As we noted on the Q1 2017 Macro Themes call last week, Republicans’ plans to repeal and replace the Affordable Care Act are slowly coming into focus. Republicans will use three tools, each with its own limitations but working together will eliminate most of Barack Obama’s signature legislative achievement: reconciliation, regulation and regular order. We predicted that on the first day of the Trump administration there would be some administraitve action meant to support repeal and replacement of the Affordable Care Act. We were not disappointed.
Just hours after inauguration, President Trump signed an executive order “to minimize the unwarranted economic and regulatory burdens of the [Affordable Care Act].” At the highest level of interpretation this order communicates to Trump voters that the Donald plans on being a very different kind of president, separating himself from the often plodding and deliberative ways of Washington through swift and decisive action.
The executive order also has the effect of communicating to the vast federal health care bureaucracy in no uncertain terms that repeal of the ACA is a top priority of the Trump Administration. For 30 years, health policy wonks, the educational institutions that trained them and the publications that embraced them, have promoted a system that papered over the soaring costs of health care with expansion of health insurance coverage because, they argued, health care is exempt from market forces that normally control price.
Trump and Congressional Republicans hope to turn health policy in America toward a more consumer-based system and thus finally bring health care inflation to heel. It isn’t a new idea but it is not one that has been widely embraced by the Washington policy machinery. For that reason, people who agree with that philosophy are in short supply at Health and Human Services. Trump’s executive order makes clear that dissenters should, nonetheless, fall into line.
More specifically, the executive order directs executive agencies to do three things:
- Waiver, defer, grant exemptions from or delay the implementation of any provision or requirement of [the ACA] that would impose a fiscal burden on any State or a cost, fee, tax, penalty or regulatory burden on individuals, families, health care providers, health insurers, patients … makers of medical devices, products or medications
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Use their discretion to provide greater flexibility to States and cooperate with them in implementing health care programs
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Encourage a free and open market in interstate commerce for the offering of health care services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.
The first of these three directives is more or less a summary of the provisions in the ACA included in the repealthrough reconciliation approved by Congress in 2015 but ultimately vetoed by Obama. A list of the 2015 repeal provisions can be found here. Given Trump’s often confusing statements about repealing and replacing the ACA, the executive order gives comfort to Congressional Republicans worried about getting out of step with their party’s leader.
The second provision is critical in its timing. State legislatures are convening this month and need clear direction on laws they would need to amend or enact to accommodate any changes to the ACA. Front of mind for most Governors are changes to the requirements of Qualified Health Plans sold on the ACA exchanges and their Medicaid program.
If the individual mandate and associated subsidies are repealed through reconciliation (or go unenforced through executive order), requirements of QHPs like essential health benefits and rating factors would need to be relaxed. Senator Lamar Alexander, Chairman of the Senate Health, Education, Labor and Pensions Committee has called for permitting any plan approved for sale in a state to be considered a QHP. QHP standards were largely left to the HHS Secretary and the executive order signals the federal flexibility states want to see.
The second provision also may bring welcome relief to states that are locked in negotiations with CMS over Medicaid Section 1115 waivers. Texas and Florida, for example, are working on changes to their Medicaid program and been granted extensions but are clearly frustrated with a process long thought to be federal micromanagement. For a complete list of Medicaid provisions that have raised the ire of Governors, read Tennessee Governor Bill Haslam’s handy chart included in a recent letter to House Majority leader Kevin McCarthy.
Finally, with state legislatures convening in January, the executive order provides incentive for those assemblies to enact Section 1332 State Innovation Waivers. This section of the ACA – which if used as liberally as the statutory language allows - could accomplish most of the policy goals of ACA repeal and replace. However, the regulations controlling the granting of Section 1332 waivers were very narrowly written. As a result, only nine states have enacted the necessary Section 1332 legislation – Alaska, California, Massachusetts, Minnesota, Ohio, Oklahoma, Rhode Island, Texas and Vermont. California recently withdrew its waiver request which was focused largely on health care coverage for undocumented immigrants.
On its face, the third provision of the executive order addresses Trump’s campaign promise to “get rid of the lines around the states” which translated from Trump-ese means allowing insurers to sell across state lines. Less obvious is the direction it provides the Federal Trade Commission which is responsible for scrutinizing health care services and insurance mergers and the Department of Justice which intervened in two health insurance mergers last year.
Using the usual assumption that being a Republican translates into a laissez-faire attitude toward market competition, pundits have assumed Trump will be friendlier toward combinations like AET and HUM. That assumption, of course, requires us to ignore Trump’s raison d’etre – populism. Less large scale mergers not more seem to be the direction Trump is headed in with this executive order.
The executive order is broadly written to allow the incoming administration the greatest amount of flexibility in guiding the ACA through repeal without complete chaos in the insurance markets and state Medicaid programs. It also serves to correct the wishful thinking that the ACA or parts thereof may survive because the damage from repeal will be too politically costly.
We are here to answer questions. Unlike most women in Washington we are not trapped on the Mall or the Metro.
Emily Evans
Managing Director, Health Policy
@HedgeyeEEvans
