There is no shortage of prognostications about what ACA repeal looks like and what is means to every imaginable health care sector. Most, if not all, those theories are designed to forward one agenda or another - usually a really scary one. The reality is that some members of Congress, including leadership, are looking for a state-based solution to replace the ACA that probably isn't all that scary. The irony of this repeal scenario is that it can be accomplished with provisions of the ACA itself. It is a fluid situation and this is politics so things may change tomorrow. Right now this the way we see it:
Will they or won’t they? The idea bandied about by some pundits that Congress will not go through with repeal of the Affordable Care Act is wishful thinking. It is also bad politics. The ridicule that would be brought down upon the majority party would be merciless with implications stretching well beyond health care policy. In other words, they have no choice but to repeal.
All signs point to repeal originating in the Senate. According to Chairman-elect of the Energy and Commerce Committee, the House will vote on the FY 2017 budget the week of Jan. 9 and mark up the Committee’s reconciliation instructions the week of Jan. 30. That schedule pre-supposes the Senate has acted earlier in the month. Assuming the House and Senate stick to that schedule (and there is no guarantee they will) a reconciliation bill will be ready for the president in the first couple of weeks of February.
What Stays and What Goes. The big question is which provisions will be included in the repeal package. There is broad agreement it will include all the still relevant provisions of HR 3762 which passed both Houses and was vetoed by President Obama in 2015. A compete, easy to read list can be found here.
Eliminating subsidies and other cost sharing mechanisms while retaining the onerous insurance market provisions like the 1:3 age band, the essential health benefits and community rating would create significant disruption in the insurance markets. This widely held conclusion means that either repeal through reconciliation will include provisions beyond those included in HR 3762 or there will be some notion of a replacement proposed.
The very influential Heritage Foundation believes that the entirely of the ACA could be repealed via reconciliation. We have heard from former leadership that they believe the Heritage Foundation is correct. That being the case, complete repeal coupled with a delayed effective date would meet the political aims of Republicans while preserving the status quo long enough to develop a replacement.
However, repeal – in full or in part – and delay does create a challenge for replacement. Once the revenue provisions of the ACA like the Cadillac Tax, the Additional Medicare Tax and the Investment Income Tax are repealed they would no longer be available under CBO scoring rules to offset an alternative proposal.
Repeal – in full or in part – and delay also creates a political problem. The strategy assumes that there will be some bipartisan agreement on replacement that could overcome the Senate’s 60 vote filibuster-proof threshold. Developing a bipartisan agreement does have some merit given the Senate electoral map in 2018. It is, nonetheless, risky. Headlines about chaos on the insurance markets brought on by regulatory uncertainty and the accompanying obligatory anecdotes of human suffering will not help Republicans achieve the Holy Grail of a 60 vote majority in 2018.
In recent days, Republican leadership has focused on what one senior member called 80 percent of the problem – Medicaid. While the number of uninsured has dropped from about 42 million in 2013 to an estimated 27.3 million in 2016, Medicaid enrollment has ballooned from 54 million in 2013 to 74 million in Oct. 2016.
Before Christmas, Senate Finance members sent a letter to Governors asking for their feedback on the Medicaid program. Senate Finance, joined by House leadership, also sent a letter to CMS asking about oversight of the Medicaid expansion implying some of that enrollment is suspect. (Based on our analysis, they are probably right to be concerned - more on that another day)
The Senate Finance Committee’s letters were preceded by a House leadership inquiry to Governors regarding their Medicaid program. To address the other 20 percent of the problem – exchange enrollment – the Members also asked about states’ interest in use of the ACA’s Section 1332 waivers. House members asked for a response by Jan. 6, 2016.
We can anticipate that a major concern of states will be maintaining as much as possible the federal funding levels they currently enjoy. We can also anticipate the most states would welcome increased flexibility in the Medicaid program and better coordination with non-Medicaid populations on the exchanges.
Congress’s interest in the states’ goals and needs suggests that there may indeed be a replacement to the ACA offered at the time of repeal if only on a transitional basis. Parsing out Congress’ various signals, we appear, at this point, to be headed toward a package that includes:
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Repeal of the ACA provisions included in the 2015 reconciliation bill with delayed effectiveness for, at a minimum, revenue provisions.
