Obamacare in 2017 and Beyond

Repeal Would Affect More Than 'Just' 22 Million ...

Tales from the Alternate Universe is a blog by Health Cost Matters. We explore health costs at the national level, the way we select, compare and pay for health services.

In today’s tale, we’re going to imagine what will become of the Affordable Care Act in 2017 and beyond

During this election season Donald Trump declared Obamacare (aka the Affordable Care Act) a ‘Total Disaster’ and promised to repeal and replace it on Day One of his presidency.  Republicans in Congress have been trying to do this since Day One of its enactment. The latest drumbeat about gutting the plan took place largely within the context that Hillary Clinton would probably win the presidency. This isn’t to say that Republicans like Obamacare and aren’t serious about their desire to repeal it. But what can they do, what will they do, and when will they do it?

Here’s what we know:

1.  Immediate, full repeal of Obamacare in 2017 is highly unlikely. Full repeal of the Act (including thousands of pages of regulation that all businesses offering coverage have absorbed) takes 60 votes in the Senate, and it’s unlikely that 60 votes exists. 

2.  Partial repeal (requiring only 51 votes) of funding mandates could occur on Day One. This would include repealing funding of Medicaid expansion as well as tax credits for enrollees with income levels up to 400% above the federal poverty level. Since 80% of ACA enrollees would be affected, the cascading effects would quickly imperil the entire Exchange program. 

3.  Partial repeal could also eliminate certain regulations including the 10 essential health benefits that the ACA mandates for all plans. These are expensive, yet popular components central to the ACA, and repealing them could affect everyone with coverage, not just Exchange enrollees. These mandated benefits require that plans cover chronic conditions, preventive care, prescription drugs, maternity and newborn care, mental health and substance abuse treatment, rehabilitation and other services. 

4.  The healthcare industry, including insurers and hospitals, likes Obamacare. They support the ACA, they helped design it and worked with President Obama to implement it. The healthcare industry has a hugely powerful lobbying force, so their sway and voice in how this unfolds should not be underestimated. They have and will continue to have a seat at the table as future legislation is designed.

5.  Repeal and replace would impact most businesses, and by default most Americans. Even if the Act was repealed, businesses may not smile at the specter of spending another fortune undoing the ACA and then incorporating something else. The quickest impact would occur if the requirement to cover the 10 essential health benefits was repealed. Business options would be to continue covering these expensive but popular benefits, trim benefits, or cancel coverage.

6.  Neither Trump nor Republicans has a workable plan to replace the ACA. Crafting of the ACA took years, and began during the Bush administration, fully 18 months before Obama was elected. It’s an intricate series of interconnected benefits, problems and solutions that are meant to delicately balance the bill into affordable comprehensive coverage available to all. 

Not everything worked as planned, and the law enacted in 2010 was an imperfect system with unintended and expensive consequences that got us only part of the way there. Cherry picking to keep the popular aspects, such as maintaining pre-existing conditions, cannot succeed unless the costs of those expenses are offset by increased revenue. The plan has not attracted the numbers of healthy enrollees needed to increase revenue, and this is a fundamental problem that needs addressing.  

7.  Repeal is easy. Replacement, not so much. Drafting a plan that is satisfactory to Congress, President Trump, business and the healthcare industry that gets negotiated, debated, redesigned, renegotiated, (repeat) could take years.

What are the replacement ideas offered

Republicans and Trump have offered few ideas on how to replace, and specifics of their plans are vague. Here’s what’s been suggested so far:

  • Expand availability of Health Savings Accounts to everyone. These are currently available to Americans under age 65 who have high deductible plans. Realistically, HSAs are also limited to those who can afford to fund them. Most Exchange enrollees cannot afford to fund them, and thus could not take advantage of this benefit.
  • Replace federal funding for Medicaid enrollees with block grants to states. If this happens, Medicaid enrollment is predicted to drop as a result, and the number of poor uninsured could soar. This would become a political firestorm.
  • Allow health insurers to sell insurance across state lines, thereby increasing competition. The marketability of this idea is unproven. Three states and the ACA already have provisions for this option, but not a single insurance company has offered it. For this to become reality would entail making significant changes in current state insurance laws that are set up for patient protection. Changing the regulations at the federal level could take years, so this would not be a quick fix. Another reason this is being suggested is to allow consumers to shop for lower cost coverage. But the value of this reason has diminished since the ACA has mandated what services must be offered, and healthplans across all states are more uniform than they once were in benefit design. Difference in cost becomes more related to difference in provider charges, not unwanted benefits. Finally, the practicality of this idea is questionable. Like politics, all healthcare is local. If you live in Florida and purchase insurance from New York, the network of providers resides in New York. Smaller health plans would be able to compete by offering a rented provider network but this could be expensive with a more limited provider selection, and this could put smaller, regional plans at a competitive disadvantage. If this were to happen, it could eventually negatively impact competition, consumer choice and cost. 

Predicting What Happens Next…

It’s unlikely that much will happen to affect the ACA, its funding and benefit design in 2017. After that point, it’s conceivable that the Republicans could defund it. Since most enrollees’ coverage in the Exchange is subsidized by federal funds, defunding would essentially gut the ACA, spelling the end of the program.

But repealing funding without replacing would result in 22 million angry Americans and intense political fallout from many states as well as the health insurance industry. Even reducing federal Medicaid expenditures could be more difficult than expected. Changing Medicaid funding from largely a federal entitlement program to one that is funded through block grants to states is predicted to significantly increase the numbers of poor uninsured, including children and pregnant women. 

It does appear that Trump is softening his rhetoric about repeal and replace on Day One. With millions of Americans’ coverage at stake, the new administration’s best alternative will likely be to tweak and fix the existing plan. There is no shortage of opinions on what needs fixing, but options are limited on how to accomplish. It is likely that some benefits will be eliminated or reduced. 

One possibility in reducing the cost of the Exchange would be to focus on reimbursement of providers for the Exchange program. The healthcare industry likes the law because it's good for their bottom lines. A profitable business model is important and necessary, but is there room and appetite for negotiating a more rational reimbursement methodology? 

From a baseline perspective on how the ACA will evolve, expect some of the most drastic changes to the law to be primarily in the form of new packaging, labeling and communication. How we refer to the Affordable Care Act, what we call it and the terminology we use to describe it will probably change considerably over the next 4 years. 

How can we begin to cure exorbitant health costs? There is no one solution … progress starts with hundreds of small steps. The first step is understanding what it is we’re trying to fix. 

At Health Cost Matters we welcome feedback and ideas from readers and thought leaders from all sides that is reasoned and not politically dogmatic. 

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