Democrats Need an ACA Retain and Repair Plan

Even before President Barack Obama signed the Affordable Care Act into law, Republicans in Congress have sworn to repeal it. “Repeal and Replace” became a rallying cry that helped switch 63 House and six Senate seats to the GOP side of the aisle in 2010. Today Republicans have the majority in both chambers of Congress and occupy the White House. the GOP opposition to the ACA is not the only explanation for this pendulum swing, but that opposition was certainly a factor.

Republican votes to repeal the ACA became a Washington staple in the six years after the law’s passage. There’s no official count, but House Republicans may have voted 60 times or more to do away with Obamacare. And why not? With President Obama in the White House they knew their repeal legislation would never become law. Votes to repeal the law were an easy political statement.

Now Republicans hold the power to make repeal real and thing aren’t so easy. The House Republican Leadership, reputedly with input from the White House and Senate Republicans, drafted and put forward the American Health Care Act as the first step in the repeal and replace effort. The AHCA faces an uncertain fate in even in the House of Representatives. And a report by the Congressional Budget Office of the AHCA’s impact on the uninsured, the federal budget, premiums and the affordability of coverage has only narrowed the bill’s path to passage.

Republicans want to keep their promise to repeal Obamacare and fear the political payback if they fail to do so. They know they will own the results of any health care reform they pass. f that result includes higher premiums and fewer insureds, the political price could be both high and painful.

Thus the current Republican civil war. More moderate Republicans worry the AHCA doesn’t do enough to support Medicaid and keep Americans insured. Their conservative counterparts are lining up against the AHCA because they see the bill as creating new entitlements and failing to cut back on Medicaid fast enough. Whether the two sides can be brought together is unknown (although I’m skeptical).

Which leaves Democrats sitting back and enjoying the spectacle of Republican-on-Republican political violence. They’ll occasionally throw a sound bite over the transom keep things interesting and to remind their base that they’re fighting the good fight. Generally, however, Democrats are adhering to adage of avoiding interfering with the enemy when they are in the process of destroying themselves.

This is a dangerous strategy. Politics can take sudden turns and, if they’re not careful, Democrats could find themselves in the same predicament that Republicans are in today.

When attacking the GOP health care proposal, Democrats often recite a mantra along the lines of “Sure, the ACA has some problems. But we shouldn’t repeal the ACA, we should fix it.”  But what does that mean? Democrats are as shy about detailing what “retain and repair” means as Republicans have been about defining “repeal and replace.”

History may show Republican’s failure to devise an ACA alternative in the six years following its passage as political malpractice. Their civil war over the AHCA provides Democrats with a window of opportunity to avoid a similar judgment..

Republicans want Democrats to do more than gloat. The Hill reported that Senator John Cornyn challenged Democrats to offer an alternative to the AHCA. Senate Minority Leader Chuck Schumer response: we have and it’s called the Affordable Care Act.

That’s a good line, but that’s all it is. If Republicans fail to pass health care reform, things as they are remains. That status quo is the ACA, a law Democrats admit is flawed and should be fixed. Democrats can claim the high ground by identifying those flaws and offering remedies. Even if Democrats fail to gain Republican support for retain and repair, there’s a value to building a party consensus around a proposal now.

After all, President Donald Trump prides himself as a deal maker. It’s extremely unlikely, but if the AHCA fails, President Trump might look for an alternative and the Democrats should be ready with one. Again, a deal with President Trump is highly unlikely, but these are not likely political times.

Even if the Democratic retain and repair proposal goes nowhere in 2017, it could be useful later. Democrats will need something to run on in 2018. A consensus retain and repair platform might be helpful.

Then there’s the possibility that Democrats are in control of Congress and the White House come 2020. If so, today’s Republicans offer an important lesson. The year you take control of Washington is not the time to start debating a health care reform plan; it’s the time to present one.

 

Is All Payer Ready for a Comeback?

Congress is debating the American Health Care Act, the first of three steps in Republicans’ march toward repealing and replacing the Affordable Care Act. Things are not going smoothly. GOP conservatives, which have considerable clout in the House of Representatives, want the bill to repeal more and replace less. More moderate Republican Senators, of which there are enough to block any legislation, argue the legislation goes too far in some respects. Attempts to mollify one side hardens opposition on the other. And so far, no real effort has been made to entice Democrats to do more than watch Republicans fight one another.

It’s possible President Donald Trump, Speaker Paul Ryan and Senate Majority Leader Mitch McConnell can corral enough votes in each chamber to push the AHCA through Congress. It’s possible, but I’m skeptical. And what if they can’t?

