Hogan Lovells Publications | Health Alert | 01 December 2016

Gearing up for change: President-elect Trump's nominees to head HHS and CMS, and their views on the ACA, Medicare, and Medicaid

On November 29, 2016, President-elect Trump announced Congressman Tom Price as his intended nominee for Secretary of Health and Human Services, and Seema Verma, as his intended nominee for Administrator of the Centers for Medicare & Medicaid Services (CMS). President-elect Trump stated that "Chairman Price and Seema Verma are the dream team that will transform our healthcare system for the benefit of all Americans." He also applauded Congressman Price's qualifications and commitment "to repeal and replace Obamacare and bring affordable and accessible healthcare to every American" and Ms. Verma's "decades of experience advising on Medicare and Medicaid policy and helping states navigate our complicated systems." To help assist you in preparing for the transition of leadership at the Department of Health and Human Services (HHS) and CMS, we are providing this summary of Congressman Price's and Ms. Verma's past work concerning the Affordable Care Act (ACA), Medicare, and Medicaid.

CONGRESSMAN TOM PRICE

Tom Price is a six-term Republican Congressman from Georgia and an orthopedic surgeon. He serves as Chairman of the House Budget Committee and also serves on the Health Subcommittee of the House Ways and Means Committee. Congressman Price's intended nomination suggests a commitment by the Trump Administration to repealing and replacing the ACA and introducing reforms to reduce federal involvement in Medicare and Medicaid.

1. Repealing and Replacing the Affordable Care Act
Congressman Price has been an outspoken critic of the ACA since its inception. He has introduced an alternative reform proposal in every congressional session since 2009. The Empowering Patients First Act (Act) would repeal the ACA and offer instead the following age-adjusted tax credits to assist with the purchase of individual and family health insurance policies:

• US$1,200 for those between ages 18 and 35;
• US$2,100 for those between ages 35 and 50;
• US$3,000 for those who are ages 50 and older; and
• US$900 per child up to age 18.

The tax credit would be available to those who purchase health insurance policies in the individual market, with the option of receiving an advanceable, refundable credit upon purchase. The credit would not be available to those receiving federal health benefits, such as Medicare, though the Act would allow individuals in such programs to opt out and receive the credit instead, without losing other federal benefits like Social Security. Similarly, the tax credit would not be available to individuals in employer-sponsored health plans, though the Act would allow employers to grant employees a pre-tax benefit in the form of a defined monetary contribution that employees could elect to use to purchase a health insurance policy in the individual market instead of enrolling in the employer-sponsored health plan. The Act would supplement this tax credit with grants to states to subsidize coverage for "high risk populations." To encourage competition among health insurers, the Act would enable such insurers to sell across state lines.

In addition to the tax credit, the Act would provide an incentive for individuals to establish Health Savings Accounts (HSAs) through a one-time $1,000 tax credit. The Act also proposes a series of reforms to HSAs designed to incentivize their use and increase their flexibility, including allowing rollover to a child, parent, or grandparent; raising the maximum contribution limit; and protecting HSA funds from seizure in bankruptcy proceedings.

2. Medicare

The 2016 budget proposal produced by Congressman Price and the House Budget Committee, A Balanced Budget for a Stronger America, endorsed a premium-support model under which Medicare would pay a set amount directly to the health plan chosen by the beneficiary. This model would start in 2024, at which point Medicare enrollees would be responsible for the balance of the premiums for the chosen plan. The amount of premium support would be adjusted upward for a beneficiary with an illness whose condition worsens. Additional support would be available to assist lower-income seniors with out-of-pocket costs, and higher-income seniors would be expected to pay higher premiums. This premium-support model would reduce federal Medicare expenditures and make them more predictable.

3. Medicaid

The 2016 budget proposal supported the repeal the ACA's Medicaid eligibility expansion and endorsed block-granting federal funds for state Medicaid programs. It proposed to provide federal funds to states on a per capita basis and allow states to use those funds for their Medicaid programs with few restrictions. This proposal would increase states' flexibility in designing and administering their Medicaid programs, but would likely reduce federal funding.

