A series of articles published this year in JAMA Internal Medicine has substantially added to the empirical literature showing that access to and use of primary care medicine in the US is associated with higher value care and better health outcomes than care that is more specialist-oriented. While these studies confirm our view that the number of primary care physicians should be increased (and likely with such an increase, a decrease in the overall numbers of specialists), one study predicted that this imbalance is likely to worsen in the future rather than improve.

More recently, the Secretary of Health and Human Services announced a new “Primary Cares” initiative to promote primary care in the Medicare program. The press release for this initiative stated, “Empirical evidence shows that primary care is associated with higher quality, better outcomes, and lower costs within and across major population subgroups.” The initiative is intended to attract over 25 percent of all Medicare fee-for-service beneficiaries in five separate primary care payment models that will be launched beginning in January 2020.

In a Brookings white paper we published in December 2018, we came to the following principal conclusions: First, the income gap between the earnings of PCPs and specialists is the major driver of physicians’ choice between these groups of specialties and the main reason why physicians in training tend to favor specialization over primary care. Second, Medicare’s system of paying physicians for services furnished to Medicare beneficiaries, and its emulation by other payers, is a major contributor to the income gap. Based on these observations, we recommended two complementary measures to improve the mix of PCPs and specialists by reducing the income gap – that Medicare should change the Physician Fee Schedule (PFS) and its method of updating to channel more income to PCPs and less to specialists,^[1] and that the US should develop a loan forgiveness program for physicians who practice primary care.

It may not be obvious how both changes in the Medicare PFS and loan forgiveness would lower the PCP/specialist income gap. Raising Medicare fees for services furnished by PCPs and lowering fees for services provided by specialists would alter PCP and specialist revenues in a manner that would reduce the gap. Loan forgiveness available only to PCPs would raise the discounted present value of lifetime earnings of PCPs relative to specialists, which would be another way of reducing the income gap. These measures are complementary because loan forgiveness operates at the early stage of medical training and practice, while PFS changes have their greatest effect as physicians’ fee-for-service practices mature.

Neither of these ideas is particularly new but, in our view, their potential power to improve US healthcare is underappreciated and obscured by numerous views of the problem that distract policymakers from arriving at the right conclusions. Here are five common beliefs that share that defect:

1. Student debt and its need for repayment cause physicians to specialize. If that were true, one would expect physicians who incur no debt to be more likely to elect primary care, but there is no evidence of such a pattern. Nevertheless, some institutions, such as NYU, have decided to forego charging medical school tuition in hopes that it will encourage more doctors to become PCPs. Because this strategy would not reduce the income gap, it is unlikely to be successful – a better strategy would be to target tuition subsidies to those who will practice primary care.
2. Medicare’s system of subsidizing graduate medical education  should be amended to encouraging teaching hospitals to expand primary care residency positions.  We agree that there are many ways that Medicare’s subsidies could be adjusted to make hospitals more accountable for achieving socially desirable goals, as MedPAC and others have recommended over the past several decades. In our white paper we reasoned that teaching hospitals do not have much incentive to disturb the status quo of favoring residency positions in specialty medicine, which generates more hospital and faculty income than primary care. Tweaking Medicare’s direct and indirect medical education subsidies also  would not overcome the powerful incentives for medical students to enter specialty residencies. Simply put, if hospital payment and subsidy changes fail to address the gap, they won’t affect physicians’ propensity to specialize.
3. Increasing Medicare payments for Evaluation and Management (E&M) services is a sufficient way of reducing the PCP/specialist income gap. We agree that payment for E&M services, which provide most of PCPs’ Medicare revenues, should be raised.^[2] However, even if this was  done in a budget neutral fashion, which would lower fees paid to specialists, it would take a long time to change the PCP/specialist proportion appreciably. We believe that the need to change the proportion is urgent, requiring additional action that would have more immediate effects
4. Subsidies to PCPs should be tied to existing social goals, such as improving access in underserved areas. We applaud programs, such as those administered by the Health Resources and Services Administration, which seek to improve access in underserved areas, reduce racial disparities in health care consumption, and achieve other social goals. While these programs are valuable and should be continued, they are not enough to accomplish the broad objective of improving our overall health care delivery system served by correcting the PCP/specialist imbalance. In addition to continuing these programs, we would support other initiatives to subsidizing physicians to practice primary care, such as the loan forgiveness, that would apply throughout the country.
5. The PCP shortage can be solved by expanding the number and responsibilities of Advanced Practitioners such as Physician Assistants (PAs) and Nurse Practitioners (NPs). By all means, let’s encourage the health care workforce to expand to include more advanced practitioners practicing at the full extent of their scope of practice in primary care settings. We observe, however, that PAs and NPs are subject to the same financial incentive as physicians, and many are entering specialty, rather than primary care, settings. More importantly, increasing the number of PAs and NPs doesn’t reduce our need for PCPs, especially considering demographic and health policy trends in the US. As we noted in our white paper, our health system would benefit enormously if the PCP/specialist proportion were to be raised.

Anecdotal evidence suggests that there is some stigma attached to primary care by medical students as they contemplate what residencies to seek as they approach graduation. No doubt, if true, this could be partially due to students’ perceptions of value associated with future earnings in different specialties. But imagine the signal that would be sent by the availability of loan forgiveness for those willing to enter primary care. In addition to the effect of loan forgiveness for PCPs on the income gap, we would expect medical school students’ perceptions of primary care to improve due to the implied social value of a major subsidy program of this nature.

A loan forgiveness program would have the advantage of an immediate effect on students’ choice of specialty, while changes in the Medicare PFS might take more time to influence specialty choice. Nevertheless, we believe the recent evidence cited above lends some additional urgency to the need to implement major Medicare payment changes, and we hope that policymakers will act accordingly. Our approach is straightforward – implement changes to Medicare and other policies to reduce the gap between primary care and specialist incomes, and the resulting improvement in the PCP/specialist imbalance will accrue both financial and patient care benefits to our health care delivery system.

Illustrative estimates of the benefits of raising the PCP/specialist proportion

If measures were adopted that would reduce the PCP/specialist income gap, what would society reap in return? To answer this question, we rely on data from several cross sectional studies with different designs spanning several decades.^[3] We present several figures that illustrate what might happen if cross-sectional  research findings were used to provide a reasonable approximation of what we regard as the true causal relationships  related to PCPs’ and specialists’ effects on US health care. We present estimates of two kinds: first are estimates of the effects of reductions in the income gap of various amounts on the PCP/specialist proportion; second are estimates of the effects of increasing the PCP/specialist proportion on spending and health outcomes.

The effect of a reduction in the income gap on the proportion of physicians who practice primary care.