Well, they could do nothing, leaving enough uncertainty laying about that the individual market, at least, collapses. That could make 2018 a tough election year for Republicans. Or they could offer AHCA version 2.0 and hope for better results. Wishful thinking is a great past time, but hardly a vehicle for making public policy.

All of which argues for doing something outside the proverbial box. Maybe Congress could even address the core problem facing America’s health care system: the cost of medical care. What might that look like? One option would be to look at an idea that’s been around since the 1990s if not longer: an all payer system. It would certainly be an interesting debate.

One idea that fits that bill is an all payer system. To oversimplify, under this arrangement providers and payers (usually the government) establish a price for each medical treatment and service. Every provider accepts this rate as payment in full and every payer (government, private insurance, self-funded plans and individuals) pays this rate.

As noted by The Hill, several states experimented with one version or another of all payer systems in the 1990s, although today only Maryland’s remains. As recently as 2014, academics at Dartmouth proposed using 125 percent of Medicare reimbursement rates for a national all payer program. Pricing transparency advocates like all payer systems because everyone knows the cost of care – the ultimate transparency. And this system eliminates the wide variance in pricing for identical treatment so prominent today.

A pure all payer system would be difficult to pass, however. Free market Republicans will not accept the government setting the price for all medical care payments. And pharmaceutical companies, doctors, hospitals and other providers are not going to take kindly to having anyone set a one-size fits all cost structure. There are variations on the all payer theme that might make such a system more palatable — and allow for a healthy (and entertaining) debate..

For example, consider an all-payer system in which Medicare reimbursement rates are simply a starting point; the benchmark used by all providers in setting their costs and all payers in determining their reimbursement levels. No more Alice in Wonderland pricing by hospitals and other providers. Each service provider would describe their fees as a multiple of Medicare. Insurers would offer plans that cap reimbursements at different multiples of Medicare.If the doctor’s charges are at a lower or the same multiple as an insurance policy’s, that provider would be fully reimbursed by the carrier and no charges beyond co-payments, deductibles and co-insurance (if any) would be required of the patient. If the practice has set a higher Medicare multiple than a patient’s policy covers then the patient is liable for the additional cost. The key, however, is that the consumer would know this before incurring the charge. (Which is why emergency care would be treated somewhat differently).

An all payer system requires higher cost providers to justify the extra expense. It eliminates the helter skelter of ever-changing networks. Health insurance premiums would reflect reimbursement rates and would correlate with the number of providers whose services would be covered in full.

Conservatives can’t claim all payer systems is a government takeover of health care. On the contrary, the only role Medicare plays is providing the baseline for reimbursement … a common language all providers and payers speak.  What they do with that baseline is up to them. Liberals won’t like that insurance companies remain in the health care system and will object to limiting, as a practical matter, poorer Americans to low reimbursement policies.

Right now, all attention is on the American Health Care Act. That’s as it should be. After all, it’s not dead yet. Given there’s a good chance the legislation will crash and burn, there’s no harm in thinking about what could come next. I’m rooting for something that isn’t just a rehash of the 2009 debate, but rather something bolder. An all payer proposal is just one idea and there are no doubt many better ones.

What’s your favorite?

The Math of Health Care Reform

The House Leadership’s plan for repealing and replacing the Affordable Care Act is now public for all the world to describe, dissect and debate. Entitled the American Health Care Act, the legislation first stop will be the House Energy and Commerce Committee. At the same time, the House Ways & Means committee will consider budget language to support the Republican repeal and replace effort. For articles on what it does, please check out my Flipboard magazine.

To call the legislation dead on arrival is unfair. However, even ahead of its first hearings, the proposal is looking under the weather. Conservatives in the House have long expressed their displeasure with key elements of the Leadership’s proposal like the inclusion of refundable tax credits to help Americans pay their health insurance premiums. And four Republican Senators with what the House bill would do to Medicaid. If the four Republican Senators hang together and together they could block any health care reform bill. Majority Leader Mitch McConnell needs at least 50 votes in the Senate to repeal the financial aspects of Obamcare through the budget reconciliation process. There are 52 GOP Senators in his caucus. If he loses four of them he’ll need two Democrats to come to his rescue. The price for their assistance will be extremely high.

In short, as I’ve posted previously, what Speaker Paul Ryan and the Republican Leadership put forward this week is highly unlikely to be what emerges from Congress … assuming health care reform does emerge from Congress.

