AHCA AUTOPSY – BRING OUT YOUR DEAD!
The American Health Care Act (AHCA) was perhaps not the best piece of legislation. We have yet to see that unicorn. It did contain some provisions critically important to the core beliefs of Republicans, especially House Republicans. The AHCA represented the most radical change to an entitlement program in 50 years. A conversion of Medicaid to a block grant or per capita program has long been sought by Republicans and even conservative Democrats as a way to bring spending growth in line with inflation. The changes to the regulatory architecture of the individual market like deferring definition of essential health benefits to states and relaxing the age ratio to 5:1 were critical to keeping the individual health insurance market viable in many states.
Even with those significant policy wins, the House choked on Friday. It remains to be seen if health care legislation is truly dead for the year – certainly Freedom Caucus members have the most to lose if it is - and we must remember that the ACA debate raged for just under a year with the bill being declared dead several times. In the short term though, the ramifications of the AHCA’s failure are significant:
Winners:
The Democrats. Say what you will about their policies and politics, Democrats have proven once again that they are much better at keeping their caucus together and driving toward a goal even when it is not perfect. The ACA became law despite similarly purist objections that sank the AHCA. In the aftermath of the failure of the AHCA, Trump said he wanted to work with Democrats to solve what he sees as the inevitable implosion of the individual market under that ACA. That clear repudiation of the far right wing of his party may end talk of repealing the ACA – a must have to Democrats. (As a technical matter the AHCA wasn’t repealing much, but that fact was overwhelmed by talking points).
Some States. The shift to a block grant or per capita payment system was going to be a tough ride for states that have become accustomed to double digit growth in their Medicaid expenditures largely financed by the federal government. For other states – mostly poorer and rural, it might actually have been a better outcome. If you are California, anything that flattens the Medicaid growth curve was going to take some significant adjustment on the part of providers and the state. So, the divide between states that have and those that have not will persist for the time being.
Losers:
The Freedom Caucus. They overplayed their hand by insisting that the AHCA include repeal of all of the consumer protections in the ACA except pre-existing conditions. Although the insurance industry had identified the age rating and the Essential Health Benefits (EHB’s) as major cost drivers, the Freedom Caucus insisted that all of Title I be repealed including popular provisions like allowing children to stay on their parents’ policies until age 26. Trump took to Twitter yesterday to call them out as having saved Obamacare and Planned Parenthood. It is not hard to imagine presidential rallies in Freedom Caucus districts where Trump is very popular so he can make the point again and again and again.
The Republican Party. After seven years – count ‘em SEVEN YEARS – and 62 prior repeal votes fueled mainly by the Freedom Caucus, when it finally mattered House Republicans choked. Now they are between a rock and a hard place. They could not deliver on a significant political promise and they cannot find relief for their constituents from increased premiums and cost-sharing. Trump’s flirtation with the Democrats post AHCA confirms some of their worst fears. Trump does not and will not adhere to party ideology. Getting things done is his top priority and if Republicans won’t play ball, he will find someone that will. Not exactly a recipe for party building.
Tax Reform. After the failure of the AHCA, the president announced that he was moving on to tax reform. However, because he was counting on the AHCA to lower baseline spending, it is going to get tougher. With Democrats emboldened by the failure of the AHCA and perceiving Republicans and Trump (on this count they are wrong) as wounded, they are likely to launch a similar counter-offensive as they did with the AHCA. The damage to Republican leadership’s reputation probably means more ambitious elements of the tax reform agenda like the Border Adjustment Tax get tossed overboard.
The Individual Health Insurance Market. There is no doubt insurers were counting on relief from the onerous age bands and the EHBs to continue participation in the ACA federal and state-based exchanges. Those changes combined with regulatory improvements like tightening up the Special Enrollment Periods is what they were counting on in developing their 2018 plans and pricing. Now, with no relief and with the Trump Administration predicting an implosion, it is hard to see how large for-profit insurers stay interested. Mission driven insurers and certain Blues are likely to remain but even they may pare back their involvement.
Something in between:
President Donald Trump. The post-mortems have included assessments of the damage done to Trump’s presidency. His supporters, however, are not likely to see it that way. They will blame Congress and remind themselves that is exactly why they voted for him. His action compared to Congress’ fumbling around in the dark stands in stark relief. They will double down and move to tackle bigger, more complex issues, but those with which he is more comfortable championing.
With apologies to Monty Python fans for our title today…
