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Republicans’ new Obamacare repeal bill has a lot for insurers to like and for hospitals to hate

Physicians and health workers join House Democrats to speak out on the impact of the Republican health care plan, on Capitol Hill in Washington, Thursday, June 22, 2017. (AP Photo/Andrew Harnik)

Major health care industry groups largely fell into two camps on Thursday when Republicans released their Affordable Care Act repeal: There were those groups that criticized the bill, and those that preferred to say nothing at all.

For the health insurance industry, the bill is a mixed bag. The major trade association for health insurers, America's Health Insurance Plans, declined to issue a specific response to the bill, saying they were still evaluating it. But the proposed legislation contains several provisions that the industry has been fighting for, including a tax repeal worth $145 billion over 10 years to the industry and a guarantee that billions of dollars of federal subsidies would be paid in 2018 and 2019 to stabilize plans in the Affordable Care Act's marketplaces before they are phased out. There are also two funds, adding up to $112 billion over a decade, to stabilize the market and make insurance more affordable.

“Whatever insurers have been doing to lobby paid off,” said Larry Levitt a senior vice president at the Kaiser Family Foundation.

But it also holds major drawbacks, particularly for firms that provide Medicaid coverage. Companies that sell commercial insurance in the marketplaces set up by the Affordable Care Act stand to benefit in the short term, although long-term questions loom over the stability of the marketplace that the bill would set up. Meanwhile, health insurers that provide Medicaid coverage stand to lose if millions of the program's recipients become ineligible.

“I’m very unhappy with what came out today. In the long run, it’s no better, and in some aspects it's even worse than the House bill,” said John Baackes, chief executive of L.A. Care Health Plan, a California health plan with 2 million Medicaid members who spearheaded a sharply critical letter to lawmakers arguing against Medicaid cuts earlier this week. He noted that while there had been significant publicity around the individual market where 12 million people buy insurance, Medicaid covers nearly 75 million people.

“What we see in the Senate and House bill is just awful — it’s just awful for poor people,” Baackes said.

The final assessment of how many Americans would lose coverage if the bill passes will come next week from the Congressional Budget Office, and some industry groups said they were reserving judgment until then. But several health policy experts said they expected the losses, driven largely by Medicaid cuts, to be on par with those in the House bill. The CBO projected that under the House bill, 23 million additional people would be uninsured in 2026 as compared to if the Affordable Care Act remains law.

“When you take a step back and think about the size of these cuts, they are just unprecedented,” said Dan Mendelson, president of Avalere Health, a consulting firm. “It's hard even for policy analysts to estimate how fundamental those cuts will be.”

Concern about those losses was echoed by another major industry that will suffer huge economic consequences if millions of people lose coverage: hospitals.

“Now is the time for the Senate to hit reset and make key improvements to this legislation,” Chip Kahn, president of the Federation of American Hospitals said in a statement.

Steve Shapiro, chief medical and scientific officer of the University of Pittsburgh Medical Center said the bill would take a toll on hospitals, increasing the amount of “bad debt” — care they must give free — because patients lack insurance or can't pay their bills. He said the toll would fall especially hard on rural hospitals, many of which are already struggling financially and are fighting an opioid epidemic.

“In a way, this is moving us back to the bad old days when people didn’t have preventive care, coordinated care, were too sick and used the emergency department,” Shapiro said.

The National Health Council, an organization that includes a wide gamut of health industry players among its members, including patient advocacy groups, drug companies and medical device makers, slammed the bill in a statement.

The bill “will have a devastating impact on people with chronic conditions, who will pay more for access to less care. This is unacceptable. The proposed cuts to Medicaid will harm the nation’s poorest and sickest populations,” Marc Boutin, chief executive of the National Health Council said.

A major group representing doctors, the American Medical Association, said it was reviewing the bill, but strongly opposed Medicaid caps. David O. Barbe, AMA's president, said the group was reviewing the bill, with “grave concern” over whether changes to Medicaid “will not cover needed care for vulnerable patients.”

The biggest questions the bill will raise are in the long term, when the new marketplaces would be set up with less generous subsidies that are structured slightly differently than the Affordable Care Act. The bill effectively eliminates the mandate that people carry insurance or pay a penalty and does not replace that provision with any other incentive to try to get healthy people to sign up. That leaves big question marks over whether the insurance market set up by the law will have enough healthy and sick people to function.

The Medicaid cuts, too, will be felt over time, since they would establish caps based on recent spending and grow more slowly than medical costs.

“It kicks the can down the road,” Mendelson said. “There’s going to be a lot of political pain in 2020.”