Delivery of Care

Life, death and taxes in a post Obamacare world

Projections of what repeal of Obamacare could mean to Rhode Island: loss of more than 10,000 jobs by 2019 and a loss of $1.7 billion in federal Medicare and Medicaid funds over the next decade

Image courtesy of the communications office of Gov. Gina Raimondo

The state has no apparent strategic plans to respond to the consequences of the repeal of Obamacare, which threaten Rhode Island with the potential loss of more than 10,000 jobs as well as the loss of $1.7 billion in federal Medicaid and Medicare funds over the next decade, creating the likelihood of an economic tsunami. All the work around "Make It in Rhode Island" may unravel as a result.

By Richard Asinof
Posted 1/9/17
With the repeal of Obamacare, Rhode Island may face drastic losses of more than 10,000 jobs as a result, as well as significant losses in both federal Medicaid and Medicare funding, as much as $1.7 billion over the next decade. Such losses could create an economic tsunami in Rhode Island, jolting the state into a major recession. Currently, there are no apparent plans by Gov. Gina Raimondo or the R.I. General Assembly in how to deal with the potential draining of the state’s financial reservoirs.
How does the state plan to deal with the potential loss of federal funds to support the state’s Medicaid expansion? Would the R.I. General Assembly be willing to raise taxes necessary to cover the amount, projected to be more than $500 million a year? Would the potential taxes raised as a result of the legalization of recreational marijuana be targeted to address the shortfall? Could The Collaborative be assigned the task of researching how the repeal of Obamacare would affect the flow of future research funds to the state’s academic research centers? What are the potential public health impacts from a reduction in $1.7 billion in federal Medicare and Medicaid funds over the next decade? Can those health impacts be quantified?
The absence of a strategic plan to address the potential calamitous economic consequences of the repeal of Obamacare by either Gov. Gina Raimondo, the R.I. General Assembly, Stefan Pryor at CommerceRI or the state’s business community presents an opportunity to change the dimensions of the conversation and influence the outcomes.
Making it in Rhode Island needs to change from a branding slogan promoting a political agenda to more of a convergence around how decisions get made and who gets to participate in that decision-making.
The work being done by Rep. Aaron Regunberg to create an engaged community of activists working on potential solutions and strategies is a good first step in that process. But to succeed, it will require the building of a new kind of civic engagement network. Stay tuned.

PROVIDENCE – I’m not holding my breath. But I have a faint glimmer of hope that an intrepid reporter at the scheduled Jan. 11 news conference with President elect Donald Trump may be courageous enough to ask the following questions: How much does your health insurance plan cost a month for you, your wife and family? How much do you pay out of your own pocket? What is your co-pay? What is your deductible? How much do you pay out of pocket for your prescriptions?

And, as follow-up questions: What are the co-pays, if any, under the health plans for your family who work for the Trump family business? How does that differ from the health plans of your workers at your Palm Beach resort?

Of course, Trump is 70 and eligible for Medicare, and he no doubt takes full advantage of the federal health insurance program. But does he – or his company – pay for all of the other additional coverage needed by himself and his family?

Not that I expect Trump to answer any of the above questions. [After all, it appears that the only way that he will release his tax returns will be as a result of a criminal investigation.]

In all likelihood, Trump would dismiss such questions with a frown and a wave of his hand. Off with their headsets! [Tweets to follow.]

But asking these questions is important, because it would begin to reveal, in real terms that most Americans can understand, in dollars and cents, the divide around who pays – and who does not – for health care.

And, answers to these questions can also help to illuminate the debate swirling around the future costs of health delivery care in the U.S. – and in Rhode Island – if Obamacare is repealed.

Coming to a State House near you
Whether its repeal and replace, repeal, delay and replace, or repeal and dismantle, whatever branding label gets slapped on the effort to undo the Affordable Care Act, or Obamacare, the Republican majorities in the Senate and the House in Congress are beginning to sound as ideological as the Khmer Rouge in Cambodia.

