likely increase the number of uninsured residents in California, healthcare advocates say.
"The state's analysis confirms that the AHCA will devastate the healthcare safety net and that it is not a viable replacement for the ACA," said Carmela Castellano-Garcia, president and CEO of California Health + Advocates, in a statement.
"Using new healthcare rationing funding like block grants combined with federal funding cuts that start in 2019, TrumpCare will force states to limit eligibility and care, eliminating access to care for millions of hard-working families just trying to get by."
A new federal law requires hospitals to explain observation status to patients and how it could impact their out-of-pocket costs. A similar state observation notice law took effect in January.
Hospitals in California must now comply with two laws requiring them to notify patients if they are under observation status and explain the potential out-of-pocket cost implications that observation status may carry.
A new federal law that went into effect March 8 requires hospitals to provide a form to Medicare patients being held in observation that explains observation status and how it could impact their out-of-pocket costs.
The new version of the Medicare Outpatient Observation Notice (MOON) is designed to reduce the risk of Medicare beneficiaries receiving surprise bills for outpatient care.
A similar state observation notice law took effect in January.
Although it has the same goals as the federal regulation, the state law includes different notification timelines and covers all patients, not just Medicare beneficiaries.
'It's Complicated'
"It's complicated and hospitals have to understand both requirements and how they work," said Debby Rogers, vice president of clinical performance and transformation for the California Hospital Association (CHA).
Senate Bill 1076, authored by Sen. Ed Hernandez (D-West Covina), was approved by state lawmakers in 2016.
It requires hospitals to notify patients immediately when they are in observation status, and to provide those patients with care that's equivalent to the care provided to inpatients.
The federal law requires hospitals to notify patients within 36 hours of being placed in observation care, but a hospital can provide the forms to patients sooner if the hospital is in a state—such as California—that has its own laws regarding observation status.
CMS also allows hospitals to provide non-Medicare patients with MOON forms explaining the ramifications of observation care.
"So there are complexities involved with both policies and they require a higher level of planning for hospitals to make sure they cover all the bases," said Rogers.
CMS has been struggling for years to work out a solution to address patient complaints about observation status.
In 2013, the agency issued the two-midnight rule that required doctors to admit patients to the hospital if they expected patients to remain in the hospital for more than two days (two midnights).
But a study of the program released in December 2016 by the U.S. Health & Human Services Department Office of Inspector General determined that the policy did not reduce the incidence of observation visits.
Two critical access hospitals in California have hired physicians under a new law that exempts the smallest and most remote hospitals from the state's ban on corporate medicine.
Mayers Memorial Hospital in Fall River Mills and Healdsburg District Hospital hired physicians in January under provisions of Assembly Bill 2024, which allows certain hospitals to hire physicians under a seven-year pilot program that began in January.
"We become much stronger in our ability to attract physicians who want to work in a different environment than what larger hospitals offer," said Nancy Schmid, CEO of Healdsburg District Hospital.
At least half of the state's 34 critical access hospitals plan to take advantage of the new law, said Peggy Wheeler, vice president of Rural Health and Governance for the California Hospital Association (CHA).
"I conducted an informal poll of [critical access] hospitals about a week ago and it appears about half of them plan to hire a physician this year," said Wheeler.
"This is something critical access hospitals have been requesting for a long time and it's good to see that they're going to take advantage of [the waiver]."
AB 2024 exempts 34 critical access hospitals from the state's corporate medicine ban.
A Steady Paycheck
Small, rural hospitals often have a difficult time recruiting physicians and AB 2024 allows hospitals to offer physicians a guaranteed salary and benefits that wouldn't be available to them as independent contractors, according to Wood.
"Most young physicians would prefer to be employed by a hospital rather than go into private practice," he said.
"It is a daunting task for young physicians, who are often tens of thousands of dollars in debt, to move to a small town and try to build a practice from the ground up."
A 2015 survey conducted by research firm Merritt Hawkins found that 92% of first-year medical residents would prefer to work directly for a hospital rather than practice as an independent contractor.
The state's ban on corporate medicine was created more than century ago in response to mining companies hiring their own physicians, and concerns over whether the physicians worked in the best interests of patients or their employers.
In the past decade, several bills that would have allowed rural hospitals to directly employ physicians failed, Wheeler said. AB 2024 succeeded because it limited the waiver to critical access hospitals, rather than all 67 rural hospitals in the state.
Medicare Disadvantage
Physicians in small communities are also at a disadvantage because their patient population is comprised largely of Medicaid and Medicare patients, which provide lower reimbursement rates than commercial health plans.
"They're at a real disadvantage because so many people in rural communities are covered under government health plans, and that makes it harder for them to make a living," said Wheeler.
California is one of only five states that don't not allow hospitals to hire and employ physicians, she said.
"Millions of Californians" could lose health coverage under the proposed American Health Care Act (AHCA) due to reductions in federal subsidies and changes to Medicaid funding, according to Covered California Executive Director Peter Lee.
