“Repeal and Replace” Gives States More Control over Healthcare Market

January 23, 2017; Kaiser Family Foundation

The Trump administration has made it clear that the Affordable Care Act is on the chopping block with its “repeal and replace” agenda. While a specific replacement has not yet been identified, an executive order signed on Friday implores federal agencies to act within the constraints of the ACA to delay or even waive portions of the law that they believe place too high a cost burden on insurers, providers, consumers, and states. The order says:

In the meantime, pending such repeal, it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize unwarranted economic and regulatory burdens of the act, and prepare to afford the states more flexibility and control to create a more free and open health care market.

While the order does not specify aspects of the law to focus on, it clearly states that the goal of any ACA replacement will be to give states more control over government-funded health care options (particularly Medicaid) while simultaneously weakening state control over private health insurance by promoting the sale of policies across state lines. The U.S. does have some version of this in place right now, since states determine their own patient eligibility criteria for Medicaid.

The Affordable Care Act originally proposed that federal law would require expansion for all states up to 138 percent of the Federal Poverty Level; however, a Supreme Court ruling determined that deciding whether to expand Medicaid was a state issue. To date, 19 states do not have Medicaid expansion.

The impact of this is that in those states that did not opt into Medicaid expansion, there is an insurance coverage gap for families that fall between about 45 percent and 100 percent of the federal poverty level. Their income is too high to qualify for Medicaid in their state but too low for marketplace subsidies. These families essentially have two options—remain uninsured, or pay for a marketplace health plan that may be difficult to afford.

The Kaiser Family Foundation (KFF) recently released a brief pertaining to the nation’s federally funded community health centers, described as “the dominant model for federal grant funding for primary care in the country’s health care safety net” and “the largest source of comprehensive primary health care for medically underserved rural and urban communities and populations.” Community health center data in states with Medicaid expansion was analyzed and compared to that from those without. What the researchers found was that in states with Medicaid expansion, more patients seen at community health centers were insured (a natural outcome of expansion), the community health centers themselves earned three times more money, and they experienced increased service capacity, which in turn led to increased patient access to needed services.

Health centers that see more insured patients, whether privately insured or government-insured through Medicaid and Medicare, receive more revenue from insurance payments. More revenue equates to a greater capacity for offering an expanded scope of services and hiring additional staff to see more patients.

On the other hand, one in three patients at community health centers in states without Medicaid expansion are uninsured, and the centers’ total revenues are far below those in states with expansion. Without a new source of income, these community health centers are essentially stagnant and unable to increase capacity, leaving these underserved communities with even fewer healthcare options.

The KFF brief offers a plethora of data, clearly pointing out that any ACA replacement that leaves the health care market completely in the hands of the states is setting the country up for unequal access to healthcare, with the most vulnerable among us potentially faring the worst.— Sheela Nimishakavi