In April of 1975, the victorious Khmer Rouge forces drove people out of the capital Phnom Penh in a forced march, attempting to turn the historical clock back to what they called the Year Zero, as part of their genocidal effort to wipe out anyone who could remember the past – in the name of Angka.

In the Republicans’ case, they want to erase all memory of Obamacare.

House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and President-elect Donald Trump appear to be on board with the big erasure. So far, none of them dared to call it Trumpcare.

Exactly what they plan to replace Obamacare with – and when the repeal will actually be slated to occur – remains a stealth policy mystery, despite the fact that campaigning against Obamacare has been a constant thump, thump, thump of the Republican drum for six years.

The only certainty, according to Ryan, is that the repeal legislation will include language to defund Planned Parenthood as a health provider under Medicaid for preventive health care screening and family planning. Priorities are priorities.

Whatever is contained in the final legislation that is approved by Congress and signed by Trump, it promises to create an economic tsunami in many statehouses across the nation.

Here in Rhode Island, the repeal of the premium tax credits and Medicaid expansion are projected to result in the loss of more than 10,000 jobs by 2019, according to a recent study published by the Commonwealth Fund, using the content of the latest version of the bill repealing Obamacare passed by the U.S. House of Representatives in 2016.

Further, the dismantling of Obamacare is projected to result in a loss of $1.7 billion in federal Medicare and Medicaid funds for Rhode Island over the next decade, according to a recent study by the American Hospital Association.

The cold, hard economic facts
Here are some basic facts about health care and the Rhode Island economy that are often misunderstood:

Money from Medicaid and, for that matter, Medicare, doesn’t flow to the people who qualify as members. It goes to pay the health care service providers who take care of people when they are sick – the doctors and nurses [and health system administrators] as well as the insurers who manage the risk.

In 2012, the total worth generated by the health care industry sector by physicians in Rhode Island was calculated to be $7.7 billion – roughly one-sixth of the state’s gross domestic product. That included the total sales from physicians, some $4.8 billion, and wages paid to employees, some $2.8 billion, and $1.96 million in state and local taxes, according to figures from a study conducted in partnership with the Rhode Island Medical Society.

Similarly, in 2012, an analysis by the Hospital Association of Rhode Island pegged the total economic impact of hospitals in Rhode Island at $6.7 billion.

The latest figures from the Hospital Association of Rhode Island say that in 2014, hospital revenues of $4 billion created nearly $7 billion in economic impact.

Medicaid revenues are approximately 25 percent of that $4 billion, and Medicare revenues are about 33 percent of that $4 billion, according to Amanda Barney, vice president of Communications at HARI. Translated, some 58 percent of hospital revenue in Rhode Island is generated from federal health insurance programs.

[The actual total economic impact of the health care industry sector in Rhode Island may be far north of those numbers. It is unclear how the numbers from the hospitals and the physicians intersect and overlap. It is also unclear how much of the academic research enterprise funded through federal, state and private sources is included. Or, for that matter, how those numbers would increase if revenues from academic enterprises, such as nursing schools, the medical school and public health school at Brown University, physician assistant schools at Johnson & Wales and Bryant universities, were included.]

Another study, conducted by Jeffrey Clemens at the University of California at San Diego and Benedic Ippolito of the American Enterprise Institute, analyzed the redistribution of federal funding if Medicaid were changed to a block grant funding formula, using 2015 data. The study found that Rhode Island could lose some $514 million in federal Medicaid funding under such a formula.

Translated, as WPRI’s Ted Nesi reported, that amount would be equal to 22 percent of the state’s $2.3 billion Medicaid funding for 2014-2015.

Calculating the loss of jobs, federal funds as a result of repeal
Based upon the most recent Obamacare repeal bill passed by the U.S. House of Representatives, HR 3762, Rhode Island would lose $1.7 billion in funds between 2018 and 2026, according to a study conducted in December of 2016 by the health economics firm Dobson|DaVanzo for the American Hospital Association.