Covered California's preliminary analysis of the Affordable Care Act (ACA) replacement bill suggests the AHCA would "provide lower overall assistance to our current enrollees" and estimates that subsidies could be cut by as much as 40% from current levels for enrollees by 2020.
Covered California did not provide estimates or projections on how the changes would affect overall enrollment.
"The most critical element of the ACA is the subsidies that make coverage possible," said Lee. "The dramatic reduction in the amount of subsidies means there's going to be fewer people covered."
The AHCA's proposed changes to Medicaid—which include phasing out Medicaid expansion and funding Medicaid under a block-grant plan—could also jeopardize coverage for the nearly 4 million state residents who joined Medi-Cal under Medicaid expansion, said Lee.
Covered California's preliminary analysis estimates that a family of four living in Los Angeles with an annual income of $41,000 would have its annual subsidy reduced from $10,000 a year to $7,812 per year under the replacement plan.
For the individual market, the analysis estimates that a 62-year-old individual with an annual income of $30,000 living in San Francisco would see his or her annual subsidy drop from $9,516 to $4,000.
The report also suggested that people living in Northern California, where premiums are higher on average, would be at a disadvantage under the replacement plan, since subsidies would be the same statewide and would not vary by market.
Lee noted that subsides are designed to "bring premiums within reach" for lower income residents and Covered California estimates that more than 90% of consumers who purchase health plans on the state exchange in 2016 received subsidies.
The Kaiser study noted that tax credits under the ACA "vary with income and cost of insurance where people live, as well as age," while credits under the replacement bill would provide subsidies "that vary with age and grow annually with inflation."
The replacement plan would also provide financial assistance for people with incomes of up to $75,000 per year and would "provide relatively more assistance to people with upper-middle incomes" compared to the ACA plan that provides more for people with lower incomes.
A comparison of subsides under the ACA and the AHCA estimates that a 40-year-old making $20,000 per year would be eligible for $4,143 in subsides per year under the ACA but would be eligible for only $3,000 under the replacement plan.
The Kaiser analysis found that "the American Health Care Act provides substantially lower tax credits overall than the ACA" and that people with lower incomes, older people, or people living in high-premium areas would be particularly disadvantaged under the replacement plan.
A Congressional Budget Office report estimates that as many as 24 million Americans would lose health coverage through 2026 due to changes brought about by the AHCA and estimates the plan will reduce federal healthcare spending by $337 billion over that time.
A pilot program that helps primary care physicians in Los Angeles County refer patients to specialists has reduced wait times by more than 17% in its first three years of operation.
The eConsult program allows primary care physicians to consult with medical specialists online before making a patient referral, a consult that helps physicians determine whether a referral is necessary.
A Health Affairs study of the program that appeared in the March issue of found that 25% of patients whose cases went through the eConsult network had their health issues resolved without having to see a specialist and that the average wait time to see a specialist declined 17.4% from 2012 to 2015.
"It's a simple program that's had a huge impact on primary care and referral times in Los Angeles County," said Mario Gutierrez, executive director for the Center for Connected Health Policy, a Sacramento-based organization that promotes telemedicine.
"We think it can be a model for other states to use." The study found that the number of consults performed under the program grew from 86 per month during the third quarter of 2012 to 12,082 per month during the third quarter of 2015.
By the end of 2015, 3,060 primary care providers and 479 medical specialists in Los Angeles County were using the program in 86 specialty services.
Lower Average Wait Times
In addition to reducing the average wait time to see a specialist by 17.4%—from 63 days to 52 days—the program increased the percentage of appointments scheduled within 30 days from 24% to 30.2%.
The decrease in the average wait time varied by specialty, ranging from a 15% decrease for podiatrists to a 39% decrease for ear, nose, and throat specialists.
The study noted that before the program launched, some patients had to wait up to nine months for an appointment with a specialist.
In addition, some physicians were frustrated to the point where they "referred their patients to the emergency department in an attempt to expedite a specialist consultation," the report stated.
The study suggested that the eConsult program offered "continuing education" as primary care physicians learned through their interactions with specialists.
"Over time, there could be less of a need for primary care providers to send eConsult requests for easily manageable issues. Consistent with this, we observed a decrease in eConsult requests resolved without a visit during the study period."
The eConsult program has continued to expand since the end of the study period in December 2015, said Paul Giboney, director of specialty care for the Los Angeles County Department of Health Services.
"Since the end of 2015, we have expanded eConsult to use by providers in county jails, the LA County Department of Public Health, and the LA County Department of Mental Health Services," Giboney said.
"There are now more than 4,000 providers submitting over 17,000 eConsults per month."
Senate Bill 17 focuses on the most expensive prescription medications, the most commonly prescribed drugs, and those with the greatest price increases year over year.
California Senator Ed Hernandez introduced a bill that would require health plans to provide more transparency to the public regarding prescription drug prices.
Senate Bill 17 would require health plans to report annually on pricing for the 25 most commonly prescribed drugs, the 25 most expensive drugs, and the 25 drugs with the highest year-over-year increases in price.