Assuming an average income gap of approximately $104,000 and the estimated responsiveness to a gap reduction reported in our white paper, a one percent reduction in the gap of $1040 would raise the PCP proportion, currently at 32 percent, by approximately one percentage point over a long period of time (see Figure 1).^[4] Additionally, assuming a working lifetime of 35 years ^[5] and an immediate response of new entrants to medicine (i.e., doctors in training selecting residencies and those in internal medicine and other primary care residencies deciding to remain in primary care), achieving a one percentage point increase in the PGP proportion in ten years would require a reduction in the income gap of $3640.^[6] Note that the PCP/specialist proportion is affected both by the mix of PCPs and specialists entering medical practice and by the mix leaving medical practice upon retirement. Achieving an increase in the proportion to 40 percent, the level recommended by COGME, in ten years would require a decrease in the gap of approximately $29,120.^[7]

As we acknowledged in our white paper, there are many reasons why physicians select their fields of practice other than income. Some will prefer primary care regardless of continuation of the status quo and others who are attracted to the performance of procedures will not be persuaded to enter primary care even if the income gap is substantially reduced. Nevertheless, within the “relevant range” of the current and recommended PCP proportions, we believe that reductions in the income gap will effectively increase the PCP proportion over a number of years. We admit that it is hard to predict how long it would take to achieve a large change in the proportion of physicians practicing primary care in the US.

The effects of increasing the PCP proportion on health care spending.

Baiker and Chandra (2004) examines the effect of changing the number of PCP per 10,000 population on Medicare spending, while holding the total number of the physician workforce constant. They calculate Medicare reimbursement per beneficiary at the state level while adjusting for inflation, state-specific cost-of-living, and age, sex, and race of the states’ Medicare population. We apply estimates from Baicker and Chandra and convert PCP per 10,000 to PCP proportion by calculating the number of PCP per 10,000 needed to achieve a percentage point increase in PCP proportion in 2017. Medicare spending reduction was adjusted to 2017 dollars by using the Personal Consumption Expenditure Price Index (PCEPI).

Figure 2 illustrates the effects of increasing the PCP proportion on fee-for-service Medicare spending per beneficiary (Baicker and Chandra’s estimates were based on FFS Medicare payment data). Taking those estimates as causal, a one percentage point increase in the PCP/specialist proportion would reduce the FFS per capita spending by approximately $343 over a long period, and a higher increase in the PCP proportion would be associated with much greater savings.

Assuming the benefit of increasing the PCP proportion will manifest itself throughout the health care system, not just in Medicare, a one percentage point increase in the PCP proportion would yield a $362 reduction in per capita US health spending.^[8]This would translate into a savings of over $100 billion in ten years, and a larger increase in the PCP proportion could yield substantially more savings.

The effects of raising the PCP proportion on life expectancy and other outcome measures.  

Using data provided in Basu et al, and applying the same methodology to estimate the effects of increasing the PCP proportion on life expectancy as we used to convert the estimates from Baicker and Chandra, we constructed the relationship between PCP proportion and days of increased life expectancy shown in the following figure.^[9]

In the same issue as Basu et al, Levine et al published data on the association between primary care and the value and patient experience of care received. They found that patients receiving primary care had significantly higher-value care on average and better health care access and experiences than those without primary care. They concluded that, “Policymakers and health system leaders seeking to improve value should consider increasing investments in primary care.”

Conclusion

All signals point in the same direction – we need to increase the proportion of physicians in the US who place patients and their comprehensive needs at the center while simultaneously allowing them to practice primary care with reduced pressures of income/financing. Medicare has contributed to the current imbalance by paying specialists too much and PCPs too little. This phenomenon, combined with its emulation by other payers, has increased the income gap between PCPs and specialists. While CMS’ new Primary Cares initiative may ameliorate the problem somewhat, an overhaul of the PFS to more appropriately match payment rates to the value produced by particular services would help enormously. That improvement in the Medicare fee schedule, combined with a loan forgiveness program for PCPs, would reduce the gap enough to encourage substantially more physicians in training to choose to practice in primary care. In our view, the evidence shows that raising the PCP proportion would yield such substantial benefits in both health and savings that failure to do so would be a lost opportunity with major consequences.

The authors did not receive any financial support from any firm or person for this article or from any firm or person any views or positions expressed or advocated in this article. Bruce Steinwald and Kavita Patel are committee members for the Physician-Focused Payment Model Technical Advisory Committee at the Department of Health and Human Services. However, the views and positions expressed in this article are solely those of the authors and should not be attributed to any other person or organization.

[1]See Berenson and Ginsburg (2019) for a current discussion of ways to improve the Medicare PFS. The CMS Primary Cares initiative, by providing monthly payments for care coordination and related services, would also channel more Medicare income to PCPs participating in the Medicare program. CMS stated that the program could increase PCP Medicare incomes by as much as 50 percent.

[2]This would also benefit physicians in other “cognitive” specialties, such as infectious disease and neurology, who have also been disadvantaged by the way the MFS RVUs have been established and updated.

[3]Cross-sectional research findings should be interpreted with caution when attempting to estimate causal relationships. This is a common problem in policy analysis wherein one seldom has ideal data and analysis to investigate important policy issues. For example, Baicker and Chandra (2002), whose research findings we rely on heavily in our estimates of the effects of changing the PCP/specialist ratio, acknowledged this issue and performed a number of secondary analyses to minimize the risk of bias in their findings.

[4] ASPE Effect of Earnings on Specialty Choice by Physicians show that studies estimate earnings elasticity (among US medical school residents) ranging from 1.03 to 2.5. To be conservative, we assumed that the earnings elasticity was 1.

[5] We assume starting age of 30 and retirement age of 65, as it usually falls between 60 and 69.

[6]We assume that the gap reduction only affects the decisions of doctors in training (medical students and residents), not those already in practice. Therefore, it will take several years for the gap effect to change the PCP proportion significantly. We chose to illustrate the effect over 10 years, the period of time used by the Congressional Budget Office to estimate the budgetary impact of legislative proposals. Based on these assumptions, a change in the income gap will realize approximately 10/35 of its full effect in ten years.

[7] 2017 dollars

[8] We assume, as we did in our white paper, that other payers will emulate Medicare in setting relative fees for PCP and specialist services, and loan forgiveness operates independently of the mix of payers for physicians’ services.

[9] The life expectancy at birth figures reported by Basu et al ranged from 76.8 years in 2005 to 77.8 years in 2015.

       

A growing body of evidence shows that areas in the United States with robust primary care systems tend to have better outcomes and lower per capita costs than areas that rely more on specialists.¹ Over the past several decades, the US medical education system has produced an increasingly specialized physician workforce without any strategic direction toward achieving a socially desirable mix of primary care physicians (PCPs) and specialists.² At the same time, health care reforms, such as patient-centered medical homes and Accountable Care Organizations (ACOs), rely more on PCPs and other providers who are equipped to coordinate their own care with the care of specialists. Demographic trends signal a growing need for such coordination as the population ages and patients with multiple chronic conditions become more prevalent.³ Despite these trends, physicians in training tend not to select primary care or related specialties.

In Medicare Graduate Medical Education Funding is Not Addressing the Primary Care Shortage: We Need a Radically Different Approach we investigate whether and to what extent the ways Medicare pays for physician and hospital services and subsidizes graduate medical education (GME) in teaching hospitals either fosters or acts as an impediment to achieving a mix of specialists and PCPs consistent with more effective and efficient delivery of health care.⁴ Looking at this issue through the lens of the medical education marketplace, we conclude that Medicare’s GME subsidies have relatively little effect on specialty mix.

