Advocacy

NACo’s Analysis of Senate Health Proposal: Massive Costs for Counties

Tags: Health

On June 22, 2017 Senate Republicans released a 142-page discussion draft of their health overhaul bill, the “Better Care Reconciliation Act (BCRA) of 2017.” They released an updated legislative draft on June 26, 2017. The Senate proposal builds on H.R. 1628, the “American Health Care Act (AHCA) of 2017”, which the U.S. House of Representatives passed in May. The legislation, intended to fulfill congressional Republicans’ promise to repeal and replace the Affordable Care Act (ACA), proposes major changes to the nation’s health care system.

The National Association of Counties (NACo) opposes the “Better Care Reconciliation Act” because it would:
  • Adversely alter the federal-state-local partnership for Medicaid
  • Significantly shift costs to county taxpayers, and
  • Negatively impact counties as health providers, payors, administrators and employers. 

Counties are the front door to the nation’s health system and provide annual investments in health services totaling over $80 billion. Counties also own and support approximately 1000 hospitals and 900 nursing homes—the majority of which are in rural and small counties. At a time when our nation is facing a devastating opioid epidemic, counties’ 750 community behavioral health providers offer key mental health and substance abuse services. Nationwide, over 1,900 county public health departments keep our communities healthy and protect them from health emergencies like Zika.

America’s counties have always served as a safety net for the those unable to afford health care, and since 1965, the Medicaid program has been crucial to helping counties fulfill this often state-mandated obligation. Counties play a key role in the Medicaid program, helping to fund and administer the program and providing quality care to Medicaid beneficiaries through multiple county health systems. Medicaid is also a critical source of health coverage for county residents, especially in rural areas—without which counties would have to provide uncompensated care.

Counties also provide health insurance to a combined county workforce of 3.6 million and invest approximately $25 billion annually to provide health benefits to employees and their families who dutifully serve their residents.

The proposed legislation will continue to undergo changes as Senate Republicans look to secure the votes needed for a simple majority passage. NACo will continue to analyze the bill’s contents and their impacts to counties.

Please bookmark this page for up-to-date information. If you have any questions, please contact Brian Bowden, NACo’s Associate Legislative Director for Health Policy at bbowden@naco.org.

------------------------

(Updated July 6, 2017)

Key provisions in the Senate bill that would impact counties include:
 

The Senate bill makes drastic cuts and caps to federal funding for the Medicaid program—even deeper than the House-passed bill—that would significantly shift Medicaid costs to all counties for years to come while impeding counties’ ability to provide health services to our residents

The bill would permanently restructure Medicaid as it has existed since 1965, changing it from an open-ended program to one in which the federal government would limit funding to states beginning in Fiscal Year (FY) 2020. This would be achieved through the establishment of a “per capita cap,” unless the state selects a block grant option available for certain populations.

Under a per capita cap, states would receive set amounts of federal funding for categories of populations enrolled in Medicaid including the elderly, blind and disabled individuals, children, adults in Medicaid expansion states and all other adults. The Senate bill also excludes certain populations from this structure including children enrolled in the Children’s Health Insurance Program (CHIP), blind and disabled children, enrollees in the Indian Health Service, and individuals eligible for breast and cervical cancer treatment. The bill provides states limited flexibility to determine how their per capita cap would be established.

The non-partisan Congressional Budget Office (CBO) estimates cuts to traditional Medicaid and ACA’s Medicaid expansion (explained below) would total $772 billion, or one-fourth of federal funding over the next decade. This would lead to an estimated 15 million fewer Medicaid enrollees over the same timeframe. The decline in federal funding is more severe over time due to an adjustment of the growth rate after FY 2025. According to the CBO, federal funding would be reduced further from 26 percent in 2025 to 35 percent in 2036. States would then be forced to further cut benefits and/or shift costs to providers or local governments, including counties.

While the Senate bill would place additional limits on states’ ability to use provider taxes to raise revenue for Medicaid funding, counties receive no such protections in the bill. Provider taxes would be decreased annually by 0.2 percent over a five-year window. This would commit counties to financing an even greater share of the Medicaid program, while also having to cover uncompensated care costs and/or services for residents that were previously covered by Medicaid.

In sum, the Senate bill would allow the federal government to pass costs and financial risks associated with the Medicaid program directly on to states and local governments. This would end the current federal-state-local partnership for Medicaid that allows the program to be responsive to help our counties weather demographic shifts, increases in healthcare costs, downturns in the economy and/or public health emergencies.    

 

The Senate bill would phase-out the ACA’s Medicaid expansion, further eroding health coverage gains for counties and lead to higher uncompensated care costs that would be passed on to local taxpayers

The bill would end the added federal funding for the ACA’s Medicaid expansion, which extended health coverage for 11 million childless adults with incomes up to 138 percent of the federal poverty level in the 30 states and the District of Columbia (who opted to expand Medicaid). Under the Senate bill, Medicaid expansion states would continue to receive their enhanced federal funding only through 2020. Beginning in 2021, the additional federal funding would be phased down gradually from 85 percent to 75 percent before being eliminated in 2024.

