Dive Brief:
U.S. providers could lose more than $32 billion in revenue next year if more generous subsidies for plans on the Affordable Care Act exchanges expire, according to a new analysis.
Meanwhile, uncompensated care — when hospitals and doctors deliver services without being reimbursed — will rise by an estimated $7.7 billion, according to the research from the Urban Institute, a left-leaning think tank.
It’s the latest warning about the impact to the healthcare system if the subsidies are allowed to lapse. The issue is at the center of the government funding battle being waged on Capitol Hill, with Democrats pushing for an extension in exchange for their support of a funding bill in advance of the Sept. 30 shutdown deadline, according to reports.
Dive Insight:
Congress put enhanced premium tax credits in place during the coronavirus pandemic as a measure to get as many Americans insured as possible during the public health crisis.
Specifically, lawmakers removed the cap on eligibility for tax credits for enrollees with incomes higher than 400% of the federal poverty line, while limiting premiums to at most 8.5% of household income. As a result, most low-income enrollees pay nothing or next to nothing for their plan, and coverage became much more affordable for middle-income Americans.
The expanded financial assistance is credited for record enrollment in ACA plans. Currently, more than 24 million people are covered by plans on the exchanges. But the subsidies are only in place through the end of this year, setting up a massive affordability cliff: Research estimates that between 4 million and 5 million Americans could no longer afford their coverage and would become uninsured if the subsidies expire.
An increase in the number of uninsured Americans of that size would have stark downstream impacts for providers. The Urban Institute’s new analysis estimates total spending on healthcare services will drop by $32.1 billion next year if the subsidies lapse, a figure that represents roughly 1.3% of total U.S. healthcare spending for the nonelderly.
Hospitals will be the most affected, losing $14.2 billion in revenue. Doctor’s offices will lose $5.1 billion. Roughly $5.8 billion less will be spent on prescription drugs, while spending on other healthcare services will drop by $6.9 billion, according to the analysis.
Of the projected $7.7 billion increase in uncompensated care, about $2.2 billion will affect hospitals, $1 billion will affect doctor’s offices, $1.5 billion will affect prescription drugs and $3 billion will affect other services, according to the Urban Institute.
“The negative effects of allowing these tax credits to expire couldn’t be more stark,” Katherine Hempstead, the senior policy adviser at the Robert Wood Johnson Foundation, which funded the research, said in a statement. “Healthcare institutions are often the economic engines of entire communities. If the credits expire, the ripple effects will be felt for years to come.”
Health policy researchers, patient advocates and Democrat lawmakers have been ringing warning bells for a while about the loss of the subsidies, but Congress is running out of time to act. Though there are more than three months until the end of the year, open enrollment for ACA coverage begins in November, meaning there’s a shrinking window for states and insurers to adjust if there is an extension. Beneficiaries have already receiving notices warning them of steep premium hikes — on average, ACA marketplace payers want to raise premiums by 20% next year, according to health policy think tank the KFF.
Subsidies are one issue at the locus of a looming government shutdown. Last week, House Republicans passed a stopgap funding bill to keep the government operating through Nov. 21, but Democrats in the Senate say it’s a nonstarter without movement on the subsidies.
Republicans generally oppose extending the financial assistance, citing what they say is rampant fraud on the ACA exchanges spurred by the influx of additional federal funds. The GOP is also turned off by the steep cost of extending the subsidies. The Congressional Budget Office estimates that permanently extending the subsidies would cost $358 billion over the next 10 years.
Still, there’s a political argument for keeping the subsidies in place. If they expire, premium sticker shock will hit American families before the midterm elections, which could cost some Republicans their seats.
More than four-tenths of people who buy their own insurance, mostly through the ACA exchanges, identify as Republican, including one-third who support President Donald Trump’s MAGA movement, according to KFF. Similarly, the loss of the subsidies would be felt most intensely in the red states that have elected not to expand Medicaid under the ACA, like Mississippi, Texas, Georgia and Florida, research shows.
