REGIONAL—Scenic Rivers CEO Mike Holmes has had a close-up view of the health care debate in Washington in recent months, but says he still can’t predict how the changes being debated in the nation’s capital will ultimately affect people back home in northern Minnesota. But if current Republican plans to repeal and replace the Affordable Care Act are ultimately enacted, said Holmes, they could hit rural residents the hardest.

Holmes was among three health care experts who testified Friday before the House Energy and Commerce subcommittee on Health. He was there to urge Congress to reauthorize funding for the community health center program, which expires Sept. 30. Without reauthorization, federal funding for community health centers, like Scenic Rivers, would decrease by 70 percent, putting the future of many of them at risk.

While community health centers have long enjoyed bipartisan support in Congress, Holmes said reading the political tea leaves is especially difficult given the current situation in Washington, where so much is in flux in the area of health care.

Holmes testified in Washington just one day after the U.S. Senate released the outline of its proposed repeal and replacement of the Affordable Care Act, which has dominated the health care debate in Washington in recent weeks. “That consumed a lot of our discussion time,” said Holmes.

The debate took on new urgency on Monday, when the Congressional Budget Office released its analysis of the Senate plan, which the CBO determined would push 22 million Americans off of their health insurance within ten years. The imposition of a cap on Medicaid expenditures, which would likely eventually limit the number of people who could obtain coverage under the program, along with a significant reduction in the ACA subsidies, would combine to price more and more Americans out of the insurance market, according to the CBO. Senate leaders had promised a vote on the proposal on Thursday but postponed it after it became clear the measure lacked the support needed for passage.

But Senate Republicans will be back after the July 4 recess in hopes of passing the measure and, if successful, the changes could have significant consequences for residents of northeastern Minnesota, including large premium increases for many residents. Premium changes will vary widely, depending on where an individual lives, their income, and their age. In St. Louis County, for example, a 60-year old with a $50,000 annual income would see their yearly premium for silver level coverage increase by $12,810 under the Senate plan. That’s according to the Kaiser Family Foundation, which tracks healthcare costs in the U.S. On the other hand, a 27-year old with a $50,000 annual income would save $370 a year on their insurance premium under the Senate bill.

Two factors account for most of the premium changes under the GOP plan, according to Holmes. The plan would sharply reduce premium subsidies currently provided under the ACA, which help to cover the bulk of the cost of premiums for individuals earning up to 400 percent of the federal poverty rate. At the same time, it allows insurance companies to charge older Americans up to five times more for insurance than younger people. Under the ACA, insurers can only charge older customers three times as much as young people. That change accounts for much of the increase in premiums for older residents. According to the Kaiser Family Foundation, the yearly premium for a 60-year old would jump by nearly $4,500 a year from that change alone. By contrast, the yearly premium for a 27-year old is only expected to decline by about $400, according to Kaiser.

The Senate plan, like the bill passed by Republicans in the House in May, would also cap spending on Medicaid and phase out funds that allowed for the expansion of Medicaid under the ACA. According to the CBO, that change will be responsible for most of lost insurance coverage it expects if either the current Senate or House bill becomes law. The CBO also concluded that the Senate plan would eventually lower premiums modestly, but mostly by allowing insurance companies to offer plans with much higher deductibles and fewer benefits.

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Medicaid cuts

to hit rural areas the hardest

The Medicaid changes will have the most impact in northeastern Minnesota, according to Holmes. The Medicaid expansion enacted under the ACA has provided significant new federal resources to rural hospitals and clinics, many of which had struggled financially before passage of the ACA. Depending on the final version of an ACA replacement, said Holmes, the change could cost Minnesota $2 billion annually in lost Medicaid funding, an amount that the state almost certainly won’t make up through state resources.

The impact of that lost funding will fall hardest on areas where Medicaid is most prevalent, said Holmes. “If you’re in a suburb, like Eden Prairie or Wayzata, there won’t be much of a noticeable effect,” he said. “Rural areas have a much higher percentage of Medicaid population,” Holmes notes, which means the impacts of the loss of Medicaid funding will fall hardest on health care facilities, such as Scenic Rivers, that serve those populations.

Medical costs also tend to be higher in rural areas, in part because many rural residents are older and have more health problems than urban residents. “Rural America is gray,” noted Holmes. “As kids leave to metro areas for jobs and opportunities, we’re seeing the graying of rural areas.”

Surprisingly, most Medicaid dollars don’t go to provide medical services to the low-income— they go to provide nursing home care to the frail elderly. “In rural Minnesota, in many cases 90 percent of nursing home populations are on Medicaid,” said Holmes. If Medicaid funding is cut significantly, as Republicans in Congress now propose, that is going to pose a quandary for policymakers in the near future, who may have to choose between health care for children and low-income families, or nursing home care for the elderly. “From the Legislature’s standpoint, they’ve wrestled with nursing home costs for a long time already,” said Holmes. “And that’s only going to get worse over time.”

Looking ahead, the changes now proposed by Congress could put rural health care facilities at risk, said Holmes, and that will have ripple effects. Health care facilities are often the largest employers in small rural communities, so closures or layoffs have significant impacts to local economies. Closures also affect emergency services to local communities, notes Holmes. “In our rural areas, all the health care infrastructure tends to be based around the limited number of providers,” he said. “If you lose a small critical access hospital, you often lose your ambulance. Long-term, that may be more of an impact.”