Other variables complicate matters even more for Medicaid expansion states. Eight states have “trigger laws” which conditions their participation on current federal funding levels, meaning they would presumably end their expansion in 2021 anyway. It is also unknown if the other expansion states would be able to provide the increased fiscal match as the enhanced federal funding is phased down. While restored in non-expansion states, the Senate bill fails to reinstate what are known as Medicaid “disproportionate share hospital (DSH) payments” to pre-ACA levels for county safety-net hospitals in expansion states. These payments are meant to help offset uncompensated care costs for hospitals like those owned and supported by counties whom serve a primarily low-income and underinsured population. 

The CBO estimates that 22 more million individuals would be uninsured in the next decade, including 15 million of whom who would otherwise be enrolled in Medicaid. Such drastic reductions in health coverage would be detrimental for groups that otherwise ends up receiving more expensive uncompensated health care through county hospital emergency rooms, homeless shelters and unfortunately county jails—costs that are transferred to county taxpayers. 

 

The Senate bill’s drastic cuts to Medicaid, optional coverage requirements for certain health benefits and elimination of the Prevention and Public Health Fund would further limit counties’ ability to provide mental health, addiction treatment and core public health services to our residents.

Medicaid is the single largest payor for behavioral health services in the United States, with one in five Medicaid enrollees living with a mental illness or substance abuse disorder. The bill would drastically reduce federal funding for Medicaid as outlined above and would force states to determine which Medicaid services to cover and could leave many low-income American with behavioral health conditions without access to medically necessary prevention and treatment services.

While the Senate bill provides $2 billion to states in 2018 to address the opioid epidemic, this does not come close to offsetting the loss of billions in federal Medicaid funding that counties could otherwise use to help combat the opioid epidemic over the next decade. Similarly, the removal of the Medicaid exclusion for treatment of opioid addiction for stays up to 30 days–if all things were equal—would be applauded, but the widespread Medicaid cuts and associated revenue for county behavioral health providers would mean a further set back. Supply is already not enough to meet demand for both addiction and mental health services in local communities.

Initial analysis indicates the Senate bill may allow states to apply for waivers allowing them to opt out of requiring insurers in their state to provide “essential health benefits.” These include items such as maternity care, preventive services and behavioral health services. Therefore, this provision could further erode health coverage for county residents and revenue streams for county health providers. Unlike the House version, the Senate bill does maintain the ACA’s pre-existing conditions requirement which bans insurers from charging people more or denying coverage based on an existing medical condition. However, other provisions could weaken protection for people with medical conditions.

The Senate bill would directly impact counties approximately 1,900 local public health departments by eliminating the Prevention and Public Health Fund beginning in Fiscal Year 2018 (October 2017). This would result in a reduction of almost $1 billion annually for public health investments, much of which is transferred directly to states and counties to help safeguard residents from infectious diseases like measles or Ebola and prevent the onset or spread of disease. Such loss of funding would further inhibit counties’ ability to respond to public health emergencies and address the underlying causes of poor health outcomes and health disparities amongst our residents.

 

The Senate bill’s drastic cuts to Medicaid would inhibit counties’ ability to provide healthcare and long term services and supports for our older residents.    

Medicaid covers long-term care costs for two-thirds of Americans living in nursing homes, including many who spent all their savings on long term care services before becoming eligible. Nine hundred county-owned and supported nursing homes serve a higher proportion of Medicaid populations, often providing specialized care in our rural counties for an increasingly older population.

Medicaid increasingly provides home and community-based services to help county residents, who are living longer, stay in their homes for as long as possible. The proposed Medicaid cuts would disproportionately impact older residents by potentially leading to reduced benefits or less access to services or nursing homes, which could face reduced Medicaid payments.

Initial analysis indicates the Senate bill also makes various changes to the private insurance market that could impact older adults, potentially having a ripple effect on counties who provide a variety of health and human services supports to older adults. 

 

The Senate bill’s failure to repeal the “Cadillac Tax” on employer-sponsored health plans would continue to cause uncertainty for many counties, forcing counties to potentially raise insurance deductibles or significantly reduce healthcare benefits for employees.

The Senate bill repeals all of the ACA’s taxes except the 40 percent “Cadillac Tax” on employer-sponsored health plans. Many counties would be subject to the “Cadillac Tax,” which is currently set to go into effect in 2020. While the Senate bill delays the tax further through 2025, counties would still face increasing uncertainty as they have to plan now how to shift health plans for their employees to prevent them from having to pay the tax in the future. Counties would likely achieve this by raising deductibles over time or reducing health benefits for employees. High quality health coverage is one of the few benefits counties are able to use to attract and maintain a high-quality workforce that serves our residents.

 

About Brian Bowden (Full Bio)

Associate Legislative Director – Health

Brian Bowden serves as NACo’s Associate Legislative Director for Health and staffs NACo’s Health Steering Committee, lobbying Congress and the Administration on all health issues impacting counties including Medicaid, behavioral health, public health, jail health and long-term care.