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Transitional provisions that extend the operational aspects of Medicaid enrollment and the ACA exchanges under Section 1332 and Section 1115 waiver authority, expedited to limit disruption.
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More intense oversight of Medicaid eligibility and enrollment practices.
Long term, Section 1332 and 1115 waivers as well as the CMMI could provide the vehicles for more permanent policy.
What About Medicare? In late November, Senate Democrats trotted out new health care policy messaging accusing Republicans of a “War on Seniors.” The crux of the message is that Democrats must defend Medicare from privatization via a voucher-like program advocated by House Speaker Paul Ryan and others.
By choosing to fight the “War on Seniors” Senate Democrats are assured of some health policy victory in a landscape that offers little hope otherwise. Any sweeping changes to Medicare would need to get past Sen. Lamar Alexander, Chairman of the Health, Education, Pension and Labor Committee. He has already put the kibosh on the idea of reform, calling it “biting off more than we can chew.”
The Medicare provisions of the ACA including the reimbursement cuts, value-based purchasing provisions and other payment reforms, save IPAB, are likely to remain. Tellingly, Republicans have toned down their criticism of CMMI which offers a pathway to testing some of the reforms conservatives would like to see enacted.
Status quo for Medicare is not likely to stop Democrats, in defense of the ACA overall, to use the bipartisan and time honored ploy of scaring America’s senior citizens to death by magnifying and even fabricating threats to the program. It has the added benefit of inoculating vulnerable Democrats in the 2018 elections, an approach that has worked very well for Republicans since 2010.
Where is the Defense? Reflecting the deep psychological wounds inflicted by the 2016 elections on the Democratic Party, capitulation to repeal was immediate. The messaging from supporters of the law amounted to demands that a replacement be in place before repeal is enacted – thereby suggesting repeal was inevitable.
In the last few weeks, Democrats appear to have regained their footing a little. On Wednesday, President Obama will meet with House and Senate Democrats to discuss saving his signature domestic policy achievement. Obama appointees like CMS Acting Director Andy Slavitt, HHS Secretary Sylvia Burwell have taken to Twitter to promote stories of individuals whose lives have been positively impacted by the law and its health insurance coverage provisions. Obama proxies have spread out across the country to meet with providers and ask for grass roots support of the law.
To counteract Republican charges that the health law was collapsing under its own weight, HHS is proclaiming 2017 open enrollment a big success. Marketplace enrollment has seen an increase of 400,000 plan selections versus the same time last year. Unfortunately, new consumers decreased from 2.4 million for 2016 to 2.1 million for 2017. The administration has declined to share the number of new consumers automatically enrolling in exchange based plans.
On Jan. 15, Democrats plan a “day of action” in support of the ACA, Medicare and Medicaid. This “day of action” will feature rallies across the country and are designed to blunt Republican ambitions to repeal the ACA and modify Medicaid and Medicare.
It is not likely that these efforts will thwart repeal of the ACA but they may have the effect of limiting or slowing Republicans' aspiration to further alter federal health policy.
What is Noise and What is Not. As each party deploys its strategy, assisted by trade groups, unions, business organizations and grass roots activists, every possible scenario and message is going to get tested. From the impossible -Medicare reform - to the improbable -a decline in mental health and substance abuse coverage - to the downright laughable - an increase in IUD sales because they last more than four years – the headlines will provide lots of fodder for any number of misguided investment thesis.
Given the current state of play, we can say with conviction that Medicaid is ground zero for health care reform. Medicare will enjoy a bit of a holiday from reimbursement pressures as Republicans accept the political reality that major changes are not viable just yet and use political capital elsewhere. The ACA exchange populations are likely to find themselves with insurance coverage heavily integrated with their state’s Medicaid Managed Care organization.
The situation is very fluid and critically, President-elect Trump has not articulated a strategy beyond full repeal of the ACA. So, expect things to change as we move through January - or not.
Call with questions. We are always here.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
