Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The tenth jolt of a defibrillator usually won't revive a patient.  But it seems to have worked for the American Health Care Act, the Republican Party's plan to repeal and replace the Affordable Care Act.

The AHCA seemed headed for a House vote Thursday afternoon, and hospital stocks tumbled as investors worried about the possibility of lost revenue and higher costs. But it would be a mistake to prep for doomsday just yet. Even if this bill succeeds in the House, there are still many firewalls keeping it from becoming law in anything like its current form. 

Update: The AHCA passed the House by two votes along party lines Thursday afternoon. That somewhat dates the next couple of paragraphs, but everything about the law's issues and remaining firewalls is still true. The Senate will write its own version of the bill instead of taking up the House's version.

Intensive Care
Hospital stocks have been repeatedly hit by anxiety over the ACA's fate since the election and fell again as a GOP health care plan looked set to pass the House
Source: Bloomberg

For one thing, the bill could still fail in the House. GOP leadership claims to have the votes it needs, but any passage will come with a razor thin margin, and this vote may be a tactic to pressure wavering members. The bill's latest version is substantially more conservative than when it nearly came to a vote in March, and substantially riskier for Americans with pre-existing conditions. It would let states waive requirements that insurers not charge sick people more for insurance and cover "essential health benefits" such as hospitalization, prescription drugs, and maternity care. It could make insurance all but unaffordable for the chronically ill. Such changes might have bought conservative votes while turning off moderates.

The bill will fund high-risk pools to subsidize sick patients, but such programs have worked poorly in the past and could be dramatically underfunded by this law, according to an analysis by health-care consultants Avalere. A last-minute addition of $8 billion in funding to help people with pre-existing conditions managed to buy some votes, but won't buy much more coverage. And these extra funds may actually encourage more states to cut pre-existing protections. As that becomes clear to members who were only able to see the full text of the bill very recently, more may get cold feet. 

Essentially the entire medical establishment opposes the bill on moral and financial grounds. The combination of wildly unpopular pre-existing protection cuts, lost insurance coverage, and the optics of gouging Medicaid and subsidies for poor Americans to pay for tax cuts for the wealthy and corporations will make for some difficult 2018 re-election campaigns.

Shift
The AHCA would substantially cut health care spending (mostly for the poor) to fund tax cuts (mostly for the wealthy)
Source: Bloomberg
Uses March data because an updated CBO score is not yet available

The House is set to vote without an updated analysis of the bill from the Congressional Budget Office -- in other words, with no concrete idea what it will do to insurance markets, how much it will cost, or how many people it will leave un- or underinsured. The CBO analysis of the earlier bill estimated 24 million people would lose coverage over 10 years, potentially devastating for some hospitals and insurers. This version could be worse.

The bill might also result in employers providing less-generous coverage and imposing lifetime and annual coverage caps as they did pre-ACA, potentially affecting millions of Americans who get coverage at work.  

This bill is even worse than the previous version for hospitals, who may be forced to provide more uncompensated care, and for certain insurers, who may lose millions of customers.

But it is unlikely to pass the Senate in its current form, providing one firewall for companies and individuals in its path. 

The GOP can only afford to lose three votes in the higher chamber, and many more senators than that registered concerns with even the milder version of the bill. Meanwhile, even some arch-conservative members such as Ted Cruz may still be unsatisfied with this bill. The Senate also must wait for what will likely be a grim CBO analysis. And the Senate must abide by complicated rules to pass the bill with a simple majority rather than 60 votes. 

If the bill survives at all, it will probably be changed dramatically. Moderate senators have the upper hand in the Senate and will likely want to soften the portions of the law that will negatively impact hospitals, insurers, and drugmakers. They will likely want the bill to cover more people, to better protect those with pre-existing conditions, and to leave Medicaid more intact.

And that dynamic creates yet another firewall: If a less-draconian bill does make it out of the Senate, then it will go back to the House -- where it may not pass muster with the conservative House Freedom Caucus, which derailed the initial version of the AHCA for being too soft.

The most reassuring outcome for hospitals and Medicaid insurers would be the bill going down in flames in the House on Thursday. But even if it survives this test, investors shouldn't immediately assume it means the end of days for these companies or the ACA.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net