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Will Shocking Election Result Put Affordable Care Act on Chopping Block

Will Shocking Election Result Put Affordable Care Act On Chopping Block

Donald Trump proved almost every political pundit wrong Tuesday night by pulling off one of the greatest upsets in presidential election history. On January 20, 2017, the successful businessman yet political novice will become the 45th President of the United States. Trump has promised some swift action on a number of issues, most notably Obamacare. From the beginning, he has advocated a repeal and replace strategy. With both houses of Congress to stay in control of Republicans, changes to Obamacare are sure to be an early priority.

Over the next few weeks, Strategic Insights expects to brief you on the specifics of some of the long-talked-about alternatives to the existing system. But for this blog, we want to set the table on what to expect and build on last week’s Fact Check on Obamacare. Here are a few premises we are assuming as the public-policy debate on repeal- and replace gets started.

Premise 1: Something will happen

Trump seemed to convert millions of Americans in the last two weeks of the election cycle by promising to repeal and replace Obamacare. Rocked by huge Exchange premium increases in most states, voters seemingly embraced the call. Trump has staked a good deal of his reputation on doing something with Obamacare – and fast. It is fair to expect Obamacare to change rather quickly, although arcane legislative rules militate a bit against swiftness.

Back in 2010, we all remember how the act was forced through Congress with little deliberation. Because the Senate Democrats lost their 60-plus majority between December 2009 and January 2010 as the bill was in process, Democrats did have to resort in part to pass the legislation through what is known as the “reconciliation process.” This process, which allows especially important financially related legislation to go through on just a majority vote, overrules the usual requirement of needing a 60-vote supermajority to limit debate in the Senate and pass a bill. With an expected slim majority of 52, the GOP would likely seek to use that process again in some form if a bipartisan coalition could not be formed for amendments (although Democrats will challenge the use given they argue repeal or substantial amendment actually adds to the deficit, at least on paper). The GOP could not really repeal in full but it could substantially amend it and scrap major portions.

Premise 2: Something does need to change

Obamacare’s Exchanges are fundamentally broken. It cannot survive for a number of reasons. First, if the Affordable Care Act (ACA) in totality is not monolithic (see an explanation below in Premise 4), the benefit design and structure of the Exchange benefit is. The incredibly rich and inflexible benefit structure create the adverse selection and high premiums that have led to the massive erosion of insurers and plan coverage. This will only worsen over time. The rich benefit and overly generous subsidies erode personal responsibility and are simply unaffordable over the long term. The cost to the government of ever-increasing subsidies will mean our fourth entitlement obligation that compromises our economic future and we even know the per-person expansion cost of Medicaid was well above original forecasts. The sooner we grapple with these facts and make changes, the better for the federal budget, state budgets, and personal pocketbooks.

There also is the real problem of provider access for members. What providers are in network and what they get paid are the “go-to” for plans when you cannot tinker with the benefit design. If the “old system” where 50 million Americans were uninsured provided for a have-and-have-not healthcare system, the current construct could quickly devolve into a two-tiered healthcare system where some with employer-based coverage have access to the best doctors and others (those in Medicaid and Exchanges) are relegated to an inferior, poor quality system.

Premise 3: We think most Democrats and Republicans agree that access to quality healthcare for everyone is important

Democrats and Republicans should agree that, notwithstanding how we get there, the goal of ensuring access to healthcare for everyone is a good one. It is what mature democratic societies do. Moving from a crisis-oriented health system to one that emphasizes quality and prevention is key to both our healthcare and economic future. The reality is the government is already a huge funder of the system as a whole—about two-thirds of it. It will pay a big share whether it is doling out subsidies or tax credits for consistent access to insurance coverage or for high-cost crisis hospital services for Medicaid and the uninsured. There, too, is a massive cost transfer from the “have nots” (Medicaid and the uninsured) to the “haves” (the commercial insurance world). This crushing burden has put American business at a competitive disadvantage in the world economy. And providing upfront, quality-oriented coverage will reap lower costs over time and shrink the amount of Gross Domestic Product (GDP) that is needed to support the healthcare system, thereby freeing up capital for growth in other areas of the economy. The GOP should appreciate more than anyone the economic imperative of health reform.

Premise 4: Not all of ACA will go away

The ACA is a complex piece of legislation that touches not just the creation of the Exchanges but so much of the healthcare system. We have argued in the past about 90 percent of the bill was consensus politics for years, but it was the 10 percent that caused political rancor across America. So we don’t expect the so-called “good policy stuff” to go away. The ACA set the stage for a conversion of both the Medicare and Medicaid fee-for-service systems from ones based on inefficient transactions to one based on care coordination, prevention, and quality outcomes. The Medicare Advantage Star program was overhauled and has been a tremendous success. Billions of overall savings in these programs were assumed over time.

The fact is, dismantling entitlements once they are in is a tough proposition. In fact, by and large, it has not been done and the entitlements just seem to keep growing. Witness Medicaid and Medicare over the last 60 years.

