What to Expect with Health Care Reform

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By William G. (Bill) Stuart

Director of Strategy and Compliance

Jan. 5, 2017

With the 115th Congress convening in the nation’s capital this week, all eyes will be on Republicans and their approach to the Affordable Care Act. Readers know that the Patient Protection and Affordable Care Act (dubbed the ACA or ObamaCare) passed Congress without a single Republican vote in 2010 and has been the law of the land since then.

During the intervening six years, Republican and Democrats in Congress have proposed – and sometimes passed – legislative changes to the law. President Obama has made unilateral changes through executive orders. Read more here.  In addition, the Obama administration has exercised the broad power that Congress ceded to the executive branch to issue regulations to fill in the administrative details where Congress was vague and gave broad powers to the Secretary of Health and Human Services.

All the while, Republicans vowed to eliminate the ACA. With President Obama in the White House, they understood that their efforts wouldn’t become law. They proposed legislation to defund the ACA, forbid any government employee from implementing any part of the law and withhold pay of any federal official who implemented the law.

In late 2015 and early 2016, Congress passed legislation along party lines that repealed several key sections of the ACA. President Obama predictably vetoed the legislation, thus preserving his signature domestic achievement.

Republicans’ efforts haven’t been in vain, though, as they’ve made a clear political statement that the party stands behind repealing the ACA. Voters responded to that message by retaining GOP control of both chambers of Congress and electing a Republican president. A Republican president and majorities in both the Senate of House of Representatives aren’t enough to repeal and replace the ACA, however.

Reconciliation

Under Senate rules, a single senator can filibuster (speak continuously – see the movie Mr. Smith Goes to Washington for an example) a bill to kill it. Only if 60 senators vote to end the filibuster and bring the bill to the floor of the Senate for a vote can the proposed legislation become law.

Democrats controlled 60 seats in the Senate when they passed the ACA in 2010. They promptly lost the 60th seat in a special election in January 2010 (Republican Scott Brown won the seat occupied by the late Sen. Ted Kennedy, a Democrat). Neither party has approached 60 seats since then. The 115th Congress has 52 Republican senators and 46 Democrats, with two Independents (Sanders of Vermont and King of Maine) who caucus and typically vote with Democrats.

In the coming weeks, you’ll continue to hear the term reconciliation. Reconciliation is a process reserved for legislation that impacts fiscal issues (taxing and spending). Created four decades ago to simplify the process of reconciling the preliminary and final federal budgets, it requires only 51 votes to pass legislation.

The most famous use of reconciliation involved President George W. Bush’s tax cuts in 2001. The Senate passed the measure through reconciliation and put an expiration date on the tax cuts so that the projected impact on government tax receipts wouldn’t doom the legislation.

Republicans passed the ACA repeal measure in the last Congress using reconciliation. That legislation wouldn’t have repealed the full  ACA, a law with 10 specific parts, called Titles. Instead, it could repeal only the titles that involve federal taxes and spending. These provisions are contained only in Title I, Title II and Title IX.

GOP lawmakers face a similar problem in the 115th Congress. Without a filibuster-proof majority in the Senate, their only prospect once again is to use reconciliation to disable the spending and tax provisions of the law. This action would eliminate advance premium tax credits (premium subsidies) for the 83% of roughly 10 million people who enroll in commercial insurance through public exchanges and end the Medicaid expansion that has enrolled about 10 million individuals who otherwise wouldn’t have qualified for Medicaid coverage.

The total number of Americans enrolled in coverage through these two programs will be between 20 million and 22 million in 2017. Not all will lose coverage with a repeal of the ACA because they have access to other care, such as through an employer or the pre-expansion eligibility rules for Medicaid of which they weren’t aware prior to publicity generated by the passage of the ACA.

This approach would eliminate taxes associated with the law, including the excise tax on high-premium plans (the Cadillac tax), the tax on medical devices and the application of Medicare taxes to investment income for certain taxpayers. It also would allow individuals covered by Health FSAs and Health Savings Accounts to reimburse over-the-counter drugs and medicine tax-free without a prescription.

 The Republican approach

Washington insiders expected Republicans to introduce a bill almost immediately to repeal key provisions of the ACA through reconciliation. They weren’t disappointed, as Sen. Mike Enzi (R-WY) offered the bill Tuesday, the first day of the 115th Congress.

One central question is how much of the ACA can be repealed through reconciliation, since the procedure is designed to apply to legislation and laws with a fiscal impact.

In this battle, the spotlight will shine on two virtually unknown Americans: Thomas J. Wickham, Jr. and Elizabeth MacDonough. They don’t hold elective office, don’t appear on cable TV news shows and aren’t contestants on the celebrity versions of Family Feud or Jeopardy!  Living far from the limelight, Mr. Wickham and Ms. MacDonough are, respectively, parliamentarians for the US House of Representatives and Senate. They have the authority to rule on what titles and provisions of the ACA may be repealed through reconciliation.

The GOP doesn’t have a replacement bill in the works. Rather, Republican lawmakers and think tanks have submitted a variety of proposals during the past six years that are touted as “ACA replacements.” While all contain sometimes similar free-market principles, they differ in their approaches. Republican support hasn’t coalesced around a single approach to healthcare reform, a signal that Republicans won’t be able to repeal the ACA and simultaneously offer a replacement.

