Health Care Roundtable e-News – June 2, 2017

GOP Senator Predicts No Health Care Bill This Year

A senior Republican senator predicted that Congress will not pass legislation to replace the Patient Protection and Affordable Care Act (ACA).

The House of Representatives on May 4 narrowly passed the “American Health Care Act” (H.R. 1628), which would, among other things, eliminate or make major changes to the ACA’s individual and employer mandates, Medicaid expansion, subsidies for the purchase of health insurance in the exchanges created by the ACA, prohibition on setting premiums based on a person’s health status, and requirement that policies cover certain “essential health benefits,” all while cutting taxes by $883 billion over 10 years.

Although Republicans have majorities in both chambers, the House bill has little support in the Senate, and GOP senators have been developing their own proposal. Sen. Richard Burr, R-N.C., who at the moment is best known for leading an investigation of Russian meddling in the 2016 presidential election as chairman of the Senate Intelligence Committee, does not expect them to be successful.

“It’s unlikely that we will get a health care deal,” Burr said on June 2. “I don’t see a comprehensive health care plan this year.”

Burr’s comments are not entirely surprising. Republicans have only a two-seat advantage in the Senate, and it has been apparent all year that the party has significant divisions on the health care issue.

Still, though, some GOP leaders remain optimistic. Sen. John Cornyn, R-Texas, the Senate majority whip, confidently proclaimed on May 31 that, “We’ll get it done by the end of July at the latest.”

Senate Majority Leader Mitch McConnell, R-Ky., meanwhile, was more ambiguous in his assessment, saying, “I don’t know how we get to 50 [votes] at the moment. But that’s the goal.”

The process could get more difficult if Cornyn’s deadline is not met. Congress will be in recess in August, and when it returns to Washington after Labor Day, it will be occupied with passing spending bills and other critical legislation before the end of the year. In addition, GOP lawmakers want to pass another major piece of legislation – tax reform – this year.

Even if Senate Republicans are able to write a bill that wins over nearly their entire caucus, that legislation would have to go back to the House for another vote, and the changes made by the upper chamber could upset the delicate balance that was crafted to get the bill through the House the first time.

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Republicans Considering Tax on Employer-Provided Health Benefits

Senate Republicans are reportedly considering including a tax on employer-sponsored insurance plans in their health care proposal.

Health insurance provided by an employer is not taxable as income. Many economists and others say that the exclusion distorts the market and raises health care costs.

While Republicans are generally anti-tax, some leading GOP lawmakers have supported making changes to the income tax exclusion. Speaker of the House Paul Ryan, R-Wisc., for example, said in March that revisions are needed to “stop the discrimination in the tax code against people who want to go out in a free marketplace and buy the health care of their choosing.” The health care bill that the House passed in May would not make any changes to the tax treatment of employer-provided plans.

Now senators who are writing their own legislation to replace the Patient Protection and Affordable Care Act (ACA) may try to claim at least some of the $250 billion that the federal government does not collect each year because of the income tax exclusion, The Wall Street Journal reported.

Fox Business noted in its reporting on the issue, though, that, “there is no consensus yet on whether it should be included in the draft bill being written.”

Any proposal to tax employer-provided health insurance is almost certain to be met with fierce opposition from both employer and employee groups.

The ACA included an excise tax – informally known as a “Cadillac tax” – of 40 percent on the cost of employer-provided insurance plans that exceed certain thresholds. The tax was to go into effect in 2018, but in December 2015, Congress passed, and then-President Barack Obama signed, legislation that postponed the effective date for two years.

The baseline thresholds for the tax, which are subject to annual revision based on inflation, are $10,200 for employee-only coverage and $27,500 for family coverage. The tax is projected to raise $87 billion over the first 10 years, largely resulting from the presumption that employers will increase wages, which are taxable, to offset decreases in health benefits.

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Some Medicare Advantage Plans May Discriminate Based on Health Status: GAO

The Centers for Medicare & Medicaid Services (CMS) should exercise more oversight of Medicare Advantage plans that may be treating beneficiaries differently based on their health status, the Government Accountability Office (GAO) concluded in a report.

Medicare Advantage (MA) offers managed care plans through private companies, which receive a fixed amount of money from the federal government per beneficiary each month. Around 18 million people – about one-third of all Medicare beneficiaries – are in Medicare Advantage.

In an analysis of 126 Medicare Advantage contracts that had higher than average disenrollment rates, GAO found 35 in which “beneficiaries in poor health were substantially more likely (on average, 47 percent more likely) to disenroll relative to beneficiaries in better health.”

Medicare Advantage contracts prohibit plans from limiting coverage based on a beneficiary’s health status, but GAO reported that, in those 35 contracts, people tended to leave because of issues related to preferred providers and access to care. In the other 91 contracts, disenrollments were more likely to be based on the cost of care.

“Such disparities in contract disenrollment by health status may indicate that the needs of beneficiaries, particularly those in poor health, may not be adequately met,” the report stated.

GAO recommended that CMS begin analyzing disenrollment patterns as part of its routine review of Medicare Advantage contracts.

“By not analyzing disenrollment rates for signs of potential health-biased disenrollment, CMS account managers may fail to identify problems in MA contract performance,” the report stated. “This poses a risk to beneficiaries, given that MA contracts are prohibited from limiting or conditioning their coverage or provision of benefits based on health status and must ensure adequate access to covered services for all beneficiaries. CMS’s oversight is also inconsistent with federal internal control standards, which call for agencies to identify, analyze, and respond to risks.”

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