However, Medicare’s payment system may tend to skew the choices made by doctors when selecting residency programs and entering into medical practice. In 1992, Congress changed the method of reimbursing physicians from a system based on individual physicians’ historical charges to one based on the “relative values” of the thousands of services physicians charge Medicare for. This meant that while fees for existing services have increased very little over the past several years, high payments for new services coupled with substantial increases in the volume of expensive diagnostic and other procedures, have widened the income gap between physician specialties.

We conclude that the mix of physicians in the US has too few PCPs and too many specialists, the income gap between the two is a major determinant of the PCP/specialty mix, and Medicare physician payment policy is a major contributor to the income gap. Changes in GME payments to hospitals to favor training of PCPs have little potential to make a meaningful difference because other incentives affecting physicians in training and teaching hospitals are too powerful. We find that loan forgiveness policies for medical students who pursue careers in primary care appear to be a promising path towards closing the gap and incentivizing more medical students to pursue careers as PCPs. However, no approaches focused on medical education are likely to be successful without revamping the Medicare relative value scale so that it contributes less to the physician income gap.

Read the full paper here.

The authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. They are currently not an officer, director, or board member of any organization with an interest in this article.

       

On October 18, the USC-Brookings Schaeffer Initiative for Health Policy hosted Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, for a discussion about Medicare Part D and what can be done to improve the program. Following her presentation, Ms. Verma sat down with USC Schaeffer Center for Health Policy & Economics Director Dana Goldman for an interview. A panel of experts then discussed the administrator’s comments and related issues in the Medicare Part D program.

       

On Friday, July 20th, the USC-Brookings Schaeffer Initiative for Health Policy hosted a conference to discuss whether MIPS is achieving the desired objectives and whether the program should be maintained, reformed, or even eliminated. Two expert panels convened. The first focused on experience with MIPS to date, and the second discussed whether the program should be reformed or replaced and, if so, how.

       

On May 4th, the House of Representatives passed the American Health Care Act (AHCA), complete with a series of amendments that represent compromises to gather enough votes. The majority of amendments centered around compromises to either relax federal requirements for the essential health benefits that were required in the Affordable Care Act as well as compromises to add more money to care for older patients or those with high risk medical conditions, since those patients are more likely to find insurance unaffordable due to changes allowing insurance companies to charge more for these patients. The Congressional Budget Office (CBO) released the estimated impact of the AHCA after the bill had already passed the House, finding that the bill would reduce access for 23 million Americans compared to the Affordable Care Act, largely through changes to the Medicaid program as well as issues of affordability and what is even considered to provide enough protection to count as insurance. While the Senate is working on their own bill that will likely look different than the one passed, Americans need to know how they may expect to be affected by this legislation. Here, we answer ten important questions about the legislation, its estimated impact, and what Americans can anticipate moving forward.

1. Does the American Health Care Act repeal the Affordable Care Act (ACA)?

The legislation does not repeal the ACA, but it does make significant changes to many ACA provisions, including the law’s Medicaid expansion, financial assistance for people purchasing individual market health insurance, regulations on health insurance plans in that market, and federal requirements that individuals have and employers offer health insurance. The law would also further limit federal funding for state Medicaid programs beyond rolling back funding for the ACA’s Medicaid expansion.

While earlier versions of the AHCA largely left insurance market regulations intact—including the requirement that insurers offer coverage to people with pre-existing conditions on the same terms as to everybody else—the AHCA bill passed by the House included new amendments that allow states to submit waivers to change some of the ACA’s consumer protections. For example, a state could waive the requirement that insurers must cover a minimum set of health benefits—such as hospital care, prescription drugs, and maternity care—or could waive the community rating requirement that prevents insurers from charging higher rates to individuals on the basis of health, gender, or other factors. The CBO projects that about one-sixth of the U.S. population lives in a state that would likely waive both essential health benefits and the community rating requirements.

However, some of the ACA’s insurance market regulations and its provisions affecting Medicare are generally not affected.

Notably, there is uncertainty as to whether the AHCA can be passed as intended through the Senate’s “budget reconciliation” process, which allows legislation to pass with fewer votes in the Senate but limits what types of changes that legislation can include. A full repeal would require a filibuster-proof 60 votes in the Senate, requiring at least eight Democrats to vote to fully repeal the ACA. Instead, the budget reconciliation process allows a bill to pass the Senate with only a simple majority, provided it is limited in scope to policies with a budgetary impact or are necessary to such budgetary provisions.

2. I currently purchase insurance on the individual market. What will the AHCA do to my insurance costs?

Under the ACA, the federal government provides advanced tax credits for premiums, called subsidies, which are determined by your income, age, and the cost of a silver-level insurance plan in your area and grow as the cost of insurance increases over time. They are available to people with incomes up to 400 percent of the federal poverty level (FPL), approximately $47,520 for a single individual or $97,200 for a family of four who are not offered employer coverage. For individuals with incomes between 100 and 250 percent FPL, the ACA also included cost-sharing subsidies to help with out-of-pocket costs. Under the AHCA, subsidies are determined by age and will grow with inflation, but do not vary based on income or on the cost of coverage in a person’s geographic area. These tax credits do phase out starting at income levels of $75,000, or $150,000 for a family. It also removes the extra cost sharing subsidies for those between 100 and 250 percent FPL.

The AHCA also includes changes that will affect premium costs. The CBO predicts that the Republican plan will cause a reduction in the generosity of coverage offered on the individual market, at least in some states, both by narrowing the types of benefits covered and by increasing cost sharing. The AHCA also includes other changes to insurance market regulations, such as loosening the age band by allowing insurers to charge five times as much for a 64-year-old compared to a 21-year-old, instead of three times as much, which is what the ACA dictates. This will lower premiums for younger individuals, and increase premiums for older enrollees.

The most recent MacArthur amendment would also allow states more flexibility to decide how to regulate insurance. If a state seeks a waiver, they can reduce the number of essential health benefits (EHBs) insurance companies must cover, which include things like hospital care, emergency services, mental health services, and maternity care, and insurers can charge more for consumers with pre-existing conditions. While insurers are theoretically only allowed to charge more to people who don’t maintain continuous coverage, this structure would in fact unravel protections for people with pre-existing conditions even if they did maintain continuous coverage.

What this all boils down to is that how much it costs to purchase coverage under the AHCA will vary widely depending on where you live, how old you are, and how much you earn. If you live in a state that chooses to take a waiver, having pre-existing conditions also affects your premium costs. The effects on consumers with pre-existing conditions is explained below.

In general, enrollees who are younger, have higher incomes, or live in low-cost areas are most likely to be better off, while enrollees who are older, have lower incomes, or live in high-cost areas are most likely to be worse off. In fact, the CBO’s latest report predicts that the out-of-pocket amount paid toward premiums by low-income, elderly enrollees could increase from $1,700 on average to $13,600 in states that only request a moderate amount of waivers, or $16,100 in states that request no waivers. On the other hand, 21 year olds with higher incomes would see premiums decrease from $5,100 on average to $1,250 in moderate waiver states, or $1,650 in non-waiver states. In the aggregate, subsidies will be lower.

