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Wednesday, February 15, 2017

Expected Program Cuts to Affordable Care Act and Federal Budget Impact

Orthopedic surgeon, Dr. Tom Price is now in charge of Health & Human Services and here is an analysis of the laws he may try to dismantle, programs which could lose government support, and the ensuing federal budget implications. This article is based on actual facts, not “alternate facts” which are popular with the Trump Administration.
Budget Implications
The Patient Protection and Affordable Care Act has been a revenue generator, while also providing medical insurance for 20 million low income people and has helped to reduce the federal deficit. (, 2017) According to the Office of Management and Budget (OMB) and the Joint Committee on Taxation (JCT), repeal of the Affordable Care Act would cause the federal deficit to grow by $137,000,000,000 by 2025. (Congressional Budget Office, 2015) That’s right, a repeal of the ACA would increase the deficit by 137 billion dollars.  Here are some of the provisions which have generated money for the government, which are likely to be repealed by the Republican Congress under the Trump Administration.
Pay or Play-Taxes generated from income tax filers who did not have an exemption to the requirement for obtaining medical insurance and are required to pay a tax penalty.
Luxury Plan Tax-This tax is applied to health insurance plans which cost more than twice the national average for an enrollee.
Insurance Company Tax-Insurance companies pay a premium tax which goes into the fund to pay for medical insurance for low-income residents and the provisions of the Affordable Care Act.
Medical Device Tax-Orthopedic and cardiac device manufacturers have been required to pay a 2.9% tax on the cost of the device, which funds provisions under the ACA including healthcare for low-income people.
Estate and Trust Tax-This tax applied to undistributed net income, which affects larger trusts, and is 3.8% of that income.  Again, the money goes toward health insurance subsidies for low income persons.
Employer Tax-Failure to offer minimum essential benefits in a health insurance plan will generate a tax, up to $3,000 per effected employee.
Medicare Payroll Tax Increase-The payroll tax used to fund Medicare, was increased by .90% (less than 1% not 90%, if Sec. of Education DeVos is quoting this). This tax is paid equally by the employee and employer and is used to pay for Medicare programs. Don’t kid yourself, Congress will never reduce your payroll tax as this is necessary to shore up Medicare.
Medicare Changes from the Affordable Care Act
Most of the Centers for Medicare and Medicaid(CMS) changes under the ACA involve improving health quality (clinical quality based on patient results) and transparency (in terms of payment and performance). Will these programs also be terminated under HHS Cabinet Secretary Price?
1.       Subsidies for Medicare Advantage (HMO) payments based on counties with a higher density of low income residents-This benefits rural areas as well as the urban poor.
2.       Health care quality rankings impact how much the facilities receive, as well as the Medicare Advantage enrollment population. This is a pay-for-performance initiative.
3.       Insurance companies selling Medicare Advantage Plans must use 85% of annual collected premiums to pay for enrollee claims and plan services, which caps opportunistic accounting charges which contribute to inflated premiums. Insurance companies should be able to administer their plans for 15% as Medicare does it for 6%.
4.       Designating medical homes for patients, is a patient management tool, and has been shown effective in care management, especially for diabetes and other chronic diseases.
5.       Mandatory 90-day review period before the government will pay for durable medical equipment, which is frequently marketed to senior citizens without regard to efficacy or best fit analysis.
6.       Fraud Detection-A special commission in Health and Human Services was established to compare tax records to aid in identification of criminals who are stealing money from our government through fraudulent claims, etc.
Medicaid Changes from the Affordable Care Act
Under the Trump Administration many programs impacting low-income Americans are likely to be modified, reduced or cut and here is the list:
1.       Expansion of Medicaid to include all low-income people, not just children. This was modified through a court order and now applies to 33 states which opted to expand their Medicaid coverage, thus reducing stress on state health systems. Will these states lose the federal matching money they are currently receiving for providing this coverage for low income residents with incomes within 138% of the federal poverty range?
2.       State employees became eligible to enroll their children on the Children’s Health Plan (CHIP) because of the Affordable Care Act, will this be repealed?
3.       Free standing birth centers, such as midwifery and other women’s health facilities, such as Planned Parenthood, became eligible to receive Medicaid funding for additional services under the ACA. Congress has already indicated a desire to defund Planned Parenthood, but what about the other facilities under this provision? This means program cuts for preventive care for women. I guess Trump expects women to build a wall around the uterus, just like Mexico.
4.       Creation of Medical Home designations for patients with at least two chronic conditions, which provides funding for better care management. Participating medical facilities received additional compensation to assume enhanced care coordination through the medical home provisions. Will community health organizations lose this funding?
5.       Hospital Safety-net Demonstration Project-This is an initiative involving several hospitals to identify vulnerabilities in hospital systems across the nation, which are primarily urban trauma centers, to prevent hospital closures. Tom Price has said he does not favor the Centers for Medicare and Medicaid Demonstration Projects. (Pear, 2016)
6.       Greater mental health treatment funding for hospitals with a significant population of indigent patients (urban trauma centers) was part of the ACA. Will there be funding cuts for vulnerable populations and will the mental health parity insurance mandate be repealed?
7.       Medicaid Waiver or Section 1115 Programs have been around a long time and they are primarily a vehicle to increase cost sharing for recipients and reduce expenses for the states which fund them. The standardization of this process will probably not go away as states continue to seek relief from spiraling Medicaid costs.
8.       Improvement of funding for state Medicaid matching for noninstitutionalized care programs-will this be torpedoed?
Improving Health Quality and Paying for Performance
Accountable Care Organizations
The Accountable Care Organization Act became effective in 2012 and is administered by the Centers for Medicare and Medicaid. This program saved CMS over 700 million in the first five years, through better monitoring of preventable health events. (David Blumenthal, 2015) At present, 15% of all Medicare enrollees are served through Accountable Care Organizations. The ACO program identifies high cost health care events, such as hospital re-admissions and links improved clinical outcomes to performance, by paying health systems more money for achieving these targets. Health systems voluntarily participate in the program. There are 480 participating health care organizations within the U.S. and nine million people benefit from accountable care provisions. (Centers for Medicare Services, 2017)The Centers for Medicare and Medicaid have indicated this program saved the government 466 million in 2015. (Centers for Medicare and Medicaid, n.d.)
Financial and Clinical Efficacy
The Accountable Care Act created the Federal Coordinated Health Care Office whose purpose is to study health programs, gauge results, and seek ways to optimize the government expenditures with patient care. Will this agency be terminated because Dr. Price, who is a member of the Tea Party coalition, thinks doctors and hospitals should have less oversight? Hospitals are now huge corporations, often controlling entire regions, dictating prices, and are not typically subject to anti-trust laws. Shouldn’t some independent government agency be reviewing their programs, the costs, and the impacts on consumers?
Clinical Effectiveness and Research
The Institute for Clinical Effectiveness, known as the Patient Centered Outcomes Research Institute (PCORI), was created to identify and promote best healthcare practices for patient safety and clinical health, based on the following criteria:
1.       Assessment of preventative, diagnostic, and health care treatment options
2.       Improving health systems
3.       Improving health care decision making and patient communications
4.       Addressing health disparities (why patients in different demographic groups have different health outcomes/services)
5.       Accelerating patient centered research to identify ways to economically and clinically improve health
Funding for the PCORI agency was provided through the American Recovery and Rehabilitation Act in 2009, which taxes insurance companies $1 to $2 per enrollee. PCORI is taxed with identifying ways to cut waste, reduce unnecessary procedures, and improve disease surveillance to improve health outcomes.  The oversight organization has put a spotlight on medical suppliers, pharmaceutical companies, insurers, and other agents in the national healthcare landscape. For more information on this, read Chapter 3, pages 27-29 in my 2013 book, Unraveling U.S. Healthcare-A Personal Guide. (Winter, 2013)
 Of course, medical lobbyists have been deluging Congress with appeals to remove the “onerous taxes” which impact their businesses adversely (hardly at all) resulting in higher costs for American consumers. These companies simply want more money to reward their shareholders and enrich their stock option plans. No one in Congress is exempt from the influence of healthcare industry lobbyists, because even stalwart Democrats, Elizabeth Warren (MA) and Al Franken (MN) have lobbied to get the 3% medical device tax removed, because Boston Scientific, St. Jude Medical, and Medtronic are big employers located in their respective states. Removal of this tax would not result in lower costs for any patient or health system which buys any of their devices.  Increasing pricing transparency for cardiac and orthopedic devices would potentially result in savings for health systems and patients, but you don’t hear any lobbying for that. If anything, this scenario illustrates more acutely why we need independent government agency oversight for our healthcare system.

