Early this morning, the Senate voted down its last and most realistic vehicle for repealing the ACA. This blow to leadership was delivered by Sen. John McCain who has taken a good bit of heat in the last 48 hours for his vote on a motion to proceed to the bill while exhorting his colleagues to return to regular order and bipartisan collaboration.
Majority Leader McConnell announced that the Senate would be moving on and turning its attention to defense spending and nominations. In so doing McConnell encouraged suggestions but warned Democrats they had better offer something other than throwing money at the problem.
What happens next?
As we have noted every chance we got, much of what the AHCA and the BCRA sought to do, can be accomplished administratively making passage of any reform effort largely political. For example, Section 1332 waivers permit reforms to the individual market under certain circumstances all of which are subject to interpretation by the Trump Administration. Same goes for Medicaid Section 1115 waivers to expand or reform that program. Finally, the ACA endowed an enormous amount of authority to HHS to define benefits and implement the ACA. That power is now in the hands of the Trump administration to deploy as they see fit.
The path to new policies using administrative tools is certainly less defined without guidance from Congress but it is inevitable.
The biggest losers from last night’s debacle and beyond:
Insurers. McConnell has warned that Republicans are not likely to throw money at the problem in a bipartisan effort to stabilize those markets that are losing insurer participation. CSR payments are also at risk. Tom Price will be called on to manage the ACA as it is the law of the land. Unfortunately, the law of the land is that CSR payments must be appropriated and that is not likely to happen anytime soon.
The individual market is not a big part of any insurer’s book so the question they will ask is “why bother?” which will only lead to more instability.
The ACA also requires that people enrolled in Medicaid be eligible for the benefit. The well documented lack of oversight in Washington that led to over-enrollment and alarming increases in state spending is not something HHS Secretary Tom Price has to perpetuate.
<chart1>
Services. Hospitals will hold out hope that states, especially Texas and Florida, will expand Medicaid. Based on our conversations with state policy groups, we think this outcome unlikely. Further, while the Obama administration used various tactics to encourage expansion, this administration will not be inclined to bring similar pressure to bear.
Furthermore, the mechanism by which states expand – Section 1115 waivers – requires CMS approval and that is not likely to happen without reforms. Those reforms are likely to mimic Indiana’s Healthy Indiana Plan 2.0 which uses high deductible plans paired with HSAs and will soon impose work requirements.
Meanwhile, the number of insured medical consumers will decline due to the combined effects of unstable individual markets, Medicaid disenrollment and continued indifference to the individual mandate.
Devices. Repeal of the Medical Device Tax is one of the few areas of agreement between Republicans and Democrats and it has been long baked in that the tax would be repealed. Tax reform legislation offers some hope that it can be revived but we would expect Republicans are going to want offsetting reductions in health care spend.
Instead, the best the industry can hope for is a continuation of the moratorium via some unrelated bipartisan legislation.
Cynicism is an occupational hazard for policy analysts of all stripes, but even after accounting for that, we have a very difficult time seeing how any bipartisan solutions will emerge out of this wreckage. The fundamental approach of the CBO (created by ACA architect Peter Orszag) means tweaks to the very unpopular mandates or benefit design are going to be met with more CBO estimates of dramatic increases in the uninsured and/or in premiums. Funding market stabilization without those changes, as Majority Leader McConnell has indicated, is a bridge too far for most Republicans.
Congress is left with continued deference to the Trump administration on managing the implementation of a deeply flawed law or reviving reconciliation sometime between now and the end of September. In politics, there is nothing that focuses the mind quite like failure, so we will keep an open mind on that last possibility but the chances right now are pretty low.
What would change our mind?
We suspect that Sen. McCain, in voting no, took assurances from Sen Schumer that Democrats would cooperate with a bipartisan effort. If we see something that suggests Schumer cannot make good on that promise - and we think it will be difficult - that may lead McCain back to supporting a bill. Sen. Murkowski has a great deal to lose because Alaska is ground zero for many of the ACA's flaws. The Section 1332 waiver granted by HHS will certainly help stabilize things but she may be forced back to the negotiating table if the insurance markets continue to deteriorate.
Last's night's result was the worst possible outcome for pretty much everyone, including supporters of the ACA - though they have yet to recognize its implications - ensuring more controvery in the weeks and months to come.
Call with questions. We are always here and as we learned last night, a few of you are also night owls.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