To sum up: on average, premiums will be about four percent lower in non-waiver states by 2026, 20 percent in states that make moderate changes, and there would likely be even more of a significant decline in states that make a large amount of changes. However, this is mostly due to the fact that insurance won’t be as comprehensive in waiver states, and older, sicker populations will be priced out of the insurance market. Even if someone who is older and sicker can purchase a bare bones, low benefit plan, it will not likely protect them from financial devastation.

3. I have a preexisting condition: would this bill permit insurers to charge me more for my coverage, exclude coverage for my condition, or even deny me coverage?

It’s very possible. The AHCA bill that was passed in the House would allow insurers to charge higher amounts to individuals with pre-existing conditions if states sought a waiver to allow insurers in their state to do so. Under the revised bill, a state may apply for a waiver from the requirement that insurers charge individuals on the exchange the same price regardless of health status, which is often referred to as “community rating.” To be approved for the waiver, the state must demonstrate how it will achieve one of the following: reduce average premiums; increase enrollment; stabilize the individual market; or increase the choice of health plans.

States may receive waiver approval by premium reduction seemingly almost by default, as charging based on health status will likely price-out those with illness and leave a different pool of individuals, mostly healthy individuals, from which to calculate “average premiums.” Currently under the ACA, insurers set premiums based on an estimated average of health expenditures across the entire population. As a result, presently health people pay a higher premium than if they were charged based on their present health status, and people with a pre-existing condition pay a lower amount than if they were charged according to their present or historical health status. If this changed, and health insurers were able to charge based on health status, as House-approved bill outlines, premiums for the presently healthy would go down while premiums for those with illnesses would go up, in some cases dramatically so. Consequently, many people with illnesses or a history of disease may not choose, or be able to afford to, obtain coverage. With greater numbers of presently healthy individuals and fewer sick individuals enrolled in coverage, the average will be lower not by virtue of any improved competition or efficiency, but rather by who is and is not covered.

Additionally, a state may pursue a waiver from the ACA’s defined “essential health benefits” (EHB), allowing insurers to exclude certain types of care from coverage. In particular, the CBO report noted the following categories as likely being a target of EHB waivers: maternity care, mental health and substance abuse, rehabilitative and habilitative services, and pediatric dental care. If individuals wanted coverage for these services, they would come at additional costs above “essential” health coverage—if available at all.

There is debate over whether the Senate bill will include this ability to waive community rating or EHBs, and whether a bill with these changes could be passed as a budget reconciliation bill or if it would require 60 votes.

4. I have insurance through my employer. Am I affected by this?

It’s possible. Before the ACA, there were no legal protections from lifetime limits on insurance coverage. This meant that if an insurer decided to limit coverage to some maximum amount of money, it would stop providing any coverage for the beneficiaries who exceed this limit. Insurance companies also did not have to provide out of pocket spending limits, leaving a huge financial burden on patients who used very expensive care. The ACA changed this and included these protections for consumers. However, as our colleague Matthew Fiedler points out, these ACA protections are only for covering care that is considered an essential health benefit. Because the AHCA allows states the option to waive essential health benefits (EHBs), the ban on lifetime limits and maximum out-of-pocket spending limits may erode as EHBs are waived. For consumers who receive insurance through the individual or small group markets, their insurance companies have to follow its state’s requirement for EHBs. But large employers, which covered approximately 110 million people in 2015, don’t have to follow state rules – they can follow any state’s rule. So under current rules, if one state decides to waive all EHBs, a large employer operating in any state can choose to waive EHBs and accompanying protections and apply that to employees living in other states. The ACA protects against this currently by providing a federal baseline standard.

The AHCA also gets rid of the employer mandate, and the consequences of this are explained below.

5. I hear the AHCA gets rid of the mandates. Does this mean I would no longer be forced to buy insurance?

Yes. The AHCA would end the individual and employer mandates but introduces a continuous coverage provision. So while you would no longer be required to buy insurance, if you were uninsured for more than two months (technically 63 days) in the past year and then decide that you do want insurance, you would pay a penalty equal to 30 percent of your premium for one year. The thinking behind this is that people would stay insured to avoid the additional 30 percent penalties.

One worry is that healthy people would choose not to buy health insurance, knowing that they could obtain coverage later and pay only a modest surcharge. This would leave mostly sick people in the insurance pool. Without healthy low-cost people, premiums would increase to cover the disproportionate number of people with high medical costs. This would be exacerbated by an amendment reintroducing the use of medical underwriting for those without continuous coverage. States would be able to apply for and receive waivers to the community-rating rule and instead use health status to set premiums anyone without continuous health coverage. By removing community rating requirements, healthy people would have an incentive to go without coverage and reenter the market with lower premiums reflecting their health status, leaving only the sicker, higher-cost people in the community-rated pools. Premiums would continue to increase, eventually becoming unaffordable for the sickest populations

Another part of the AHCA removes penalties requiring employers to provide insurance to employees. In their original estimate, the CBO predicted that some employers would slowly stop offering coverage to their employees – partly because of this mandate removal, and partly because tax credits would be available to a broader range of incomes, making individual coverage more attractive to some employees. Employers with younger, higher-income employees would be most likely to stop offering employer coverage. Under the new estimate, the CBO estimates that fewer employers would stop offering coverage, particularly in waiver states, because insurance plans in the individual market would not be as attractive to their employees. To sum up, most changes in employer coverage will likely stem from changes in individual market regulations and subsidies, rather than the removal of the employer mandate.

6. Medicaid expansion was a large, controversial piece of the ACA. What happens next for states that did and didn’t expand?

The Medicaid program is a partnership between states and the federal government, with the federal government generally contributing between 50 and 75 percent of costs before the ACA, depending on state per capita income. To encourage states to expand Medicaid to more low-income adults up to 138 percent FPL, the federal government increased the federal share for this newly eligible population to 100 percent from 2014 to 2016, falling to a permanent 90 percent rate in 2020. The new GOP bill gets rid of this higher contribution and returns to each state’s original pre-ACA matching rate for new enrollees from this population that became eligible from the ACA. However, the Manager’s amendments released on March 20th allow work requirements for non-disabled adult enrollees, and encourages this by offering a five percent increase in matching funds if they do so. The amendment also restricts states from covering adults with incomes above 133 percent FPL after 2017, and states that have not already expanded cannot expand, effective as soon as the bill is passed.

Under the ACA, the CBO estimated that some additional states would expand Medicaid in the coming years, but without that enticing federal matching incentive, the CBO now estimates that AHCA will lead to 5 million fewer new expansion enrollees by 2026 compared to what they expect now. It’s also very likely that some states that have already expanded will revert to their pre-ACA Medicaid eligibility requirements, unable to bear these higher costs. Due largely to the reduction in states operating the ACA’s Medicaid expansion, the CBO estimates a 14 million decrease in Medicaid enrollment by 2026.

7. I keep hearing about per capita caps and block grants for Medicaid enrollees. How do these actually work, and what does this mean for costs?