Which may be a good thing. Because the American Health Care Act fails to address in any meaningful way what should be a critical goal of any health care reform proposal: making health care affordable. Washington is fixated on how Americans get health care coverage. Should there be government exchanges?. Should premiums be subsidized? Should there be restrictions on how insurers set premiums for coverage? And so on. All of these are vital, important issues. But they’re playing around the edges of public policy when the real solution is at the core.

This isn’t just opinion. It’s math. Consider: the Affordable Care Act requires carriers to spend the vast majority of every premium dollar they collect for medical care. In the individual and small group markets, 80% of premiums must go to cover medical care or carriers must refund enough premium to reach that level. For larger employers, the medical expense target is 85% of premium. The remaining premium dollars are what carriers can use for paying claims, customer service, negotiating discounts with medical providers, advertising, legal expenses, staffing, HR departments, distribution costs, profit (or retained earnings for non-profits) and any other administrative costs. (Incidentally, I don’t see any reference to these provisions of the ACA, which, I assume, means they stay in place. If I’m wrong, please let me know in the comments section.)

If lawmakers want to make health insurance coverage affordable, they’re going to have to make medical care affordable, because that’s where the money is. Zero out insurer’s operational expense and overall premiums would go down less than 20%. That’s a sizeable amount. However, in three or four years we’re back where we are today thanks to medical inflation. And there’s no way to eliminate all administrative costs. Someone has to process the claims or answer consumer’s questions. And they expect to get paid. And someone has to pay for their phone, desk and computers. And someone has to support their equipment. And so on.

Yet medical care representing 80-to-85 percent of health insurance premiums. Reduce this side of the ledger by 20% and premiums fall 17% — roughly the same as eliminating 100% of insurer’s operational costs.

If President Donald Trump and Congress are serious about reducing the cost of health insurance, they need to figure out how to reduce the cost of medical care. There’s plenty of ideas out there (a topic for a future post). And, to be fair, they’ve mentioned a few. But there’s a political reality that explains why most of the rhetoric around Pennsylvania Avenue concerns the cost of coverage: no one has lost an election by attacking health insurance companies. They’re one of the safest pinatas in American politics. On the other hand, doctors and hospitals are politically dangerous to take on. Voters actually like them.

Regulating health insurance so consumers get a fair deal is important. Lowering the cost of medical care is critical while also reducing insurance premiums. It’s just harder.Perhaps that’s why the Republican proposal is called the American Health Care Act. It would be wrong to use the word “affordable.”

 

Trump’s ACA Reform Principles and What They May Mean

President Donald Trump gave a speech to a joint session of Congress Tuesday night. A significant portion of his speech dealt with his commitment to repeal and replace the Affordable Care Act. What did he say, what does what he said mean, and what will be the impact on the ACA?

What He Said

President Trump devoted considerable time to discussing his goal to repeal and replace Obamacare. Here is what the President said, “Tonight, I am also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better Healthcare.”

Then, after reciting his criticism of the Affordable Care Act he proclaimed, “We must act decisively to protect all Americans.  Action is not a choice — it is a necessity. “So I am calling on all Democrats and Republicans in the Congress to work with us to save Americans from this imploding Obamacare disaster.”

He then cited five principles that “should guide the Congress as we move to create a better healthcare system for all Americans:

“First, we should ensure that Americans with pre-existing conditions have access to coverage, and that we have a stable transition for Americans currently enrolled in the healthcare exchanges.

“Secondly, we should help Americans purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts — but it must be the plan they want, not the plan forced on them by the Government.

“Thirdly, we should give our great State Governors the resources and flexibility they need with Medicaid to make sure no one is left out.

“Fourthly, we should implement legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance — and work to bring down the artificially high price of drugs and bring them down immediately.

“Finally, the time has come to give Americans the freedom to purchase health insurance across State lines — creating a truly competitive national marketplace that will bring cost way down and provide far better care.”

What He Meant

I hesitate to try interpret what President Trump means when he, well, uses words. We’re talking a moving target here.  However, given the gravity of the speech, I assume what he said was thoroughly vetted and intentional.  So, I’ll go try to interpret the President’s message. Full disclosure, however, Republicans are already fighting over the meaning of his five health care reform principles, so there’s clearly room for differing interpretations.

Pre-existing conditions: In the past, President Trump has expressed the desire to keep the ACA’s guarantee issue provisions that prevents insurers from declining coverage due to a consumer’s health status.  Last night, however, he said used a different wording, stating that pre-existing conditions should not bar Americans from having “access” to coverage. These are two different things. The ACA requires carriers accept consumers, even those with expensive medical conditions, into any plan for which the consumer is eligible. Calling for access means that, as an alternative, these Americans could be shunted into high-risk pools or plans designed specifically for high cost insureds.