Returning to the 1950’s model for healthcare will not lower costs across the health system and it is important for consumers to understand that your insurance premiums are but one aspect of the healthcare system. We all need to be concerned about that for which we pay for our health care, the conflicts of interest inherent in the system, and that which is negotiable. Isn’t this how we would handle any other significant purchase? Keep reading this column for up-to-date information on healthcare concerns, actions, and facts. And this is the healthpolicymaven signing off wishing you fully informed consent for your next vote, purchase, or procedure. Read the fine print and do use “actual facts” from vetted sources for decision-making.

Roberta E. Winter, MHA, MPA is a freelance journalist and consultant, with analytical experience in the insurance industry, hospital systems, regulatory analysis, healthcare research, and patient advocacy.


Centers for Medicare and Medicaid. (n.d.). 2016 Fact Sheets Medicare Shared Savings Program. Retrieved February 15, 2017, from Centers for Medicare and
Centers for Medicare Services. (2017, February 15). CMS Medicare Shared Savings Programs. Retrieved from
Congressional Budget Office. (2015). Budgetary and Economic Effects of Repealing the Affordable Care Act. United States Congress. Washington, D.C.: Congressional Budget Office. Retrieved February 15, 2017, from
David Blumenthal, M. M. (2015, June 18). The Afforable Care Act at 5 Years. (M. Mary Beth Hamel, Ed.) The New England Journal of Medicine, 372, pp. 2451-2458. doi:10.1056/NEJMhpr1503614 (2017, February 15). Retrieved February 15, 2017, from
Pear, R. (2016, November 28). Tom Price, Obama Care Critic is Trump's Choice for Health Secretary. Retrieved from The New York Times:
Winter, R. E. (2013). Evidence-Based Planning-What It Means and Why You Should Care. In R. E. Winter, Unraveling U.S. Healthcare-A Personal Guide (pp. 27-29). Lanham, Maryland: Rowman & Littlefield.


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