Currently, Medicaid has open-ended funding, meaning that the federal government covers a certain percentage of whatever costs accrue, without limit. What the AHCA proposes is a dollar limit on spending from the federal government – a capped amount of money per enrollee, based on the current average cost in the state in 2016 for each category of enrollee (child, adult, disabled, and elderly). In the Manager’s amendments included on March 20th, the AHCA also allows states to accept block grants for a period of ten years for traditional enrollees (adults and children) instead of per capita allotments. The amount of the block grant is similar to per capita allotments – the per capita cost of this population is multiplied by the number of enrollees, with funding increasing by growth in the consumer price index, but not changes in population.

Both options leave little flexibility for states in cases of emergency, like outbreaks or natural disasters, or economic recessions, when spending can increase dramatically and unexpectedly or simply if health cost trends in their state diverge from the pre-specified rate at which the caps grow. So, while the CBO predicts that this will decrease federal spending, states must compensate by either increasing their contributions to Medicaid program costs spending through raising taxes orcutting other sectors of the state budget, or by reducing Medicaid spending through things like payment cuts for providers and health plans, getting rid of optional services for enrollees, or restricting enrollment eligibility. Block grants in particular encourage cuts to enrollment more than per capita allotments, since the total federal contribution does not change along with population increases or decreases, and this shifts the cost for care of this cut population to the states.

8. Is it true that Planned Parenthood would lose all of its government funding?

Under this proposed bill, Planned Parenthood would lose access to all federal funds for a year. If cut, this funding, which makes up around 43 percent of Planned Parenthood’s annual operating budget, would not only reduce access to care for the communities served, but also result in thousands of additional births. The CBO estimates that an additional $21 million would be spent for medical care for these additional pregnancies and births, particularly affecting low-income communities with limited health care provider access. Yes, defunding Planned Parenthood would save an estimated $156 million by 2026, but those living in low-income areas where Planned Parenthood is one of the only health care providers, would no longer have access to reproductive or general health care.

9. What exactly is the Prevention and Public Health Fund, and what is the bill proposing to do to its funding?

The Prevention and Public Health Fund was created under the ACA and is dedicated solely to expanding, improving, and sustaining public health and prevention programs. With these dollars, the Centers for Disease Control and Prevention (CDC) funds state and federal programs related to emergency disease outbreak response and preparedness, immunizations, the opioid crisis, life expectancy, and other public health issues affecting Americans. An analysis last month from the Trust for America’s Health (TFAH) estimates that the fund accounts for around 12 percent of the CDC’s annual budget. In fact, the Public Health Fund provides funding for almost half of the CDC’s immunization program budget, impacting its ability to track vaccinations and improve deadly infections.

The AHCA proposes to cut its funding entirely, which the TFAH analysis estimates could cost states over $3 billion over the next five years. This is especially alarming, as the CDC and public health departments are at the forefront when combating superbugs, infectious diseases, obesity and diabetes, bioterrorism, and other crucial public health crises. Taking away funding for these programs leaves Americans at greater risk from deadly infections and diseases and as former CDC director, Tom Frieden, said, could “[lead to] tens of thousands of additional illnesses and more than 10,000 additional deaths.”

10. I’m not yet 26 years old, would I be able to stay on my parents’ insurance if this bill is passed?

Yes, this bill leaves in place the ACA’s provision allowing young adults up to the age of 26 years to remain on their parents’ health insurance plan. The House had considered, but did not pass, an amendment to the bill that would have reduced the age limit to 23 years.

       

On Tuesday, May 9, Economic Studies at Brookings hosted an event focusing on the important role of the public, private, and government sectors when it comes to improving the health of local communities. We heard from national and local experts in a dialogue on the topic.

.  For more on this topic see: https://www.brookings.edu/series/building-healthy-neighborhoods/

       

Secretary of Health and Human Services (HHS) Dr. Tom Price and Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma face significant decisions across a range of programs in the first half of 2017. Decisions regarding how the new Administration will approach the health insurance marketplaces rightly command the most attention, but important decisions on payment reform loom as well.

In particular, the Administration must soon decide whether to continue with the large-scale demonstration projects testing bundled payments for hip and knee replacements, hip fractures, bypass surgery, and heart attack. Secretary Price and others have criticized these models on a number of grounds, most importantly that they require all providers in selected geographic areas to participate. The Administration recently delayed the start date for the newer cardiac bundles program, raising some questions as to whether HHS will proceed with the program under its current structure.

We argue there is some scope to modify these models to address concerns raised by Secretary Price and others without damaging the integrity of the models. In particular, there is room to address concerns about the role of hospitals relative to physicians in the models. However, making these models optional would eliminate the ability to generate robust evidence on their effectiveness, dealing a severe blow to efforts to use bundled payments to improve care delivery in orthopedics and cardiac care, and to the chances for bringing bundled payments to scale nationally in the coming years.

THE PROMISE OF BUNDLED PAYMENT

In recent years, bundled payments have gained increased prominence through several large-scale tests and pilots by the CMS Innovation Center and private payers. The allure of bundled payments is in explicitly unifying responsibility for both the financial and patient outcomes associated with a clinical episode under a single provider, giving that provider an incentive to coordinate care during the episode.

One prototypical use of bundled payments is for knee replacements. Under fee-for-service, a hospital is paid for the cost of nursing, equipment, devices, and other items and services furnished during a surgery; physicians and other clinicians are paid separately for professional services delivered before, during, and after the surgery; and post-acute care providers are paid separately for nursing and rehabilitative care. No single provider is responsible for the entire experience, and so patients often experience fragmentation, including confusion at discharge, lack of follow-up care, inadequate rehabilitation, and avoidable medical complications, emergency room utilization, and readmissions.

In a bundled payment arrangement, however, one of those entities is held responsible for the entirety of a patient’s care during an episode, including ensuring that the patient receives high-quality and efficient care from the other participants in the delivery chain. Different bundled payment arrangements designate different “quarterbacks”—generally referred to as the “episode initiator”—among the major participants, but the hospital and the surgeon are the most common.^[1]

MEDICARE’S EXPERIENCE WITH BUNDLED PAYMENT

Before 2010, the history of bundled payment arrangements was one of small-scale tests by Medicare and other payers. These tests, including the Medicare Participants Heart Bypass Center Demonstration during the 1990s and the Medicare Acute Care Episode test, generally found savings without harming quality of care, but they were limited in their scope. Given their potential, after passage of the Affordable Care Act, CMS invested significantly in four new types of bundled payment projects from 2013-2016, all of which are still ongoing (see Exhibit 1).

Two of these models are voluntary, meaning that they include only providers who elect to be paid under the alternative structure being tested:

Bundled Payments For Care Improvement Initiative (BCPI)

This project was launched in 2013 to test 48 inpatient episodes across a diverse set of providers. For the first time, it allowed physicians, nursing facilities, and other post-acute care providers to become “episode initiators.” Additionally, BPCI added an option for “conveners” to hold financial risk on behalf of providers who wanted to participate but could not carry the requisite risk or administrative overhead. As of April 2016, BPCI had more than 1500 participants, including 385 acute care hospitals, 283 physician group practices, and 681 skilled nursing facilities. The program is scheduled to end on September 30, 2018. The independent evaluation has not yet yielded a definitive answer as to whether BPCI will achieve its goals. Orthopedics bundles and, to a lesser extent, cardiac bundles have shown positive financial results, while others are more mixed.