In Rhode Island, the repeal of premium tax credits and Medicaid expansion under HR 3762 would also result in a crippling job loss in the state, according to a recent study conducted by the Commonwealth Fund.

The study, released in early January of 2017, found that Rhode Island would lose 10,100 jobs in the public and private sectors by 2019 as a result of eliminating the premium tax credits and Medicaid expansion under Obamacare.

The projected job losses include:

5,400 jobs in health care

1,200 jobs in construction and real estate

1,100 jobs in retail trade

600 jobs in finance and insurance

3,500 in other categories

300 in the public sector

In addition, the Commonwealth Fund study also projected that, as a result of the repeal of the premium tax credits and federal support for the state’s Medicaid expansion, between 2019 and 2023, the state of Rhode Island would lose $6.5 billion in its gross state product, $10.6 billion lost in business output, and $233.6 million lost in state and local taxes.

Translated, the repeal of Obamacare, with the elimination of premium tax credits and federal funding for Medicaid expansion, could create an economic tsunami in Rhode Island.

How will the state respond?
The question is: what kinds of emergency plans, if any, are being made by Gov. Gina Raimondo and the R.I. General Assembly to replace the projected staggering loss of revenue from the repeal of Obamacare?

Would they be willing to increase taxes? Or cover the lost federal dollars to keep the state’s expansion of Medicaid? Nothing has yet been shared publicly.

There are two telling moments to watch: on Tuesday, Jan. 17, Raimondo will deliver her State of the State address before a joint session of the R.I. General Assembly. [Her communications staff has promised to share “behind the scenes photos of the process that goes into drafting and planning” that address, asking the news media to follow along on Twitter.]

Two days later, Raimondo will submit her proposed FY 2018 budget, with an embargoed, on-the-record media briefing on Thursday, Jan. 19, prior to the formal submission of the budget.

Much of the narrative for the Raimondo speech appears to have already been drafted. “As we enter into the New Year, let’s take a look back at the progress Rhode Island made in 2016. Companies like GE, Johnson & Johnson, and Virgin Pulse took a fresh look at the state and are hiring Rhode Islanders for good-paying jobs,” said the recent Raimondo’s Roundup, with the headline that began, “Growing at Home.”

“Established Rhode Island companies like A.T. Cross are expanding,” the governor’s PR missive continued. “The I-195 Land is seeing progress as the Wexford Innovation Complex moves forward.”

To date, the only comment from Raimondo about the pending repeal of Obamacare under Trump reflected a wait-and-see approach. As reported in a Jan. 8 story by The Providence Journal, Raimondo said: “The thing that would be potentially devastating for Rhode Island is a not-thoughtful, too-quick unwinding of the Affordable Care Act.”

In a Business Insider story published on Jan. 7, Raimondo said of Trump: “He’s about to be the president. I’m a governor. We have needs. I need workforce development grants, I need infrastructure grants, I need working relationships with his Cabinet,” Raimondo said. “I’ll talk to anyone if it’s going to help Rhode Island.”

In turn, the legislative leaders put the major emphasis on improving the state’s economy in their addresses at the opening of the 2017 session of the R.I. General Assembly. House Speaker Nicholas Mattiello put the emphasis on reducing taxes, while Senate President M. Teresa Paiva Weed placed emphasis on effective government spending in education, workforce development and preventive health care, with plans to look at improving mental health services as well as enacting criminal-justice reforms that died at the end of last year’s session.

Sowing the wind, reaping the whirlwind
No matter how you slice the pie, the repeal of key provisions of Obamacare and the conversion of Medicaid into block grants is likely to create an economic catastrophe for Rhode Island.

No amount of increased competition across state lines by insurers will change the financial bottom line: Rhode Island’s financial reservoirs are about to be drained.

Elections have consequences
What are the potential consequences of the projected loss of federal funds and the loss of jobs?

