Tax Bill – While the final details of the tax bill are not yet public there does appear to be a general consensus on what it contains. All below is subject to change (stay tuned) but as of Thursday morning this is the general consensus of what’s in the bill:
- Mandate- The individual mandate would be repealed starting in 2019. The expected effect is a reduction in enrollment in both the individual market and Medicaid and approximately a 10% premium increase for the individual market.
- Sequestration- The tax bill increases the deficit to the extent that automatic spending cuts (sequestration) would result unless Congress were to waive the PAYGO provision. The latest estimate is that the automatic cuts would result in a $25 billion cut to Medicare in 2018 (and each subsequent year). This would be implemented 15 days after the Congressional session ends, with OMB issuing an order to reduce spending in FY 2018. Previously, sequestration affected Medicare Advantage Organizations, Part D plans, and other Medicare programs. In 2013, CMS outlined who was affected and the process by which the cuts would be made. Cuts were tied to enrollments that happened after a future date. In the case that tax reform passes, additional CMS guidance is likely forthcoming. There has been some discussion that the PAYGO cuts will be waived as part of the year-end budget funding.
- CSRs/Reinsurance- There has been discussion that a vote on CSR funding (Alexander-Murray) and reinsurance funding ($4.5 billion over 2 years) will occur at the behest of Senator Collins as part of the tax reform package or in a subsequent end of year funding package. CBO has estimated these new provisions would have minimal effect on the individual market.
Timing/Chances - A Senate vote is expected late on Thursday at which point the bill would move to a conference committee. A final vote by both the House and Senate would occur soon after (likely next week). At the moment most signs point to the fact that this is likely to pass.
Medicare v. Private Insurance – One question that has been raised: If there are cuts to Medicare, how might that affect hospital prices on the commercial side? Since the inception of the ACA, a plethora of research has shown that in fact cost-shifting does not happen. Local context always matters but overall there is not expected to be spillover to the commercial market.
Insurance Taxes- While the health insurance tax/medical device tax delay will not be in the tax bill, it does have the potential for inclusion in the end of year spending bill (which would need to pass by December 8th to prevent a government shutdown).
Open Enrollment- This week, HHS announced that Exchange enrollment in healthcare.gov states reached 2.8 million. While enrollment continues to out-pace last year’s totals at the same time, with only two weeks left in the Open Enrollment period a very large surge in enrollment will be necessary for enrollment to be equal to last year.