Oncology Care Model (OCM)

This project pays oncology practices a monthly management fee for patients undergoing chemotherapy for a range of cancers. Practices provide an enhanced level of service with this fee and adhere to evidence-based treatment guidelines. Practices that meet quality objectives and achieve savings, including for drug expenditures, for a given year receive a performance-based payment in addition to the enhanced services fee. The program began in July of 2016 and will end in 2021. Currently, 190 practices accounting for approximately 150,000 Medicare patients are participating nationwide.

For reasons discussed in detail below, CMS also deployed two “mandatory” models that encompass all hospitals in specified geographic areas:

Comprehensive Care For Joint Care Model (CJR)

In 2015, CMS announced this model, which requires participation from hospitals in 67 randomly selected markets for hip and knee replacements and nearly all associated care for 90 days following discharge. Covered care includes both rehabilitative and physical therapy services provided in hospital, nursing facility, and home health settings. Target prices are initially based on a hospital’s historical costs but transition to a regional average over several years. The target price is set at an initial discount, generally three percent, so that Medicare reaps its savings before payment; providers can receive shared savings only if they beat the discounted target price. The discount can be reduced by improving performance on a composite measure of clinical quality. More than 800 hospitals are participating in the model, which began its first performance year in April 2016.

Cardiac Bundles, A.K.A. The Episode Payment Model (EPM)

Shortly after finalizing the CJR project in 2016, CMS proposed and finalized new mandatory bundled payments for bypass surgery and acute myocardial infarction in 98 randomly selected market areas across the country. The agency also extended the services included in the 67 CJR markets to include treatment for hip fractures. Like the CJR model, hospitals are held responsible for their financial performance against a target price and their performance on a handful of quality measures, including clinical processes of care and patient experience measures. Under a recent interim final rule HHS delayed the beginning of the first performance period from July 1, 2017 to October 1, 2017, and solicited comment on whether the delay should extend to January 1, 2018. More than 1000 hospitals are participating in this model.

Through rulemaking for the cardiac bundles program, CMS also added an option for clinicians in the CJR or cardiac bundle to qualify for the five percent bonus as an Advanced Alternative Payment Model under the Medicare Access and CHIP Reauthorization Act (MACRA).

THE PATH AHEAD FOR MANDATORY BUNDLED PAYMENT MODELS

The combination of CJR, BPCI, OCM, and EPM have greatly increased the scope of CMS’ overall bundled payments portfolio. With the significant increase in scale and the introduction of mandatory elements, bundled payments encountered their first significant political resistance, particularly from some hospitals and from some Republicans in Congress.

Hospitals generally opposed a mandatory model test, preferring a voluntary structure. Physician groups were somewhat more positive, though the major associations representing orthopedic surgeons expressed concern that the models’ approach to risk adjustment did not adequately account for differences between higher and lower risk patients.

Patient and consumer groups generally supported the stronger push from CMS on bundled payments. Members of Congress weighed in on both sides, with many Republican Members, including now-Secretary of HHS Tom Price, expressing concern about any mandatory model. Some argued that this type of demonstration project was an infringement of Congressional authority over Medicare. Still, some Members supported the project as advancing the cause of payment reform in Medicare.

Below, we consider two issues to which Secretary Price objected for the CJR and EPM projects: the question of whether they must be mandatory; and the appropriate role for physicians relative to hospitals in bundled payment models.

SHOULD CJR AND EPM CONTINUE AS MANDATORY MODELS?

Our view: It is important to try mandatory models for bundles as well as other payment initiatives.

Purely voluntary models like BPCI have important weaknesses that make them unlikely to generate the evidence required to take bundled payment arrangements to scale in Medicare or elsewhere. The first is limited size. Although BPCI was the largest test of bundled payment models yet conducted, many episodes had too little volume to generate statistically precise estimates of the model’s effects with respect to those conditions.

Another weakness of voluntary models is selective participation. The providers electing to participate in BPCI were atypical in a range of ways—for example, BPCI participants were in markets with twice as many specialists per capita as non-BPCI markets. This left the program vulnerable to criticism that any observed differences in performance in the program reflected underlying differences between participants and non-participants, rather than actual care redesign spurred by the model. By contrast, the random assignment methodology used by CJR and EPM completely avoids this problem. In principle, random assignment could be used in a purely voluntary model by allocating some of the providers who volunteer to participate to the control group. This approach, however, would exacerbate the sample size concerns noted above.

Selective participation also limits the generalizability of the results of a model test. Even where the other statistical challenges posed by selective participation can be overcome, a voluntary demonstration can typically only provide reliable evidence on how a model affects the types of providers who elect to participate. If bundled payments are ever to reach national scale in Medicare or elsewhere, we will need evidence that they work for all providers, not just “early adopters.” Policymakers will also benefit from evidence on how the effects of models differ when all providers in a market participate, rather than just a few, as these models’ systemic effects may differ from their effects on individual providers.

Mandatory approaches also facilitate the use of model designs that have potential to drive larger improvements in the efficiency of care. In particular, there is a strong rationale for setting common spending benchmarks for all providers in a geographic area based on the area’s average costs historically. Setting common benchmarks creates a level playing field across providers and allows market forces to drive market share to the most efficient providers, a potential source of major cost savings. Setting common benchmarks is also often viewed as more equitable.

In voluntary programs, however, setting common benchmarks for all providers can keep historically high-cost providers from participating (which narrows the scope of the model’s potential impact), while providing a windfall to historically low-cost providers (which creates a significant fiscal cost). To avoid this problem, voluntary programs typically must tailor benchmarks to the historical experience of each prospective participant by “rewarding” historically higher-cost providers with higher benchmarks and “penalizing” historically lower-cost providers with lower benchmarks.

The Administration’s options for making the CJR and EPM models “less mandatory” are relatively limited. The Department could mandate a small payment reduction (e.g., three percent for eligible services) for hospitals that do not participate. But this would compromise the design significantly and could still be viewed as punitive. The agency could dial back the number of selected markets, but the sample size of the existing models is near the minimum required for an effective evaluation. In addition, paring back the number of markets or the number of hospitals participating will also reduce the number of opportunities for specialist physicians to participate in Advanced Alternative Payment Models that qualify for a five percent bonus under MACRA.

Moreover, it would send a damaging signal to the health care industry about CMS’ ability to carry out mandatory demonstrations if the Administration backs away from bundled payments in CJR and EPM, sharply curtailing the potential effectiveness of the Innovation Center. In addition, such a retrenchment could have ripple effects for private payment reform efforts that attempt to complement CMS programs. Eschewing mandatory models would also have a fiscal cost. The Congressional Budget Office (CBO) told Congress in October of 2016 that prohibiting the Innovation Center from undertaking mandatory demonstrations “would substantially reduce the savings from [the Center’s] activities” because of the significant advantages such demonstrations have in certain cases.

SHOULD THE TREATMENT OF PHYSICIANS UNDER MANDATORY BUNDLED PAYMENT PROGRAMS BE MODIFIED?

