In our last blog, we referenced the 1950s comedy I Love Lucy to describe the fiasco in the House surrounding repeal and replacement of Obamacare. This week we cite the legendary gameshow To Tell the Truth and ask the question: “Will the Real Donald Trump Please Stand Up?” Why you ask?
It is our view that with the failure of the House to repeal Obamacare the impetus for a great deal of health policy change now shifts from the legislative branch to the executive branch, at least in the short term. The failed House repeal and replace burned a great deal of political capital and fractured the GOP caucus into three parts (several dozen conservative Freedom Caucus members, a few dozen moderates, and all others). We know bills are never really dead in Washington, but the latest news suggests that moderate Republicans are refusing to even negotiate with the Freedom Caucus on the issue. While Speaker Paul Ryan promises action on Obamacare in the future, he won’t commit to when a vote will occur. Ryan has challenged the various factions to get together and gather sufficient votes. Seemingly, the Senate has lost interest right now and wants to employ a go-slow approach, even courting Democrats on changes. Meanwhile, congressional Republicans and President Trump are moving the legislative agenda to other high-profile issues, including taxes, immigration, keeping the government open, and passing a budget for federal fiscal year 2018.
Legislatively, action on Obamacare likely will be pushed to very late 2017 or even into 2018 so that the House GOP can get its caucus in line and so that the more moderate and deliberative Senate can form its views. That said, healthcare interests are looking inside the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) now for where healthcare will go. Special attention is focused on the policy postures of President Trump, HHS Secretary Tom Price and CMS Administrator Seema Verna and where they may take healthcare over the next few months and years. That is why we need to ask what Donald Trump will we see?
On one hand, the “bad” Donald Trump could allow the Exchanges simply to wither away due to inaction on his part. Humana, and now apparently Anthem, have announced their intention to exit or reduce their participation in the Exchanges considerably in 2018. Humana is not a major player but Anthem is across the country. Certainly, additional regional insurers will continue to lose faith in the stability of the program as well. The result would be a system not unlike what Medicaid looks like today. Nineteen states have chosen not to expand Medicaid, leaving millions of Americans in the uninsured ranks in those states. In expansion states, citizens are enrolled at much greater levels and uninsured rates are more modest. The same would hold true in Exchanges where, very quickly, relatively urban states (which have richer mandated benefits in state law and more robust insurance competition) would probably continue having somewhat reasonable Exchange access, but access in other, more rural states would be reduced to minimal or even no coverage (e.g., Tennessee). The ranks of the uninsured would swell dramatically.
Beyond doing nothing, the “bad” Trump administration, too, could take policy actions that accelerate the demise of the Exchanges and roll back other aspects of the Affordable Care Act (ACA) and health reform:
- Trump’s recent Executive Order lessens the already loose enforcement of the individual mandate penalties. If enforcement is reduced further, fewer healthier individuals will sign up in the future and the population becomes more adverse.
- He could do little to nothing to advertise and encourage enrollment in the Exchanges, especially at open enrollment at the end of the year as was done at the end of open enrollment in 2017.
- The death knell would be if Trump and his compatriots stop payments of cost-sharing subsidies to lower-income enrollees in the Exchanges given that the House GOP won the lawsuit challenging the legality and constitutionality of the payments to health plans. The subsidies could stop as early as May. The likely result is healthier people would leave enrollment. Adversity would increase dramatically. Plans in challenging states would have no choice but to exit the Exchanges. Some estimates suggest that lax enforcement of the individual mandate penalty as well as the lack of cost-sharing subsidies could mean a combined 25-30 percent additional increase in premiums alone.
- Price is known to hate many of the alternative payment models in the traditional Medicare fee-for-services (FFS) world, arguing they place too much of a burden on hospitals and doctors. He may want to roll these back swiftly. CMS has already delayed the expansion of joint and cardiac pilots as well as delayed the cardiac rehab one. More changes can be expected. We have argued that, while not always well thought out, these pilots – in Medicare FFS, Medicaid FFS, and Medicare Advantage – are important to transform the system from one reliant on transactions to one focused on value and quality. Voluntary only reforms, such as Accountable Care Organizations (ACOs), will not fundamentally change provider practices or approaches in the dysfunctional system.
