Affordable, quality health care. For everyone.

To The Point

Could Repealing the ACA Impact Medicare? Definitely, but Many Questions Remain

Medicare and the ACA

On November 10, the U.S. Supreme Court will hear oral arguments in California v. Texas, a case brought by Republican attorneys general and supported by the Trump administration that is challenging the constitutionality of the Affordable Care Act (ACA). If the Supreme Court takes a narrow approach, striking the individual coverage mandate and related provisions like preexisting condition protections, millions of people could lose health insurance coverage. But if the Supreme Court takes a broad approach, as the Trump administration has urged it to do, and strikes the law in its entirety — including the many Medicare-related provisions — not only will 20 million people lose health coverage, but virtually every patient, health care provider, and health plan in the United States could be affected.

The ACA made myriad changes to Medicare. Some changes improved the program’s benefits. Others reduced Medicare payments to health care providers and private plans and extended the financial viability of the program. Still others provided incentives and created programs to encourage the system to provide better care. At first glance it may seem that all these changes would be undone if the Supreme Court overturns the ACA, but in reality it is less clear what the implications will be for Medicare.

What We Know

Many of the changes to Medicare made by the ACA remain in effect and have not changed since the law was passed; for example, an increase in the Medicare Part A payroll tax on higher-income workers, as well as preventive benefits like an annual wellness check-up and free coverage of some health screenings. Overturning the ACA in its entirety would likely repeal these provisions, with implications for Medicare and its beneficiaries. Repealing the payroll tax increases would reduce revenues to the Medicare Hospital Insurance Trust Fund, which covers the costs of beneficiaries’ hospital visits and is currently projected to become insolvent in 2024. Repealing these provisions also would make preventive care more expensive.

What Is Less Clear

Provider and Plan Payments

The ACA reduced Medicare payments to many health care providers, such as hospitals, skilled nursing facilities, hospice, and home health providers. Because the law provided new sources of coverage for the uninsured, it also reduced Medicare Disproportionate Share Hospital payments that compensate hospitals for providing care to low-income and uninsured patients. The law also reformed payments to Medicare Advantage plans, required a minimum portion of plans’ premiums be spent on medical benefits (rather than administrative costs and profits), and added bonus payments for higher-quality plans.

The payment reductions have been fully implemented and providers have adapted accordingly. If these provisions of the ACA were repealed, Medicare payments to some providers would increase. Many questions would need to be resolved, however. For instance, would health care providers receive back payments to compensate for payment cuts made in 2010 through 2020 when the ACA was in effect? Prior to the ACA, payments to Medicare Advantage plans were significantly higher and calculated differently. How would these payments to plans transition back to the previous system?

Value-Based and Accountable Care

In a shift toward value-based payments, the ACA imposed penalties on hospitals with higher rates of readmissions and avoidable infections and shifted payments from lower-performing to higher-performing hospitals. It also launched accountable care organizations (ACOs). Would these be allowed to continue? Would the Center for Medicare and Medicaid Innovation (CMMI) be shuttered, and likewise the Medicare–Medicaid Coordination Office? Doing so also would prevent implementation of some programs proposed by the Trump administration, such as using international reference pricing for drugs covered under Medicare.

Medicare Premiums and Prescription Drug Costs

The ACA closed the Medicare Part D coverage gap, or “doughnut hole,” helping to reduce prescription drug spending. It also increased Part B and D premiums for higher-income beneficiaries. The Bipartisan Budget Act (BBA) of 2018 modified both of these policies. If the ACA is overturned, would drug manufacturers continue to abide by the agreements that helped to pay for closing the doughnut hole? Would the doughnut hole reopen if the ACA were overturned or would the BBA changes supersede the ACA changes? What premiums would higher-income beneficiaries pay? Would some beneficiaries receive refunds for the additional premiums paid during the years the ACA was in effect?

These questions could have significant effects for people, health care providers, and federal government spending, but represent just a few of the manifold Medicare-related questions to be addressed if the ACA were overturned.

Discussion

Many effects of overturning the ACA on Medicare are not clear, yet some are straightforward. Overturning the ACA would unquestionably further erode the Medicare Trust Fund, jeopardizing the financing of beneficiaries’ hospital benefits. If parts of the law were overturned that increased federal spending for Medicare through higher payments to providers, then all Medicare premiums, deductibles, and cost-sharing would increase. Medicare payments to health care providers also would be less predictable while policymakers sorted through the various questions, adding instability to a turbulent time. While the effects of overturning the Affordable Care Act on younger adults has received significant attention, the potential effects on Medicare should not be overlooked.

Publication Details

Publication Date: October 29, 2020
Citation:

Gretchen Jacobson and Elizabeth Fowler, "Could Repealing the ACA Impact Medicare? Definitely, but Many Questions Remain," To the Point (blog), Commonwealth Fund, Oct. 29, 2020. https://doi.org/10.26099/97c6-2h41

Experts

Gretchen Jacobson
Vice President, Medicare, The Commonwealth Fund
Liz Fowler
Executive Vice President for Programs, The Commonwealth Fund