How Covid-19 will impact U.S. health care policy

While most public attention has been focused on the race for the Presidency, Congress and the states have significant influence over the health policy issues that are most salient in efforts to improve both affordability and resilience. For example, nationwide coverage reforms would require new legislation by Congress, while states can choose to implement coverage reforms at a more localized level. Big changes to funding (for example, for Medicaid or public health) also require Congressional action, as do permanent changes in telehealth reimbursement and regulation. States have significant authority over many regulations that have been waived in the acute phase of the pandemic, such as Certificate of Need and laws related to provider licensure.

While many of these issues have bipartisan appeal, others will likely be decided by the party in power. This election season brings the potential for significant shifts. With 23 Senate Republicans on the ballot, compared to just 12 Senate Democrats, the Left has an opportunity to regain the Senate and control both chambers of Congress. Seven states with Republican governors and four states with Democratic governors have gubernatorial races this year. Four of those states have a partisan divide between their governor and legislature—Montana, Vermont, North Carolina, and New Hampshire. Should a single party gain control of both branches, that party will shape the 2021 health policy agenda.

The recent death of Supreme Court Justice Ruth Bader Ginsburg has further underscored the importance of the Congressional races. The court is scheduled to hear California v. Texas—in which the plaintiffs are arguing that the elimination of the individual mandate tax penalty has made the entire ACA unconstitutional— just days after the November election. Whether a new justice is in place or not, there are several scenarios that could lead to either a partial or full invalidation of the law. If changes to the ACA do occur, Congress could decide to re-pass portions of the law.

A Democratic sweep of both the White House and Congress would likely result in an effort to re-pass any and all components of the Affordable Care Act that have not been deemed unconstitutional, and potentially a push to expand the number of justices on the Supreme Court (which would have implications for any future health care cases brought before the Court).

If the GOP retains the Senate, Congress could still attempt to re-pass certain components of the ACA that have broad bipartisan appeal, for example the law's protections pertaining to pre-existing conditions, and potentially even the Medicaid expansion (if it is struck down along with the individual mandate). But such efforts would likely be far more limited.

While most legal experts believe that a full invalidation of the law by the Supreme is unlikely, the issues and scenarios outlined above have undoubtedly reinvigorated voters on both sides of the aisle, reshaping the elections in the lead up to Election Day.

In an effort to help providers weather the financial impacts of Covid-19, CMS has disbursed billions of dollars in Advanced and Accelerated Payments. Medicare is also providing a 20% add-on payment for patients hospitalized with Covid-19 for the extent of the public health emergency. In the aggregate, CMS also avoided overall price cuts in their 2021 IPPS1 final rule and HOPPS2 proposed rule, another potential indication that they are prioritizing provider resilience over cost cutting—for now.

While necessary for preserving providers’ ability to function, these efforts have only further weakened Medicare’s already precarious financial situation. The Congressional Budget office reported in September that the Medicare Hospital Insurance Trust Fund, which finances Medicare Part A payments, could become insolvent by 2024—two years earlier than predicted before Covid-19 hit. Within the next administration, lawmakers will have to take steps to guarantee Medicare can continue to meet its financial obligations. Those steps are almost guaranteed to include higher payroll taxes and lower reimbursement rates, but the balance will likely depend on who controls Congress and the White House in 2021.

Medicare site-of-care shift a win-win for payer and patients

In the meantime, CMS has continued to double down on other spending control measures. For example, it has continued to take bold steps to shift care to lower-cost settings. Perhaps the most notable change in 2020 is a proposal to completely phase-out the list of procedures that can only be performed in an inpatient setting. The process would take place over three years, starting with 300 musculoskeletal procedures in 2021.

CMS is working to move more services to the ambulatory space and home as well. Such moves present an opportunity for Medicare to save money while boosting resilience, by creating opportunities to receive care outside of the hospital, allowing patients to continue receiving vital care in a safe setting, regardless of potential contagion or other extenuating circumstances.

Covid-19 a hurdle—not a death knell—for Medicare risk

Value-based care also remains a central tenant of Medicare’s push to control spending. In the early days of the Covid-19 pandemic, many accountable care organizations (ACOs) expressed concerns about their financial prospects. While it has since become clear that losses for ACOs will be much less than originally projected, CMS has still taken steps to protect participating organizations. Covid19 costs will be removed from evaluations and benchmarking, and ACOs will not be responsible for shared losses incurred during the public health emergency.

While the agency has had to slow implementation of many programs (e.g., the agency will not be opening an application cycle for new ACOs to begin operating in 2021), it has continued to emphasize their long-term commitment to such models.

Depressed tax revenue and an expanding pool of eligible enrollees is further straining Medicaid budgets in the wake of Covid-19. Even as resilience becomes a larger goal for lawmakers and regulators, nearly every state is constrained by a constitutional obligation to balance their budgets.

The CARES Act attempted to alleviate some financial pressure by offering a 6.2% increase in federal matching for Medicaid during the public health emergency, but in order to qualify states had to agree not to increase cost sharing, cut Medicaid benefits, or disenroll any beneficiaries. The Medicaid rolls grew by almost 3.5 million between February and June, due to suspended disenrollment and continuing job losses. As the economy continues to deteriorate, employment benefits phase out, and more people learn about alternative insurance options, we expect millions more will turn to Medicaid for both themselves and their families—further exacerbating the fiscal challenges for states.

Even once states are allowed to resume the activities prohibited during the PHE, state governments have already warned that more will be needed to balance the books. We expect that the majority states will likely turn to provider reimbursement rates for savings, just as they did during the 2008-09 recession. This will be yet another blow to providers who are likely seeing their payer mix shift away from privately covered individuals and toward more publicly insured and uninsured patients.