Offering access to high-risk pools means Americans with existing medical conditions would have fewer choices, limited benefits and pay higher premiums than their healthier neighbors. In testimony before a California legislative committee I once referred to high-risk pools as “a ghetto of second-hand coverage.” The author of the legislation establishing the state’s pool sat on the committee. Oops. But I stand by my description.

The President indicating a willingness to accept high-risk pools was good news for House Speaker Paul Ryan, who supports them. However, there are millions of Americans with pre-existing health conditions. How will they react to being removed from the “normal” market? And how will they, and their family and friends, express those feelings at the polls?

Tax Credits and HSAs: Health Savings Accounts have long been a staple of Republican health care reform proposals.  In a draft of Speaker Ryan’s Obamacare replacement bill, leaked last week, tax credits are the primary means of making health insurance premiums affordable. Conservatives have pushed back against tax credits calling them a new non-means tested entitlement program. The President’s backing of this approach will give the Speaker some leverage in negotiations with these members of the GOP caucus in the House.

Medicaid: President Trump’s call for giving governors more say in how their states implement Medicaid seems to support efforts to move federal payments for the program into block grants, which aligns the White House with Republicans in the House.  Currently states receive funds based on Medicaid enrollment (subject to a host of adjustments for a variety of factors, but let’s keep it simple for now). Block grants would give states a fixed amount to spend within very broad federal guidelines. This approach enables the federal government to cap their spending on the program and leaves it to states to manage the program.

Lowering the Cost of Care: Too often the debate over health insurance affordability ignores a harsh reality: the major driver of health insurance premiums is the cost of medical care. Most of the President’s principles concerning health care reform focuses on health care coverage. But he’s also seeking to lower costs through malpractice reform and through taking steps to drive down the cost of prescriptions. That the President is addressing medical expenses at all is a good thing. Hopefully as a replacement to the Affordable Care Act moves through Congress there will be an even greater emphasis placed on reducing the cost of medical treatments and services.

Interstate Sales: President Trump and many Republicans invoke letting consumers buy out-of-state coverage with the same passion as Hogwarts students learning their first spells. They proclaim it will increase competition and lower premiums across the country. Like that school of witchcraft and wizardry, however, this proposal is, unfortunately, a fantasy. I’ll write a post on why soon, but for now consider just one factor. Virtually all health insurance policies sold today rely on discounts offered by “in-network” doctors, hospitals and other providers of care. Plans sold in State A may look good to a consumer in State B, but if that carrier doesn’t have a strong network in State B, what good is that policy? In short,

The Impact

Let’s assume I’ve interpreted what the President said correctly. What will be the impact of his position on whatever Obamacare repeal and replace bill that emerges from Congress and lands on his desk to sign?

First, it is very significant that the President’s health care reform principles align as closely as they do with those of Speaker Ryan. This gives the Speaker a powerful card to play when herding his splintered caucus behind his preferred legislation.

Second, it seems to signal that the White House is ceding to Congress the responsibility to develop an ACA replacement. The President carved out no bold vision for what he wants nor are his principles in conflict with longstanding Republican positions. The only exception is his call for federal action to lower prescription drug costs. But would President Trump veto a bill that meets all of his principles except for this one? Doubtful.

Third, we’re only at the beginning of long, arduous march to reforming or replacing the Affordable Care Act. There’s many more parties will be heard from, including Senate Republicans, insurers, pharmaceutical companies, doctors, hospitals and other special interest groups. The public will have a lot to say on this subject, too. Plus, any reform package will likely require support from Democrats, and negotiations for those votes have not yet begun.

As I’ve written previously, what Republicans are putting forward now may bear only a passing resemblance to the health care reform we get at the end of what will be a very long, messy slog.

Please check out my health care reform magazine on Flipboard for constantly updated, curated articles.

Upcoming GOP Reform Package is Just the Start

Up until now, the debate over the repeal and replace of the Affordable Care Act has been limited to the reading of tea leaves and, at best, educated guesses. We’re about to get some meaningful data. Earlier this month, House Speaker Paul Ryan promised that Republicans in the House would unveil their health care reform legislation after the mid-February Congressional break. And, in fact, details of the GOP leadership’s Obamacare replacement plan leaked today. (More on that, below).