- The Innovation Center created by the ACA could either be on the chopping block or be overhauled to pursue strategies Price likes, such as Medicaid research and demonstration and streamlining. Health IT’s future is also cloudy given complaints from doctors and efforts to reduce regulation and discretionary federal spending.
The Medicaid Über rule was finalized last year and is slated to be implemented in states over the next three years.
- This will introduce Medicaid to the rather strict compliance and quality regime already in place in Medicare. In general, we have been supportive of the actions because quality has been abominable in the state-federal partnership program and national direction is necessary to promote a quality focus in a program that covers about one of every two births in the nation. The problem here is that Price and Verma philosophically oppose the current entitlement nature of Medicaid, believe it is too costly, and want to devolve responsibility for the program to states. The Über rule runs contrary to these views and likely will be halted or substantially watered down or stalled.
Now for the “good” Trump. Trump, Price and Verma could use their executive power to positively transform the healthcare system and, as best as possible, stabilize the current Exchange program by:
- Continuing cost sharing subsidies until a compromise bill puts in a replacement. There is some reason to think that Trump and GOP Republicans understand the major implications of discontinuing cost-sharing subsidies immediately. Speaker Paul Ryan signaled his support of continuing subsidies through 2017 and perhaps through 2018. Trump and Price are less disclosive but have generally stated they don’t want to see mass displacement during a transition. The political ramifications of yanking the subsidies worry Trump and lawmakers as well.
- Using the significant regulatory authority HHS and CMS have to refashion the Exchange benefits into something more affordable. The essential benefits mandates are almost entirely controlled by regulation and Price and Verma could reduce the overall actuarial value of benefits without necessarily creating gaps in coverage for those with significant health conditions. Refashioning the essential benefits would reduce premiums and perhaps bring in healthier individuals. The essential benefits debate is not an all or nothing proposition. The Secretary and Administrator could remove some essential benefits and keep others but reduce the scope of those mandated benefits.
- Sculpting other areas, including maximum out of pocket costs, deductibles, etc. While rule-making would be narrower here, they, too, could try to bring younger populations in by attempting to broaden overall product offerings.
- Supporting state innovation. Price and Verma are known not to be fans of overly broad eligibility in Medicaid. At the same time, they are supportive of state innovation. They could use their regulatory authority to push through 1115 research and demonstration waivers where benefits and mandates are lifted in the program, freeing up funds to expand eligibility for the uninsured in non-expansion states. Indeed, we have long criticized Obama’s CMS for demanding that all states expand eligibility to the ACA-defined standard of at least 133 percent of the federal poverty level (FPL). We said it was foolish and that they should have reached out to states willing to expand at lower levels, say 100% of FPL, so there would not be coverage gaps (remember that Exchange eligibility begins at 100%). Millions could gain coverage at a relatively cost-effective price. This, too, could become a worthy experiment for an eventual migration from entitlement to a per capita cap program.
- Betting odds suggest Trump will promote more Medicare Advantage penetration. This is a good thing given the huge quality achievements in the program, but health plans ought not to think they have a friend in Trump for life. While they may see some relief on mandates and regulations (we don’t like it if it means it negatively impacts quality achievement), the populist president is not afraid to declare insurers as profit hungry and an obstacle to his vision of what would constitute the best healthcare system. Trump, Price and Verma ultimately want to convert to a private plan premium support model. With the failure of repeal and replace and deep skepticism in the Senate for radical Medicare changes, a premium-support model is unlikely in the short term.
Where else might we see significant action one way or another?
- It is hard to understate how dreadful the past several weeks have been for GOP lawmakers on healthcare. The events literally could undermine the next two years’ worth of policymaking for the Republicans and potentially lead to a squandering of their opportunity to reshape policy on many fronts. While they will now focus great attention on tax reform and cuts, they may well ease back into healthcare by attacking drug prices. As we stated in our January 22, 2017 blog on PhRMA, the GOP has usually been the last line of defense for all things that would undermine the brand drug manufacturers. But Trump has signaled his desire to rein in drug pricing and some GOP lawmakers now are singing from a different hymnal these days (for fear of being outflanked by Trump). Drug pricing reform might well be the next legislative healthcare initiative. A bill could garner bipartisan support and potentially blaze a path and coalition for changes to Obamacare in the future.