What GOP Plan For Health Care Reform May Mean For You?

The House GOP Health Care Reform Plan provides a blueprint for eliminating important elements of the ACA and replacing them with a more market-oriented approach.

On Wednesday key Capitol Hill committees started debate on the controversial new Health Care legislation

Both President Trump and the House GOP plan contemplate using tax credits to subsidize the purchase of health insurance.

Hearings on the “American Health Care Act” (AHCA) stretched overnight at the House Ways and Means Committee and Energy and Commerce Committee. Ways and Means approved its portion of the AHCA at around 4 a.m. on Thursday, while discussion continued at Energy and Commerce

While partial details on the AHCA’s costs are available, the Congressional Budget Office hasn’t yet estimated how the AHCA would affect the uninsured rate or how much it would cost overall. CBO would not have a “score” — a report on the effects of the bill — before next week, when the measure could go to the Budget Committee.

The Plan has not yet been analyzed by the Congressional Budget Office, so it is unknown how much the plan will cost and what its impact will be on the number of people who are insured. Additionally, despite the Republican majority in the Senate, it is unclear whether all the Republican senators will support the bill.

It is far from clear, however, whether the Medicaid provisions of the House GOP plan have sufficient support to pass the Senate. Four GOP senators recently warned that they would not support any plan that does not protect the Medicaid expansion population. Moreover, in his speech last week, President Trump argued that Congress should give governors the “resources and flexibility with Medicaid to make sure no one is left out.” It is not clear what Trump meant by this statement and whether he supports the House GOP plan’s Medicaid changes could very well cause some people to lose coverage.

One way of shedding light on what a final law may look like is to look at its putative winners and losers. Although it is hard to assess the ultimate impact of health care reform until more details emerge, what’s now known suggests that particular subsectors of the industry could be winners or losers:

1. Hospitals:

To the extent health care reform results in significantly more uninsured patients, hospitals will likely bear increased costs. Because hospitals often treat patients regardless of ability to pay, more uninsured patients means increased charity care and bad debt write-offs. This burden would fall heavily on disproportionate share hospitals (DSH) — hospitals that treat a large percentage of the indigent population. The ACA had reduced government funding to DSH hospitals under the theory that they would offer less uncompensated care as the number of uninsured people drops. The House GOP plan would benefit DSH hospitals by repealing the ACA’s funding cuts.

2. Pharmaceutical Industry:

The plans contemplated by the Trump administration and House GOP will have a mixed impact on the pharmaceutical industry.

The ACA reflected a complex bargain between the Obama administration and the pharmaceutical industry. The pharmaceutical industry benefited from more insured people who could afford to purchase more drugs. It also benefited from the closing of the “doughnut hole,” the coverage gap between an initial threshold of drug costs that would be covered by Medicare Part D and a much higher catastrophic maximum after which Part D coverage would resume. In return, the branded pharmaceutical industry agreed to an annual tax of about $3 billion (allocated among branded pharmaceutical companies based on their share of the branded pharmaceutical market) and cutbacks on Medicaid reimbursements for prescription drugs.

The House GOP plan partially unwinds this bargain. The plan benefits the pharmaceutical industry by repealing the $3 billion annual tax and maintaining the closure of the doughnut hole. Additionally, repealing the “medicine cabinet tax” may boost the sale of over the counter drugs. But the pharmaceutical industry will lose to the extent that people reduce purchases of prescription drugs because they lose their health insurance or are covered by plans that provide only limited coverage for expensive drugs, even while the ACA’s cutbacks on Medicaid rebates are left intact.

3. Medical Device Manufacturers:

Health care reform will likely be a major boon to device manufacturers because there is strong GOP support for lifting the excise tax on devices. Device manufacturers may also benefit from greater flexibility in patients’ ability to use HSA money on devices that would not typically be covered by insurance. That being said, device manufacturers may suffer lost sales to the extent people lose insurance coverage or purchase only thin coverage that leads them unable to afford certain devices.

While the House GOP plan reflects the bill that the House GOP leadership would like to pass, it is likely to be just the start of a heated health care reform debate. Different health care industry subsectors may yet have a significant role in shaping whatever bill, if any, ultimately passes in Congress and is signed by the President.

Republican leaders have emphasized that the objective of the law is to lower the cost of coverage and reduce government mandates, not necessarily to increase or even maintain the number of people covered.

One thing remains clear: the changes contemplated by the Trump administration and congressional Republicans are likely to have significant implications for just about every sector of the health care industry.

Republicans hope to send the AHCA to the full House within the next month.

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In Congress: tax deduction for out-of-pocket medical expenses.

In terms of floor activity, the House of Representatives is scheduled to day, with votes expected on 19 bills that will be considered under suspension of the rules. The suspension package includes legislation reported out of the Foreign Affairs, Veterans Affairs, Natural Resources, and the Energy and Commerce Committees.

On Tuesday, members will take up three additional bills under suspension of the rules, including H.R. 3590, the Halt Tax Increases on the Middle Class and Seniors Act, legislation that would roll back changes scheduled to take place in 2017 under the Affordable Care Act to the tax deduction for out-of-pocket medical expenses. Under current law, taxpayers can deduct medical expenses which exceed 7.5 percent of their adjusted gross income for an individual year. Under the Affordable Care Act, this threshold is scheduled to increase to 10 percent of AGI in 2017. H.R. 3590 would amend the Internal Revenue Code to preserve the threshold at 7.5 percent of AGI.