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Health insurers are embracing the Senate health-care bill. Everyone else hates it.

The steps of the U.S. Capitol building in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images
The steps of the U.S. Capitol building in Washington, D.C.

Lobbyists in the health care industry kept quiet for the first weeks of debate over the Senate bill to repeal and replace Obamacare. But it's becoming increasingly clear that the measure is dividing the industry against itself.

As I previously reported, the health care industry collectively has held some of its fire over the Republican legislation. Companies were wary of agitating Republicans whose goodwill they'll need on other legislation while the party holds power.

But divisions within the industry are deepening. Insurers like several provisions in the bill: a $140 billion tax cut as well as more than $100 billion in federal funding designed specifically to improve the insurance markets. Hospitals and doctors, meanwhile, are warning of the dangers of a $772 billion cut to Medicaid over the next 10 years and the consequences of 22 million fewer Americans having insurance.

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The split makes insurers and hospitals sound like they're talking about two different Senate bills.

Anthem lauded the legislation, saying it would "markedly improve the stability of the individual market." The American Hospital Association, on the other hand, urged senators "to go back to the drawing board" because the bill's cuts to Medicaid were "unsustainable and will increase costs to individuals with private insurance."

Insurers' support for the bill is affecting its political prospects. Some Republican senators who oppose the bill, stalled for now after defections from the conservative and centrist wings, have cited the giveaways to the insurance industry — which made the strategic choice to work with Senate leaders — as reason for their opposition.

"Maybe we should think about health care and not necessarily bailing out the insurance companies," Sen. Rand Paul (R-KY) told reporters recently. "The insurance companies have had their fingers all over this bill. The rich are gonna get richer, as far as the insurance business goes."

Insurers are one of the few health care sectors embracing the GOP bill

The difference is plain in the rhetoric different health care sectors use to describe the Republican bill.

Insurance companies praise provisions in the plan — a market stabilization fund, guaranteed payment of Obamacare subsidies, and an incentive for people to stay insured — that they say will improve the health insurance exchanges in the next few years.

"We are encouraged that the proposed Senate health reform legislation includes several urgently needed and important steps to help make the individual market for insurance more stable and affordable in 2018 and 2019," the Blue Cross Blue Shield Association said in a statement.

The sentiment is widely shared within the industry.

"This bill does a lot of good things for immediate stability," Kristine Grow, a spokesperson for America's Health Insurance Plans, the top industry lobbying group, told me recently.

But the rest of the health care industry — particularly the "white coats," physicians and hospitals — has outwardly opposed the bill. They say the $772 billion in Medicaid cuts and projected coverage losses would negatively affect Americans' ability to access the health care they need (and those changes are also sure to affect their bottom lines).

When a collection of patient groups organized events opposing the bill in recent weeks, they were joined by both the American Hospital Association and the American Medical Association.

"We urge the Senate to go back to the drawing board and develop legislation that continues to provide coverage to all Americans who currently have it," the hospitals association said in a statement.

The AMA charged that the Senate's bill conflicted with the physician's code to do no harm.

"The draft legislation violates that standard on many levels," the association said.

Some insurers don't like the Medicaid cuts either, as much of the program has been moved to managed care programs that are administered by private health insurers. Cuts to federal spending are sure to affect that business.

But in their assessment, the additional federal funding and tax cuts provided in the Republican plan seem to have come out as a wash for insurers. Even if many of them are declining to take a formal position on the bill, that is still more of an embrace than it's seeing from most other parts of the industry.

"If you look at this bill, it's not about one part of the market. It's about the individual market. It's about the Medicaid market," Grow said, noting "how interrelated those two markets are. Many individuals ebb and flow between these two markets."

The Senate plan has some big victories for health insurers

The current bill adds up to some pretty big wins for the health insurance industry. Repealing the fee on health plans is expected to cut taxes for the industry by $144 billion over the next 10 years. The Senate plan also includes $50 billion for short-term stabilization of the insurance market and another $62 billion to help cover high-cost patients.

It also guarantees funding of Obamacare's cost-sharing reductions subsidies, which President Donald Trump had previously threatened to cut off, as he has the power to do because of an ongoing lawsuit started by House Republicans.

"Insurers did get a good amount of what they wanted, in the short term at least," one Republican health care lobbyist told me.

They've also gotten a technical but important provision added in the days since Republican leadership first released the bill. The initial draft had no policy incentivizing people to buy health coverage. Insurers warned that without such an incentive, the markets could be sent into a "death spiral" as only sicker people bought coverage.

A few days later, such a provision — which would allow insurers to lock people out of benefits if they had a gap in coverage — was added to the legislation.

Insurance companies have cited all of the above as positives in the Senate plan.

The Blue Cross Blue Shield Association praised the bill for "strong incentives for people to stay covered continuously, funding the cost-sharing reduction program to help people with out-of-pocket costs and providing additional, dedicated funds to care for those with significant medical needs."

Doctor and hospitals warn the bill would harm Medicaid

Doctors and hospitals, on the other hand, have found plenty of reasons to oppose the Senate bill.

The American Hospital Association named the bill's cuts to Medicaid as its biggest problem with the bill. The Senate plan would eventually end the generous federal funding for Obamacare's Medicaid expansion and cap federal spending on the program for the first time.

The collective result would be, according to the Congressional Budget Office, a $772 billion spending cut, compared with current law, and 15 million fewer Americans being enrolled in Medicaid.

"The Senate proposal would likely trigger deep cuts to the Medicaid program that covers millions of Americans with chronic conditions such as cancer, along with the elderly and individuals with disabilities who need long-term services and support," the group said. "Medicaid cuts of this magnitude are unsustainable and will increase costs to individuals with private insurance."

The AMA likewise criticized the Senate bill's cuts to Medicaid. Cuts to the nation's single largest insurer is sure to be felt acutely by health care providers, and there are not nearly as many provisions in the bill designed to offset that loss of funding for providers as there are for health plans.

Of the Medicaid caps, the doctors group said: "It would be a serious mistake to lock into place another arbitrary and unsustainable formula that will be extremely difficult and costly to fix."

Health plans aren't thrilled with the Medicaid cuts either. Much of the program has transitioned to what's known as managed care — in which the state outsources the administration of Medicaid benefits to a private health insurer. For some plans, that's a big part of their business.

So there is some fracturing, even within the insurance industry, about the Senate bill. But the major health plans and their trade organizations made the calculated decision that it would be better to work with Republicans rather than risk angering the party in power and putting plans at risk of retaliation.

That principle seems to be prevailing over some individual companies' apprehension about the legislation.

"Insurer associations are struggling with membership on what to do. Membership is split with a few supporting but most opposing," one lobbyist representing insurers told me. "However, if they come out in opposition, they lose what little leverage the have."