Even if we look at the Medicaid expansion and individual Exchanges and market reforms themselves, there are politically popular aspects of these that Republicans may be hard pressed to deconstruct in one fell swoop. Some examples:

  • Over 20 million previously uninsured Americans are now covered. Many of the lower and middle class Trump voters that answered the rallying cry and voted GOP are covered by the Exchanges because they have inconsistent access to employer-based coverage. Even with the unaffordability issue in the Exchanges, radical change could throw millions back to the ranks of the uninsured (as many as 25 million). The Medicaid expansion has actually been endorsed by both Democratic and Republican Governors. Future Vice President Mike Pence is among them.
  • The GOP is not by any means unsympathetic to access to affordable health insurance and helping people to afford premiums. What they don’t like, though, are government run systems and over-reaching entitlements.
    The extension of coverage to children up to age 26 has been wildly popular and a more efficient way to provide coverage to this age group (that often is uninsured) is hard to find.
  • The elimination of most annual and lifetime limits have cost little in the system overall and again are popular.
  • While the changes to the rating system, bars on pre-existing condition discrimination, and guaranteed issue provision have been expensive and have been at the root of the premium increases, it is again hard for lawmakers to simply undue what has been done. Covering the truly sick people through subsidized state high-risk pools had a mixed record at best, with many seeing very high premiums and insolvency. We go back to the fact that leaving the sickest of the population outside a reasonable insurance scheme actually leads to higher costs because these Americans tap the highest cost services.
  • Republicans advocate Health Savings Accounts (HSAs) and age-banded tax credits to help the uninsured to find coverage. Making tax credits refundable for people to use would not be unlike the subsidies established for the Exchange system. So changes could end up being more about political labels.

All of this is meant to say that as we exit the election season and perhaps get down to policy and governance, many may begin to appreciate that the ACA is not some monolithic creature that needs to be slayed. Indeed, even Republicans may be wary to swing the sword too much.

Premise 5: The focus may be more on fixing what is wrong than throwing everything out. Changes may be much more nuanced than first thought.

Given Premise 4, this leads one to conclude that repeal-and-replace could be a great deal more consumer friendly than the election season rhetoric might suggest. However it is featured politically, if policy-makers do their job, change may not t mean throwing everything out, but fixing the untenable. While it is hard to prognosticate two days out, we feel the following could very well be the focus.

  • Rationalize the benefit. As we stated in Premise 2, the benefit is inflexible and far-too-extravagant. The actuarial value is too high and is unsustainable. A better system could be designed to have product variability so as to attract younger Americans looking for lower cost options as well as more generous benefits and protections for those in need. Admittedly, fashioning the right fix is more complicated. The old underwriting system created haves and have nots and did not get us to universal access for the adverse populations. Some argue, though, freeing up plans to create a continuum of innovative benefits to bring in the young and healthy and freeing plans up to engage in better cost controls could be matched with the consumer safeguards of the ACA. An individual mandate (and perhaps employer one) may also be unnecessary, especially since it appears to be more of a nuisance tax anyway. A case can be made that portability and taking down sometimes arbitrary state lines could bolster innovation and insurer participation.
  • On the issue of younger Americans’ participation in the healthcare system, it needs to be noted the current Exchange benefit is not attractive because the benefit is so generous and costs have been shifted from old to young in the new community rating approach. Whatever the merits of some sort of shift of costs to smooth out age and sex-based rates, premiums are simply not justifiable to the young and relatively healthy. Lower actuarial value plans and more cost-effective products would provide a healthier consumer base and younger Americans need to be educated on the true value of health insurance. It is not about a given deductible, cost-sharing level, or maximum out of pocket cost. It is about a safeguard in the event of a catastrophic event as well as leverage in the marketplace. What do we mean about the latter? If uninsured, the individual is captive to what a given hospital or provider wants to charge. As a covered member of a plan, they immediately get the advantage of massively discounted rates negotiated by plans on behalf of members – whether they have satisfied their deductible or not.
  • While this may be a bit of tough medicine for those getting the benefit, the overall level of premium and cost-sharing subsidies is actuarially unsustainable. (A case could be made for reductions at most levels and some infusion of help at middle income levels). Whether the same type of subsidies or a conversion to HSAs and different tax credits, a change has to be made.
  • The long-term survivability of Medicaid may also be served by eliminating the one-size-fits all nature of the benefit and creating a buy-in approach to ensure people take stock of their healthcare. The Centers for Medicare and Medicaid (CMS) and states have talked about this for years but only dabbled, afraid to pierce veil. The GOP thinks block grants will facilitate this process. Whether under the rubric of block grants or the old entitlement structure, change is needed. It could also lead to more coverage at state levels because money is freed up for more participants.
  • Keep the good stuff! The ACA got one thing right – it put its thumb on the fact a quality focused healthcare system is the only way to truly bring down the cost curve and the amount of GDP we will spend in the future. It will be easy for the new administration and lawmakers to give in to political temptations to scrap meritorious experiments in reforms because local hospitals, providers, and even health plans are calling and emailing incessantly about a given provision they hate. But these ACA experiments are the incubator for lasting reform. They need time to play out.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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