What Are the Implications of Repealing the Affordable Care Act for Medicare Spending and Beneficiaries?
President-elect Donald Trump, Speaker of the House Paul Ryan, Health and Human Services (HHS) Secretary-nominee and current House Budget Committee Chairman Tom Price, and many other Republicans in Congress have proposed to repeal and replace the ACA, but lawmakers have taken different approaches to the ACA's Medicare provisions. For example, the House Budget Resolution for Fiscal Year 2017, introduced by Chairman Price in March 2016, proposed a full repeal of the ACA. The House Republican plan, "A Better Way," introduced by Speaker Ryan in June 2016, proposed to repeal some, but not all, of the ACA’s Medicare provisions.
This brief explores the implications for Medicare and beneficiaries of repealing Medicare provisions in the ACA. The Congressional Budget Office (CBO) has estimated that full repeal of the ACA would increase Medicare spending by $802 billion from 2016 to 2025.1 Full repeal would increase spending primarily by restoring higher payments to health care providers and Medicare Advantage plans. The increase in Medicare spending would likely lead to higher Medicare premiums, deductibles, and cost sharing for beneficiaries, and accelerate the insolvency of the Medicare Part A trust fund. Policymakers will confront decisions about the Medicare provisions in the ACA in their efforts to repeal and replace the law.
What are the key Medicare provisions in the ACA and how would repeal affect Medicare spending and beneficiaries?
The following discussion highlights several of the key Medicare provisions in the ACA and assesses how repeal of these provisions could affect Medicare spending and beneficiaries.2
PAYMENTS TO HEALTH CARE PROVIDERSThe ACA reduced updates in Medicare payment levels to hospitals, skilled nursing facilities, hospice and home health providers, and other health care providers. The ACA also reduced Medicare Disproportionate Share Hospital (DSH) payments that help to compensate hospitals for providing care to low-income and uninsured patients, with the expectation that hospitals would have fewer uninsured patients as a result of the ACA’s coverage expansions.
Repealing the ACA’s sustained reductions in provider payments would be expected to:
- Increase Part A and Part B spending. CBO has estimated that roughly $350 billion3 in higher Medicare spending over 10 years could result from repealing ACA provisions that changed provider payment rates in traditional Medicare. Repealing these provisions would increase payments to providers in traditional Medicare. Additionally, some hospitals would receive higher DSH payments, if these payments were restored to their pre-ACA levels.
- Increase the Part A deductible and copayments and the Part B premium and deductible paid by beneficiaries. The Part A deductible and copayments would be expected to increase due to an increase in Part A spending that would likely occur if payment reductions are repealed. This is because the Part A deductible for inpatient hospital stays is indexed to updates in hospital payments, and the copayment amounts for inpatient hospital and skilled nursing facility stays are calculated as a percentage of the Part A deductible. Similarly, the Part B premium and deductible would be expected to increase if payments to Part B service providers are restored. This is because Part B premiums are set to cover 25 percent of Part B spending, and the Part B deductible is indexed to rise at the same rate as the Part B premium.
PAYMENTS TO MEDICARE ADVANTAGE PLANS
Prior to the ACA, federal payments to Medicare Advantage plans per enrollee were 14 percent higher than the cost of covering similar beneficiaries under the traditional Medicare program, according to the Medicare Payment Advisory Commission (MedPAC).4 The ACA reduced payments to Medicare Advantage plans over six years, which brought these payments closer to the average costs of care under the traditional Medicare program. In 2016, federal payments to plans were 2 percent higher than traditional Medicare spending (including quality-based bonus payments to plans).5