Our view: CMS can expand physicians’ role in bundled payment models while maintaining their structure.

Another criticism of CJR and EPM is they are too “hospital-centric” — that is, by placing financial responsibility with hospitals, they give them too much power relative to other provider types. There are at least two reasons to question this premise, however. First, precisely because hospitals are at risk by default and clinicians are not, the negotiating table starts in a configuration favorable to clinicians. Hospitals need engagement from clinicians to succeed in the model, while clinicians could, in theory, maintain practice as usual, absent a favorable agreement with the hospital.

Second, the voluntary BPCI program, in which physician groups can participate as episode initiators, has precedence over the CJR and EPM programs. Accordingly, physician groups initiating joint replacements, hip fractures, or selected cardiac procedures and treatments can claim a bundle before a hospital can. About 280 physician groups participating nationwide in the BPCI program would be able to take advantage of this arrangement, with potentially more coming online if CMS follows through with its stated intent to re-open the next generation of BPCI in 2018.

For these reasons, we believe the current program treats physicians equitably. However, if the Administration desires, HHS does have options to allow physicians to take more financial risk for bundles, enhancing their primacy under these models. Physicians could be allowed to, on a voluntary basis, step in front of the hospital and accept ownership of CJR or EPM bundles, as the American Medical Association, Society of Thoracic Surgeons, and Academy of Orthopedic Surgeons have proposed. This could be accomplished without undercutting the superior evaluation design of the CJR and EPM projects if hospitals remain responsible in the absence of a physician initiator. However, allowing physicians to claim more episodes would aggravate the existing hospital participants by depriving them of potential savings opportunities. A variant of this concept would be to allow “convener” organizations to step in between CMS and physician groups, holding risk for the latter to facilitate more widespread participation, as was allowed in BPCI.

Another option for allowing physicians to take some financial risk for CJR and EPM bundles is to maintain the mandatory nature of the programs, but spread responsibility to all participants in an episode of care in proportion to the portion of a care they provide — an approach sometimes called a “virtual bundle.” This would put physicians and post-acute care providers directly at risk. How this would change the efficacy of a bundled payment model is uncertain. The overall payment associated with an episode would not change; the only difference would be in how that payment is allocated among providers. As a result, it is possible that providers would negotiate similar agreements with one another under either structure, leading to similar outcomes. However, it is also possible that this approach would create confusion about who is accountable for the outcome of any given patient, undermining efforts to change practice patterns, particularly since it would arguably attenuate incentives for providers most able to affect outcomes.

CONCLUSION

The Department of Health and Human Services has several options for addressing Secretary Price’s prior objections to the hospital-at-risk structure of the CJR and EPM models that could maintain the integrity of these payment reform initiatives. In our view, however, the Department does not have a good alternative to the mandatory structure used for CJR and EPM that could preserve the integrity of the models tests and the scope of their potential impact. Making these models optional would be a severe blow to efforts to use bundled payments to improve care delivery in orthopedics and cardiac care, and to the chances for bringing bundled payments to scale nationally in the coming years.

Gronniger received funding from the American Medical Association unrelated to this article. Other than this assistance, none of the other authors received financial support from any firm or person with a financial or political interest in this article.

^[1] The prospective payments systems Medicare uses for inpatient and outpatient services are arguably bundled payments relative to older payment arrangements based on individual items and services. For purposes of this paper, however, we focus on arrangements that span an entire episode of care over a period of time measured in months rather than days and that cover the services of multiple providers of care.

       

The Congressional Budget Office (CBO) recently released the highly anticipated estimated impact of the House Republicans’ proposed health care reform, the American Health Care Act (AHCA), finding that the bill would increase the number of uninsured Americans by 24 million by 2026 and reduce the federal budget deficit by $337 billion over 10 years. While Speaker Paul Ryan has touted the projected 10 percent reduction on premiums by 2026 and Democrats have criticized the exchange of Medicaid cuts for high-income tax breaks, Americans need to know how they may expect to be affected by the proposed legislation. Here, we answer nine important questions about the legislation, its estimated impact, and what Americans can anticipate moving forward.

Does the American Health Care Act repeal the Affordable Care Act (ACA)?

The legislation does not repeal the ACA in its entirety, but it does make significant changes to many ACA provisions, including the law’s Medicaid expansion, financial assistance for people purchasing individual market health insurance, and federal requirements that individuals have and employers offer health insurance. The law would also limit federal funding for state Medicaid programs. However, the ACA’s insurance market regulations—including the requirement that insurers offer coverage to people with pre-existing conditions on the same terms as to everybody else—would generally not change under the AHCA.  The ACA provisions affecting Medicare are generally not affected.

While some Republicans have voiced support of keeping the ACA’s pre-existing conditions requirement regardless of further reform efforts, one reason Congressional leaders may have avoided changing those provisions is because they intend to pass the AHCA through the “budget reconciliation” process. This process allows legislation to pass with fewer votes in the Senate to pass but limits what types of changes that legislation can include.  A full repeal would require a filibuster-proof 60 votes in the Senate, requiring at least eight Democrats to vote to fully repeal the ACA. Instead, the budget reconciliation process allows a bill to pass the Senate with only a simple majority, provided it is limited in scope to policies with a budgetary impact or are necessary to such budgetary provisions.

What will AHCA do to my insurance costs?

Under the ACA, the federal government provides advanced tax credits for premiums, called subsidies, which are determined by your income, age, and the cost of insurance in your area and grow as the price of insurance increases. They are also only available to people with incomes up to 400 percent of the federal poverty level (FPL), approximately $47,520 for a single individual or $97,200 for a family of four. For individuals with incomes between 100 and 250 percent FPL, the ACA also included extra cost sharing subsidies to help with out-of-pocket costs. In the new GOP bill, subsidies are determined by age and will grow with inflation, but do not vary based on income or geographic area even though premiums can differ widely depending on where you live. It also removes the extra cost sharing subsidies for those between 100 and 250 percent FPL.

AHCA also includes changes that will affect premium costs.  As our colleagues explain, the CBO predicts that the Republican plan will caused a reduction in the actuarial value (AV) of insurance provided because it removes AV requirements set by the ACA. The AV of a plan is the share of medical costs paid by the insurance company, so a lower AV means that individuals will pay lower premiums, but the insurance will provide less coverage, and individuals will likely pay more out-of-pocket. AHCA also includes other incentives that lower costs for younger enrollees, such as loosening the age band by allowing insurers to charge five times as much for a 64-year-old compared to a 21-year-old, instead of three times as much, which is what the ACA dictates. This will lower premiums for younger individuals, and increase premiums for older enrollees. On average, our colleagues predict that pre-subsidy premiums will decrease for people under age 39 compared to current law and increase for people ages 39 or older (as displayed in the below graph).

What this all boils down to is that how much it costs to purchase coverage under the AHCA will vary widely depending on where you live, how old you are, and how much you earn. On average, premiums are likely to be higher for people who have individual market coverage today, but the precise impact will depend on each individual’s situation. In general, enrollees who are younger, have higher incomes, or live in low-cost areas are most likely to be better off, while enrollees who are older, have lower incomes, or live in high-cost areas are most likely to be worse off.

