How Medicare will be impacted by ACA repeal

A full repeal of the Affordable Care Act (ACA) would mean increased payments to hospitals, providers and Medicare Advantage plans, while likely increasing premiums, deductibles and other costs paid for by beneficiaries.

The Kaiser Family Foundation report explored the effects of a “repeal and replace” strategy, as President-elect Donald Trump has advocated, rather than the House Republican proposal made earlier this year to maintain some of the ACA’s Medicare provisions.

Much of the estimated $802 billion increase in Medicare spending caused by a full repeal would be attributed to rolling back payment reductions to providers, as well as cuts to Medicare Disproportionate Share Hospital (DSH) payments.

Increased spending in Medicare Part A and B would amount to roughly $350 billion over 10 years. Part A deductibles for inpatient stays would increase, as its tied to the hospital payment updates, and Part B premiums and deductibles would also go up.

“The Medicare provisions of the ACA have played an important role in strengthening Medicare’s financial status for the future, while offsetting some of the cost of the coverage expansions of the ACA and also providing some additional benefits to people with Medicare,” the report said. “Savings were achieved in part by reducing payments to providers, such as hospitals and skilled nursing facilities. Medicare provider payment changes in the ACA were adopted in conjunction with the ACA’s insurance coverage expansions, with the expectation that additional revenue from newly-insured Americans would offset lower revenue from Medicare payments.”

Lower payments to Medicare Advantage plans would also be reversed, at a cost of an additional $350 billion. Prior to the ACA, per-enrollee payments to MA plans were 14 percent higher than the cost of covering similar beneficiaries under traditional Medicare. With those payments restored, MA plans could reduce costs to enrollees or provide extra benefits.

Medicare spending will also increase due to the elimination of several programs designed to test or review cost-saving ideas, like the Independent Payment Advisory Board, which had labeled by largely Republican critics as being a tool to begin rationing care, and the CMS’s Center for Medicare & Medicaid Innovation (CMMI).

“On net, (the Congressional Budget Office) has estimated that CMMI’s operations will generate savings of $34 billion over the 2017-2026 period, with gross savings of $45 billion over this period,” the reports said. “These savings are attributed to the expansion of successful payment and delivery system reform models into Medicare. In addition to eliminating the savings generated from CMMI, Medicare spending could also increase if the incentives to reduce preventable readmissions and hospital-acquired conditions are included in proposals to repeal and replace the ACA.”

In longer-term effects, the Medicare Hospital Insurance (HI) trust fund, which pays out Part A benefits, could become insolvent. Its insolvency date had been pushed back to 2028 after the ACA was passed. Without the law’s additional 0.9 payroll tax on higher incomes, the trust fund could have insufficient funds to pay Part A benefits as soon as 2017.