SEEMA VERMA

The majority of Ms. Verma's consulting career has been spent assisting states with the development of Medicaid demonstration projects under section 1115 of the Social Security Act, including work with Indiana, Iowa, Ohio, and Kentucky. She has also worked with Tennessee, Michigan, and Maine on their Medicaid programs. In addition, Ms. Verma served as a member of the Republican Governors Public Policy Committee on Medicaid reform, which produced the report A New Medicaid: A Flexible, Innovative and Accountable Future, and testified before the House Energy and Commerce Committee Medicaid Task Force on the same issue. This testimony, in addition to articles Ms. Verma has written over the years, reveals some information about Ms. Verma's perspective on Medicaid, which can be summarized as follows:

• In a 2007 Health Affairs blog, Ms. Verma stated that "Federal policy, and in particular CMS' waiver process, should provide maximum leeway for this sort of state experimentation." In a hearing before the House Energy and Commerce Committee in 2013, she also stated, "I think we need to understand or to define what requires permission and what requires just informing the federal government that the State is making a change [regarding the State Medicaid plan]. . . ."
• In the same hearing, Ms. Verma stated, "I think that so many of the policy changes or regulations are aimed at providers, they are aimed at insurance companies, pharmaceutical companies, but we sort of miss the point that the individual has a very significant role to play in controlling health care costs."
• In a 2016 Health Affairs blog, Ms. Verma stated that "[o]ne of the precepts of President Lyndon Johnson's War on Poverty, from which Medicaid arose, is that government assistance should exist to provide a temporary pathway for people to lift themselves out of poverty toward a state of self-sufficiency. . . . Unfortunately, today's Medicaid program operates largely within an antiquated framework that is not designed to prepare members for health coverage after Medicaid, and may even be counterproductive to that end."

These themes are reflected in Medicaid demonstration projects that Ms. Verma has helped design. Two of these demonstration projects are summarized below.

1. The Healthy Indiana Plan

Ms. Verma first worked with Indiana to design a Medicaid demonstration project (the Healthy Indiana Plan (HIP)), which received approval from CMS in 2007. As updated in 2016 to implement the ACA's Medicaid eligibility expansion, the "HIP Plus" plan includes a US$2,500 deductible funded through a US$2,500 "POWER" account, with some contributions made up-front by the state and some contributions made by beneficiaries on a monthly basis. Beneficiaries will be disenrolled from HIP Plus if they do not pay these monthly contributions within 60 days of the due date and will not be able to reenroll for six months. When this occurs, beneficiaries with income below 100 percent of the federal poverty level (FPL) will instead be enrolled in "HIP Basic," which features less generous benefits than those available under HIP Plus. Beneficiaries with access to an employer-sponsored health plan may enroll in HIP Link instead and receive a state-funded POWER account with US$4,000 to use toward cost-sharing under the employer-sponsored health plan.

2. Kentucky HEALTH (approval pending)

Kentucky's proposed Medicaid demonstration project, if approved by CMS, would permit beneficiaries with access to an employer-sponsored health to enroll in the plan for their first year of Medicaid coverage but would require such enrollment after the member's second year of eligibility (so long as the beneficiary has worked for that employer for at least one year). The state would subsidize the premiums under the plan, less the amount that the beneficiary would have to pay in premiums to the state if the beneficiary is without access to an employer-sponsored health plan.

For beneficiaries without access to an employer-sponsored health plan, beneficiaries would pay monthly premiums, ranging from US$1.00 to US$15.00 per month. The state would fund a US$1,000 deductible account that a beneficiary would have to use before coverage kicks in, and would fund, under certain circumstances, a My Rewards account that a beneficiary could use toward benefits not included in the base benefit plan. As in Indiana, beneficiaries with income greater than 100 percent of FPL who do not pay their premiums within 60 days of the due date would be disenrolled, while beneficiaries below 100 percent of FPL would pay a penalty, tied to the My Rewards account.

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