The hospital industry, already operating on very thin ice when it comes to its revenue operating margins, will be forced to contract and consolidate to stay afloat. The projected loss of revenue from the repeal of Obamacare will result in the loss of jobs and layoffs.

It’s likely that Rhode Island can forget about any further “reinvention” of Medicaid.

The entire State Innovation Model for transformation of the health care delivery system will become at risk.

The efforts to expand the role of accountable entities as part of the managed Medicaid programs may grind to a halt.

The funding to support better access to mental health services may be in jeopardy.

All of these consequences will contribute to a diminishing of population health in Rhode Island as well as a lessening of public health interventions, including efforts to promote recovery and counteract the epidemic of overdose deaths in Rhode Island, which are projected to reach 300 or more in 2016, a 16 percent increase from 2015, driven by the increasing presence of fentanyl in illicit drugs.

Put another way, the quality of life and health of Rhode Islanders may take a severe hit.

There are some who might welcome the right-sizing of the  overcapacity of our acute care community hospital system; there are others who may see the impending crash as the best way to arrive at a single-payer, Medicare for all solution.

For many consumers, however, the immediate reality is that the waiting lines will become longer and the quality of care will be diminished and become more costly.

Shrinking the innovation ecosystem in Rhode Island
The cuts in federal funding for Medicaid and the projected loss of thousands of jobs as a result of the repeal of Obamacare also threaten the growth of the biomedical innovation sector in Rhode Island, a key component of the state’s current economic development strategy.

In particular, the timeline for attracting new tenants for the Wexford Innovation Complex may need to be extended, because the robustness of the state’s innovation economy and, in particular, the academic research enterprise, may be forced to shrink as a consequence of the loss of federal funds in the health care industry sector.

A glimmer of hope
As dark as the storm clouds appear to be with the looming repeal of Obamacare – and the way that it promises to throw the state’s health care delivery system and the health insurance industry into disarray, there are some developments and discussions that bear watching.

The working groups organized through the “Resist Hate” citizen conclaves organized in part by Rep. Aaron Regunberg have been engaged in developing alternative strategies to respond to the repeal of Obamacare at the state level.

They include plans on how to structure the state response to the shift to block grants for Medicaid. There are also discussions about how to build a collaborative health insurance exchange involving Rhode Island, Connecticut and Massachusetts, according to sources.

The continued growth of Neighborhood Health Stations in Central Falls and in Scituate, focused on the meeting the needs of the community in a collaborative approach, rather than just addressing the needs of the providers, offer a different vision for future health care delivery. Both initiatives are built in partnership with community health centers.

For instance, in Central Falls, the city's EMS responders are now networking with primary care providers, connecting the delivery of services in an integrated approach.

The efforts to develop health equity zones in 10 Rhode Island communities, focused on improving the health and wellness of neighborhoods and communities by addressing the social and economic disparities, also bear watching. A recent statewide conference held in December of 2016 drew hundreds of participants.

The success of the Sankofa Initiative in the West End of Providence, which has connected the development of affordable housing with an urban farming effort, also speaks to a different vision of how best to promote health and wellness. Sankofa is currently interviewing to hire  a manager for their new greenhouse.

In a future world of constrained resources, how the money gets spent, and who decides how the money is invested, and who gets to participate in those decisions, become the challenges.

The hope for gradual change
Steve DeToy, long-time director of Government and Public Affairs at the R.I. Medical Society, in an interview with ConvergenceRI, cautioned that the outcomes that result from the repeal and replacement of Obamacare will take time to implement. “It took four or five years to implement Obamacare,” he said.

If they change the tax provisions, DeToy continued, “It will take the IRS 18 months to implement changes.” That was the message DeToy said he heard from a former top administrator at the U.S. Department of Health and Human Services as part of a national conference.

In terms of what the new health care law would be called, such as Trumpcare, DeToy said that would take time, too. “It could be called SpeakerRyancare,” he offered, with a laugh. “I don’t know. That may also take a long time to figure out.”

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