Congress is expected to repeal what it can of the ACA this winter while keeping the law in place an additional two or three years until lawmakers can agree on a replacement. While it fulfills a campaign promise to repeal the law, this approach carries huge risks.

First, uncertainty is likely to lead more insurers to pull out of public exchanges. Currently, residents in about one-third of US counties can choose from plans offered by only one insurer. This situation is likely to lead to higher future premium increases than the average of 25% in 2017.

Second, more lawmakers and think tanks will introduce additional proposed replacement plans, which will cause further fraction and legislative paralysis.

Third, Republicans will find it increasingly difficult to craft a bipartisan replacement plan on their terms as Democrats opposed to certain provisions in a GOP replacement plan see the clock ticking with a fast-approaching deadline before tens of millions of Americans lose access to their current coverage.

So, what makes immediate repeal and future replacement attractive to Republicans?

First, it’s like eating dessert before the meal. They can fulfill a campaign promise and score major political points by killing key provisions of an unpopular law without the corresponding difficult work of crafting and passing an alternative quickly. Immediate gratification is a key motivator to politicians.

Second, it gives them time to sort through various proposals to find the best ideas and incorporate them into a comprehensive reform bill.

Third, they may gain certain advantages by waiting. Republicans must defend only eight Senate seats in the 2018 mid-term elections, while 23 Democrat senators and two Independents who caucus with Democrats face voters. Ten of those Democrats represent states that voted for President-elect Trump. If Republicans can gain a net of eight seats – very difficult in any mid-term election for the president’s party, but a scenario in play given the volume of seats that Democrats must defend – the GOP will enjoy a filibuster-proof majority and could then pass legislation without a single Democrat vote.

The advantage in that situation is that Republicans can craft the legislation as they wish, with no requirement that they compromise on key issues to gain the support of enough Democrats to avoid a Senate filibuster. The disadvantage is that they’ll face the same issue that Democrats experienced when they passed the ACA without a single Republican vote: They own it. The opposition party can watch them twist in the wind if their law fails, without any political motivation to assist.

The bottom line

Expect an almost immediate repeal of the provisions of the ACA that Republicans can erase through the reconciliation process. We should see that action within the first 60 days or so of the Trump administration – perhaps symbolically as late as March 23rd, the seventh anniversary of President Obama’s signing the ACA into law.

Look for a lot of infighting among Republicans as they distill provisions from many different approaches to a more free-market health care reform. To glimpse at the future, read the proposals offered by House Speaker Paul Ryan (A Better Way), US Rep. and Secretary of Health and Human Services-designate Dr. Tom Price (Empowering Patients First Act) and US Sen. Dr. Bill Cassidy (the modestly named The World’s Greatest Health Care Bill. Ever).

Watch the actions of the 10 Democrats up for re-election in 2018 who represent states that voted Republican in the 2016 presidential election. Some are idealogues (Sherrod Brown of Ohio) or are popular with voters (Debbie Stabenow of Michigan, whose state is normally reliably Democrat). They’re unlikely candidates to work with the GOP except on their own terms.

Others are more politically motivated to explore their options. Keep an eye on Heidi Heitkamp (North Dakota), Jon Tester (Montana), Joe Donnelly (Indiana), Joe Manchin (West Virginia, who could switch parties), Bob Casey Jr. (Pennsylvania) and Claire McCaskill (Missouri).

Heitkamp, Tester and Manchin, as well as Sen. Tim Kaine (D-VA), weren’t in Congress to cast a vote on the ACA in 2010 and may not want to see the law’s unpopularity impact their re-elections. You can read more about the key Democrat senators facing voters in 2018 and their political situations here.

Time frame

Let’s assume that the ACA will remain in place for another two to three years after a vote for delayed repeal. That moves the calendar to 2019 for a replacement bill. That bill may be phased in over a period of two to four years as the ACA was (though the president unilaterally extended deadlines on a number of provisions). That means that the new law won’t take full effect until 2022 to 2023.

By that time, we will have had another presidential election. Republicans will have to defend a disproportionate number of Senate seats in 2020 and 2022, which increases the chances that the Senate could flip to Democrat control. And the decennial census in 2020 will impact House districts in the 2022 election, which could impact Republican control independent of any political issues.

In this dynamic political climate, we could see a very different dynamic by the time the provisions of a new bill become effective. And especially if that new bill isn’t bipartisan, we’ll likely see a repeat of the past few years with a party role reversal:

  • Democrats speaking out against the ACA replacement law.
  • Democrats refusing to support desperate Republicans trying to amend flaws in the new law as it is enacted.
  • Democrats repealing key provisions of a partisan GOP law if they have the opportunity.
  • Democrats perhaps gaining sufficient seats in both chambers to propose or heavily influence a replacement to the replacement to the ACA.

And in that case, we’re likely to see an immediate repeal with a future replacement – a situation that could drag into 2030 or later.

In other words, we may never see this issue settled and the market stabilized.

What we’re reading

The Kaiser Family Foundation, one of our favorite sources for good balanced information, surveyed voters to determine what factors, including healthcare, influenced their votes in the presidential election. You can see the results here.

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