I hear the AHCA gets rid of the mandates. Does this mean I would no longer be forced to buy insurance?

Yes. The AHCA would essentially end the individual and employer mandates but introduces a continuous coverage provision (though questions have risen as to whether this provision will remain in the bill). So while you would no longer be required to buy insurance, if you were uninsured for more than two months (technically 63 days) in the past year and then decide that you do want insurance, you would pay a penalty equal to 30 percent of your premium for one year. The thinking behind this is that people would stay insured to avoid the additional 30 percent penalties. But one worry is that with such a modest surcharge, healthy people would still choose not to buy health insurance, leaving only sick people who need coverage in the market. Without healthy low-cost people, premiums would increase to cover the disproportionate number of people with high medical costs. The CBO and Joint Committee on Taxation estimate that getting rid of the individual mandate would significantly reduce insurance coverage (by 15 million), and that the continuous coverage requirement would actually further reduce coverage by 2 million people by the tenth year, since healthy people would face higher premiums and greater documentation requirements when signing up for coverage.

Another part of the AHCA removes penalties requiring employers to provide insurance to employees. Coupling broader individual tax credits with removal of the mandate, it is expected that many employers will stop offering coverage to employees. As a result, of all of the AHCA’s various changes, CBO estimates that the number of people with employer-sponsored insurance would decrease by 2 million in 2020 and by 7 million in 2026.

Medicaid expansion was a large, controversial piece of the ACA. What happens next for states that did and didn’t expand?

The Medicaid program is a partnership between states and the federal government, with the federal government generally contributing between 50 and 75 percent of costs before the ACA, depending on state per capita income. To encourage states to expand Medicaid to more low-income adults up to 138 percent FPL, the federal government increased the federal share for this newly eligible population to 100 percent from 2014 to 2016, falling to a permanent 90 percent rate in 2020. The new GOP bill gets rid of this higher contribution and returns to each state’s original pre-ACA rate for new enrollees from this population that became eligible from the ACA. However, a new proposed amendment released Monday night does allow work requirements for non-disabled adult enrollees, and encourages this by offering a five percent increase in matching funds if they do so. The amendment also restricts states from covering adults with incomes above 133 percent FPL after 2017, and states that have not already expanded cannot expand, effective as soon as the bill is passed.

Under the ACA, the CBO estimated that a few more states would expand Medicaid in the coming years, but without that enticing federal matching incentive, the CBO now estimates that AHCA will lead to 5 million fewer new expansion enrollees by 2026 compared to what they expect now. It’s also very likely that some states that have already expanded will revert to their pre-ACA Medicaid eligibility requirements, unable to bear these higher costs. Due largely to the reduction in states operating the ACA’s Medicaid expansion, the CBO estimates a 14 million decrease in Medicaid enrollment by 2026. The CBO score for the amendment will be updated later this week, and we will update accordingly.

I keep hearing about per capita caps and block grants for Medicaid enrollees. How do these actually work, and what does this mean for costs?

Currently, Medicaid has open-ended funding, meaning that the federal government covering a certain percentage of whatever costs accrue, without limit. What AHCA proposes is a dollar limit on spending from the federal government – a capped amount of money per enrollee, based on the current average cost in the state in 2016 for each category of enrollee (child, adult, disabled, and elderly). In the new proposed amendment released Monday evening, the AHCA also allows states to accept block grants for a period of ten years for traditional enrollees (adults and children) instead of per capita allotments. The amount of the block grant is similar to per capita allotments – the per capita cost of this population is multiplied by the number of enrollees, with funding increasing by growth in the consumer price index, but not changes in population.

Both options leave little flexibility for states in cases of emergency, like outbreaks or natural disasters, when spending can increase dramatically and unexpectedly or simply if health cost trends in their state diverge from the pre-specified rate at which the caps grow. So, while the CBO predicts that this will decrease federal spending, states must compensate by either increasing their spending through potential cutting of other non-medical sectors of the state budget or raising taxes, or through reducing Medicaid spending through things like payment cuts for providers and health plans, getting rid of optional services for enrollees, or restricting enrollment eligibility. Block grants in particular encourage cuts to enrollment more than per capita allotments, since the amount does not change along with population increases or decreases, and this shifts the cost for care of this cut population to the states.

Is it true that Planned Parenthood would lose all of its government funding?

Under this proposed bill, Planned Parenthood would lose access to all federal funds for a year. If cut, this funding, which makes up around 40 percent of Planned Parenthood’s annual operating budget, would not only reduce access to care for the communities served, but also result in thousands of additional births. The CBO estimates that an additional $21 million would be spent for medical care for these additional pregnancies and births, particularly affecting low-income communities with limited health care provider access. Yes, defunding Planned Parenthood would save an estimated $156 million by 2026, but 15 percent of those living in low-income areas where Planned Parenthood is one of the only health care providers, would no longer have access to reproductive or general health care.

What exactly is the Prevention and Public Health Fund, and what is the bill proposing to do to its funding?

The Prevention and Public Health Fund was created under the ACA and is dedicated solely to expanding, improving, and sustaining public health and prevention programs. With these dollars, the Centers for Disease Control and Prevention (CDC) funds programs related to emergency disease outbreak response and preparedness, immunizations, the opioid crisis, life expectancy, and other public health issues affecting Americans. An analysis last month from the Trust for America’s Health (TFAH) estimates that the fund accounts for around 12 percent of the CDC’s annual budget. In fact, the Public Health Fund provides funding for almost half of the CDC’s immunization program budget, impacting its ability to track vaccinations and improve deadly infections.

The AHCA proposes to cut its funding entirely, which the TFAH analysis estimates could cost states over $3 billion over the next five years. This is especially alarming, as the CDC and public health departments are at the forefront when combating superbugs, infectious diseases, obesity and diabetes, bioterrorism, and other crucial public health crises. Taking away funding for these essential programs leaves Americans at greater risk from deadly infections and diseases and as former CDC director, Tom Frieden, said, could “[lead to] tens of thousands of additional illnesses and more than 10,000 additional deaths.”

I have a preexisting condition: would this bill permit insurers to charge me more for my coverage, exclude coverage for my condition, or even deny me coverage?

No. The AHCA budget reconciliation bill does not alter the ban on preexisting condition exclusions. As a result, individuals living with a preexisting condition such as diabetes, cancer, or congenital heart failure will continue to be protected from higher premiums, coverage exclusions for treatment, and from health plan denials as a result of their health status. However, President Trump and Republicans have stated their intent to pass further iterations of health reform, which may or may not amend or eliminate these protections for individuals living with preexisting conditions.

I’m not yet 26 years old, would I be able to stay on my parents’ insurance if this bill is passed?

Yes. Just like the preexisting condition ban, this bill leaves in place the ACA’s provision allowing young adults up to the age of 26 years to remain on their parents’ health insurance plan.

Kavita Patel is a practicing primary care internist at Johns Hopkins Medicine and a nonresident senior fellow at Brookings. She did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article.  She is currently a board member of Dignity Health, Tesaro, and SMM Heath which are entities that may have an interest in this article.