Lesser-known healthcare changes found in budget bill

The House-passed budget reconciliation bill, which features high-profile Medicaid changes, also has many lower-profile healthcare provisions, including last-minute alterations.

The House adopted a so-called manager’s amendment — changes approved by the Republican leadership — shortly before passing the budget reconciliation bill May 22.

The late change that most effects hospitals is one to increase limits on new state-directed payments (SDPs). The underlying bill capped future SDPs at Medicare rates, instead of the average commercial rates allowed in 2024 rule from the Biden administration. The manager’s amendment would allow SDPs for the 10 states that have not expanded Medicaid eligibility to pay up to 110% of the Medicare rate for a given service.

Other changes in the manager’s amendment:

• Accelerate implementation of Medicaid work requirements to 2027 from 2029
• Bar future administrations from waiving work rules in certain circumstances
• Expand a ban on Medicaid funded gender-affirming surgeries for minors to adults, as well

It also would clarify that the underlying bill’s reduction of federal matching payments for Medicaid expansion states that cover undocumented immigrants would not bar coverage for legally present immigrant children and pregnant women.

The manager’s amendment also would appropriate “such sums as necessary” for reducing cost-sharing payments for low-income individuals who’ve purchased silver-tier plans on ACA exchanges. It would mostly bar payments to plans that cover abortions. The language creates open-ended funding for such payments instead of any kind of cap on them.

Coverage effects                  

The Medicaid provisions of the underlying legislation have drawn the most attention, given their high-profile effects. The bill’s Medicaid changes would reduce future increases in federal Medicaid spending by $625 billion and result in 8.6 million more uninsured over a decade — including 1.4 million undocumented immigrants — according to separate recent estimates by the Congressional Budget Office (CBO).

CBO has not conducted overall estimates for how the various separate healthcare provisions for the bill would interact, but separate CBO projections of provisions crafted by different committees were expected to reduce insurance coverage by:

• 7.6 million from Medicaid
• 1 million from ACA exchanges
• 2.1 million from ACA exchanges

The ACA marketplace changes stem from several provisions that include:

• Instituting eligibility and income verification
• Rolling back income-based special enrollment periods
• Amending the definition of “lawfully present” for enrollees
• Requiring repayment of past-due premiums before starting new coverage
• Re-establishing cost-sharing reduction (CSR) payments for low-income beneficiaries

The CSR provision aims to disrupt the current “silver loading” practice employed by health plans and state regulators, which drives up premiums for silver-level plans, as well as subsidies based on the second lowest cost silver plan.

The conservative Paragon Institute has estimated 4 million to 5 million ineligible enrollees were fraudulently signed up in ACA marketplaces in 2024.

Separately, the liberal Center on Budget and Policy Priorities (CBPP) projected that, overall, about 15 million could become uninsured in future years. The CBPP projections included an estimated 4.2 million newly uninsured if COVID-era subsidies for the ACA marketplaces were not extended past a planned expiration at the end of 2025. The bill does not address those subsidies.

The CBO has identified some separate provisions that would drive some smaller insurance coverage gains, including:

• 800,000 in employer sponsored insurance
• 600,000 in the ACA marketplace

The projected effects on the uninsured drew the greatest concerns from hospital advocates.

“The sheer magnitude of the level of reductions to the Medicaid program alone will impact all patients, not just Medicaid beneficiaries, in every community across the nation, said Rick Pollack, president and CEO of the American Hospital Association. “Hospitals — especially in rural and underserved areas — will be forced to make difficult decisions about whether they will have to reduce services, reduce staff and potentially consider closing their doors.”

However, some for-profit hospital executives recently questioned the dire CBO uninsured people projections, given its poor track record in previous projections.

Low-key provisions

Among the non-Medicaid health changes was one focused on rural hospitals. Specifically, the bill would allow rural hospitals that closed between 2014 and 2021 to reopen under the newer rural emergency hospital designation. The Cecil G. Sheps Center for Health Services Research at The University of North Carolina at Chapel Hill found 130 rural hospitals closed during that period.

Also included in the underlying bill were several provisions focused on changes to tax-advantaged accounts, such as health reimbursement arrangements (HRAs) and health savings accounts (HSAs). Those would allow the use of individual coverage health reimbursement arrangements (ICHRAs) to purchase ACA marketplace coverage.

ICHRA changes include:

• Renames ICHRA as a CHOICE Arrangement
• Allows workers to use pre-tax dollars to cover their share of premiums
• Provides a two-year tax credit for small businesses (fewer than 50 employees) to adopt CHOICE Arrangements
• Allows small employers to offer both a group plan and CHOICE arrangement to the same class of employees

HSA changes included:

• Allowing Medicare Part A enrollees to continue contributing to HSAs
• Allowing HSAs to pay for direct primary care arrangements
• Allowing conversion of unused FSA/HRA funds into HSAs
• Allowing HSA use for fitness and exercise programs
• Doubling HSA contribution limits for individuals earning under $75,000 ($150,000 for families)