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Striking Down ACA Would Weaken Medicare

July 8, 2019 at 12:00 PM

Medicare beneficiaries, providers, and plans could face severe harm if the federal courts allow a district court decision striking down the Affordable Care Act (ACA) to stand. As we noted earlier today, a federal court of appeals will hear oral arguments tomorrow on whether to uphold the decision.

The ACA affected many aspects of Medicare, and invalidating the entire law would call all of them into question. In particular, the ACA altered Medicare’s annual payment updates to hospitals, skilled nursing facilities, and certain other health care providers, as well as payments to Medicare Advantage health plans. If the district court’s decision stands, it’s unclear whether the Centers for Medicare & Medicaid Services could continue paying providers and plans or would first have to establish new regulations resetting all of these payment rates.

Beyond the immediate uncertainty and confusion, letting the decision stand could jeopardize the ACA’s Medicare improvements, including:

  • Closing the prescription drug “donut hole.” The ACA gradually eliminated the Medicare Part D coverage gap — the range of beneficiaries’ drug spending for which the beneficiaries had to pay 100 percent of the costs. The 2018 Bipartisan Budget Act accelerated the timetable for eliminating the gap.
  • Providing preventive services without cost-sharing. The ACA eliminated beneficiary coinsurance for most preventive services, such as screenings, and added coverage of an annual wellness visit.
  • Promoting delivery system reform. The ACA introduced a wide range of payment reforms to promote quality and efficiency in health care delivery, including establishing accountable care organizations and the Center for Medicare & Medicaid Innovation and providing incentives to reduce unnecessary hospital readmissions. Subsequent laws and regulations have built on these promising innovations.
  • Reducing Medicare Advantage overpayments. Before the ACA, Medicare paid private Medicare Advantage plans about 13 percent more per beneficiary, on average, than it would cost to cover those beneficiaries in traditional Medicare. The ACA scaled back those overpayments.
  • Reforming payments in traditional Medicare. The ACA reduced Medicare’s annual payment updates to hospitals, skilled nursing facilities, and certain other providers, partly to account for economy-wide productivity improvements. It also reduced excessive payments to home health agencies and inpatient rehabilitation facilities.
  • Raising the Medicare tax on high-income people. The ACA raised the Medicare payroll tax rate for individuals with incomes over $200,000 and couples with incomes over $250,000. It also imposed a Medicare tax on those households’ dividends, capital gains, and other unearned income.
  • Strengthening Medicare’s financing. These changes in spending and revenues strengthened the financial status of Medicare’s Hospital Insurance (HI) trust fund. Before the ACA, the program’s trustees projected that the trust fund would become insolvent in 2017. They now project it will remain solvent through 2026. The ACA also eliminated four-fifths of the long-run HI shortfall.

If the ACA were struck down, the courts might give the President and Congress time to enact a new law to take its place. But in the current political environment, an agreement between the House, Senate, and President could prove difficult to achieve. At the very least, Medicare beneficiaries, providers, and plans would face heightened uncertainty, and at least some of the ACA’s Medicare improvements would likely be lost.

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