The “100 Day Action Plan” of President-elect Donald Trump promised to bring broad and sweeping change to the current laws governing the healthcare industry in the US Specifically, Trump’s 100 Day Action Plan called for the full repeal of the Patient Protection and Affordable Care Act (“ACA”) and its replacement with health savings accounts, cross-states sales of health insurance, and modifications to state managed Medicaid programs. The Plan also advocated a more streamlined drug approval process. Within the first few days after the election, however, many observers have noted that the prospects for rapid enactment of radical change in the healthcare regulatory landscape are not so clear, and the President-elect has already suggested that some popular provisions of the ACA should be preserved.
Below we have outlined some significant, potential changes to the current healthcare laws and the impact such laws may have on the healthcare industry under the Trump administration.
Full or partial repeal and replacement of the ACA
While Congress will likely follow through with plans to vote for the repeal of the ACA shortly after Mr. Trump takes office in January, some policy experts believe a quick repeal and replacement of the ACA will be difficult and unlikely. In addition, in the immediate aftermath of the election, Trump has indicated an interest in preserving the ACA’s provisions that allow children to stay on their parent’s health insurance policies until age 26 and that prohibit non-coverage because of patients’ pre-existing conditions. The insurance industry previously indicated that these provisions are not likely financially viable without near-universal coverage. In addition, the projected impact of the ACA’s wholesale repeal on the federal budget deficit could further complicate the repeal effort, not to mention the potential for a filibuster by Senate Democrats and the public policy implications of immediately divesting 20 million or more Americans of their health insurance before a replacement system of insurance is fully operational. Thus the prospect for a quick full repeal and replacement of the ACA is uncertain.
If full repeal and replacement of the ACA by the Republican-led Congress is not a viable option, policy experts believe Congress will again attempt to use the budget reconciliation process to dismantle some of the key insurance-related provisions of the ACA using budget reconciliation legislation, similar to what was done with the Restoring Americans’ Healthcare Freedom Reconciliation Act, passed by Congress in December 2015 but vetoed by President Obama. Since only budget-related legislation can be considered under the budget reconciliation process, some of the ACA’s provisions such as the guarantee of coverage to people with pre-existing conditions and the prohibition on charging these individuals higher premiums for coverage, coverage of a set of essential health benefits, and continued coverage for young adults under their parents’ insurance plans until they reach the age of 26, will likely remain in place.
Key provisions of the ACA that are most likely to be reversed include:
- Requiring individuals to obtain and maintain health insurance or pay a tax penalty for failure to maintain health insurance coverage without an exemption;
- The established health insurance marketplaces for individuals;
- Funding for subsidies for health insurance purchased in ACA marketplaces;
- Requiring businesses with 50 or more full-time equivalent employees to provide health insurance to at least 95% of their full-time employees and their dependents; and
- Imposing a 40% tax on employers providing employees with high-priced health insurance plans.
Trump’s previously-announced replacement plan for the ACA would establish an insurance market in which policies can be sold across state lines such that any health insurer would be able to sell any health insurance plan in any state, as long as the plans comply with the regulations of the state. Trump has maintained that allowing full competition in the insurance market will drive down insurance costs. However, in order to control costs, health plans require an adequate provider network in the geographic area where the plan is sold. It may not be easy for an out-of-state insurer to assemble such a provider network. Accordingly, it is unclear the extent to which consumers would benefit economically from purchasing out-of-state plans.
It also is unclear how the Trump administration will deal with the ACA’s healthcare fraud and abuse provisions, including the 60-day rule for refunding overpayments. They could be left untouched, repealed along with the ACA, or swept up in the repeal and later reenacted. While it is unlikely that Trump would scrap provisions that generate significant financial recoveries for the government and combat fraud, the enforceability of these provisions could be unclear during a period of repeal.
It is similarly unclear what the Trump administration will do with Accountable Care Organizations (“ACOs”), a significant component of the ACA. It is unlikely that ACOs will be abandoned entirely, as pay for performance and shared savings appear to be bipartisan issues, but Trump has yet to announce what the future will be for this initiative, and many of his supporters are advocating for the elimination of the CMS Innovation Center, which has developed many new payment models.
Trump’s replacement plan for the ACA also includes the expansion of health savings accounts. Health savings accounts currently allow people to accumulate money each year for healthcare expenses on a pre-tax basis up to a certain dollar amount. Trump intends to expand health savings accounts so that the funds may be used by any family member without penalty and the accounts would become part of the individual’s estate, which could be passed to heirs on a tax-free basis. Trump would also allow individuals to deduct the cost of health insurance premiums from their individual income tax returns.
During the campaign, Trump advocated for allowing Medicare to negotiate prescription drug prices directly with drug manufacturers. This is an idea that Republican leaders have historically opposed. In fact, current law prohibits such negotiations.
Medicaid expansion may halt
The ACA envisioned, and to a great degree relied upon, the expansion of Medicaid, a safety net program that spent approximately $532 billion in fiscal year 2015. While Trump has been unwavering with his plan to “repeal and replace” the ACA, his exact position on Medicaid expansion is less clear.
Trump previously advocated for transforming Medicaid from an entitlement program under which coverage is guaranteed for all eligible individuals (and expenses open-ended), to a block grant program whereby states would receive a specified federal allotment to fund their Medicaid programs. The block grant proposal is calculated to reduce federal funding significantly—by nearly $913 billion over 10 years according to a 2015 block grant proposal by House Budget Committee Chairman Tom Price (R-GA). This specific legislative proposal, however, could result in the loss or lessening of coverage for individuals who would otherwise be guaranteed coverage from Medicaid if it remained an entitlement program. While a block grant approach to Medicaid would be effective at cutting and controlling federal spending, states may oppose such a change as they would face an increased financial risk that was formerly borne largely by the federal government.
Trump has also suggested an interest in other innovative approaches to Medicaid expansion. Such approaches might resemble the one developed by Indiana governor and Vice-President-elect, Mike Pence. Under his “Healthy Indiana Plan,” individuals make monthly contributions into a “personal wellness and responsibility account” which goes toward a $2,500 deductible—most of which is paid by the state. If an individual’s annual healthcare expenses are less than $2,500, remaining contributions can be rolled over to reduce the monthly payment the following year.
In the event that Medicaid expansion is rolled back in some fashion, Medicaid managed care plans will also be affected by a sharp decline in enrollment and revenue.
Quicker, streamlined FDA drug approval process
In an effort to “speed the approval of life saving medications” as called for by Trump’s 100 Day Action Plan, policy experts predict the implementation of a quicker, more streamlined US Food and Drug Administration (“FDA”) drug approval process, which would impact drug and device makers. Trump also has stated that he would allow the importation of less expensive prescription drugs from foreign countries. Outside of repealing medical-device taxes under the ACA, Trump’s specific plans for the FDA are unclear. However, the announcement of a Trump presidency and the prospect of relief from intense drug pricing scrutiny has US pharmaceutical and biotech stocks surging.
Immediate changes to payment and reimbursement unlikely
Trump has not provided any insight into his policies for Medicare payment and reimbursement. His administration is not likely immediately to reverse the move towards value-based payments by the Centers for Medicare and Medicaid Services (“CMS”). CMS has finalized most payment and reimbursement rules for 2017 and would need to begin work on new rules for 2018 shortly after Trump takes office in January 2017. Due to the length of the approval process for new payment regulations, sweeping changes to payment and reimbursement are unlikely for the first two years of the Trump presidency.
We will, of course, continue to monitor and report on these developments.