The state Department of Managed Health Care and the Department of Insurance would receive the reports.
The bill would also require health plans to report on the percentage of premiums that are spent on prescription drugs.
"We deserve transparency in drug prices because the prices that drug companies charge for their products have nothing to do with effectiveness, research costs, or even changes in manufacturing costs," said Hernandez.
Recent increases in healthcare premiums have been driven in part by price hikes on prescription drugs and state legislators "have a responsibility to protect consumers" from predatory pricing, Hernandez said.
SB 17 is endorsed by the California Association of Health Plans (CAHP), which said pharmaceutical manufacturers need to be held accountable for price hikes.
"Escalating drug prices are posing a clear threat to California families, to state programs, and to the overall affordability of our healthcare system," said CAHP President and CEO Charles Baachi.
PhRMA: It's Complicated
Officials with the Pharmaceutical Research and Manufacturers of America (PhRMA) said their organization looks forward to "working with policymakers on solutions" but expressed reservations about SB 17, calling it a "one-size-fits-all solution" for a complicated issue.
"Rather than creating a new bureaucratic system that creates layers of red tape, Californians would be well served if we focus on market-based solutions that better align payment with the value to the patient," said Priscilla VanderVeer, deputy vice president of public affairs for PhRMA.
SB 17 is a follow-up to Senate Bill 1010, a 2016 bill that would have required manufacturers to justify price increases that exceeded 10% of total costs or more than $10,000 in a single year.
Hernandez tabled that bill when it was amended to require justification only for price hikes that exceeded 25% of a drug's total cost or more than $10,000 per year, changes he said would have made the bill ineffective.
Stakeholders claim the GOP proposal's freeze on Medicaid expansion and ultimate restructure would cut coverage for vulnerable Californians, but would not reduce premiums or trim spending on healthcare.
California policy experts say the GOP plan to repeal and replace the Affordable Care Act (ACA) could result in millions of state residents losing health coverage through changes to Medicaid.
The plan, unveiled in the House of Representatives last week and dubbed the American Health Care Act, would eliminate the individual mandate to purchase insurance along with penalties for not purchasing coverage.
In addition, the proposal would freeze Medicaid expansion starting in 2020 and transition Medicaid to a block grant program that allocates funding on a per-capita basis.
The plan would also allocate federal subsidies for coverage based on age instead of income and make subsidies available to people with incomes of up to $75,000 per year.
Two committees voted to advance the bill last week, but it could face opposition from conservative Republicans as well as Democrats on the House floor.
Gerald Kominski, director of the UCLA Center for Health Policy Research, described the proposed replacement as a "disaster" that would do nothing to reduce premiums or cut spending on healthcare.
'A Public Health Disaster'
"Overall, this bill is a public health disaster that will do nothing to lower premiums or increase coverage, since the only costs that will be lower will be federal costs for tax credits," said Kominski.
"However, because this bill repeals all the revenue-generating provisions of the ACA, the net cost of the bill is likely to be high, thus increasing the federal deficit. I have no idea how Republicans plan to address this problem."
The California Hospital Association (CHA) expressed concerns about provisions of the bill that would change the way Medicaid is financed and potentially reduce funding.
"The plan's proposal to restructure Medicaid will likely undo the important gains in coverage that have been made over the past few years," said CHA President and CEO C. Duane Dauner.
The CHA is also concerned about the plan's "failure to restore Medicare spending," despite its intent to roll back provisions of the ACA.
"Under the ACA, Medicare funding to California hospitals is being cut by more than $26 billion through 2026 in exchange for the promise of expanded coverage," said Dauner.
"Unless these payments are restored, California hospitals and the patients they serve will likely face a diminution of available healthcare services."
The California Medical Association (CMA) said it was pleased the bill includes expansion of health savings accounts and state innovation grants, but suggested the proposal to restructure Medicaid could have devastating effects in rural areas of the state where nearly half of all residents are enrolled in Medi-Cal.
Millions Could Lose Care
"If federal Medicaid funding is reduced through a per-capita cap or other means, this will result in millions losing healthcare while shifting the burden to the states and, ultimately, to doctors who are on the front lines caring for patients," said CMA President Ruth Haskins, MD, in a statement.
Other critics include state Insurance Commissioner Dave Jones, who said the ACA repeal bill would reverse gains California has made in reducing the uninsured population. He said the percentage of uninsured residents in California dropped from 17.2% in 2013 to 7.6% in 2016.
California currently receives about $16 billion in federal funding per year for Medicaid expansion—which has added 3.8 million members to Medi-Cal—and about $5 billion per year in federal subsidies for the 1.3 million state residents who purchase their plans through Covered California.
The GOP replacement plan could result in millions of newly insured individuals losing their Medicaid coverage, said Anthony Wright, executive director for advocacy group Health Access California.
"While they promised not to pull the rug out from anyone, this plan would cut at least $8 billion from Medi-Cal in 2020 and tens of billions more in the future, imperiling the coverage of more than 14 million Californians who depend on the program," said Wright.