The introduction of this GOP health care reform proposal is significant, but hardly as earth shattering as you might think based on the news coverage over the leak, let alone the attention the official unveiling will generate. Nor is this proposal necessarily indicative reflective of whats going to emerge from Congress at the end of this process. Think of it as allowing educated guesses to be a bit more educated. That’s important, but it determines nothing.

If you’re interested in what the 106-page document leaked today shows, Sarah Kliff of Vox.com has an excellent analysis. She writes that “In broad strokes, the draft bill hews closely to ideas outlined by House Speaker Paul Ryan and Health and Human Services Secretary Tom Price.” However, she does identify one “important shift” from earlier GOP proposals: “This bill … has more generous financial support for those who buy their own plans … and lower penalties for Americans who do not maintain continuous insurance coverage.”

Of course, the first question to ask is whether the leaked document is legitimate. The answer appears to be yes. There’s no bombshell that would suggest it’s only a trial balloon. It hews closely to the long-espoused reforms put forward by Republicans supporting high-risk pools, promoting HSAs and permitting health insurers to sell across state lines. Let’s assume, then, what we’re seeing today is exactly what Speaker Ryan will unveil next week. Does it matter?

Yes, but not much.

Changing America’s health care system will take time, regardless of how many politicians tell you otherwise. There are a lot of reasons why. Here’s just three:

  1. Republicans can’t agree on what they want to do. Just in the House of Representatives there a numerous factions each looking for a different outcome. The (very) conservative Freedom Caucus wants to repeal the entire ACA now and deal with a replacement later (if ever). Establishment members want to work out the replacement plan first and then simultaneously repeal and replace the ACA after a long transition period. Some of the two dozen members who represent districts that went for Hillary Clinton in the recent presidential election (and, I suspect, a percentage of those who endured raucous town hall meetings this week) seem more intent on repairing the ACA as opposed to blowing it up. Meanwhile, Republicans in the Senate can’t agree on what should follow the Affordable Care Act either. Many Senators, however, seem certain they don’t like the direction the House is taking. In short, consensus among Republicans is a long way off.
  2. Republicans need Democrats to replace the ACA. Even if Republicans reach a consensus on health care reform, they still need to bring along some Democrats to get the job done. Yes, heavy damage can be inflicted on the ACA through changes to the federal budget that require a simple majority of lawmakers in each chamber to pass. Regulations and executive orders can tear down more of it. Replacing the Affordable Care Act, however, will require at least 60 votes in the Senate (unless Republicans take the highly unlikely step of ending filibusters). With only 52 Republican Senators that means at least eight Democrats have to vote for the replacement legislation. And if Republicans factions in the House get too entrenched, the House Leadership may need some Democratic votes in that chamber to get anything passed. All of which means a lot of negotiating before there’s any hope of getting a new health care reform bill on President Donald Trump’s desk..
  3. The stakes are high–really, really high. As I’ve written previously, if Republicans get health care reform wrong they could destroy the individual health insurance marketplace. And I mean destroy. In fact, it may be too late to save the individual market (a possibility I’ll have another post on soon). Yet the GOP has been promising their base to nuke the Affordable Care Act and replace it with something better since before it was passed. Republicans need to act, but in a way that doesn’t leave their party explaining to voters why the demise of individual coverage is not Republicans’ fault.

Don’t get me wrong. That the GOP House leadership is introducing health care reform legislation is a meaningful milestone along the path to a post-Obama American health care system. If Secretary Price and President Trump sign-on to the bill, it will be a “big league” milestone. At the end of the day, however, it’s a milestone, not the finish line; just the first steps in what will be a long slog through numerous committees, endless public posturing, lobbying by interest groups, tumultuous public demonstrations, and intense negotiation. What Republicans are putting forward now may bear only a passing resemblance to what we get at slog’s end.

Please check out my health care reform magazine on Flipboard for constantly updated, curated articles.

Is the GOP ACA Repeal Strategy Taking Shape?

GOPThere’s politics then there’s governing. As former New York Governor Mario Cuomo put it, “You campaign in poetry. You govern in prose.” Republicans have been campaigning against the Affordable Care Act since its enactment with rhetorical flourishes along the lines of “repeal and replace” and “end Obamacare on Day One.” That is poetry (or at least what passes for poetry in politics). Come January, Republicans will need to prove they can handle the prose part. As discussed in my previous post, that won’t be easy.

Repealing the law outright would cause chaos in the health insurance marketplace and take medical coverage away from millions of consumers. However, doing nothing would break a promise central to the GOP’s electoral successes in the past four Congressional elections, not to mention the most recent presidential campaign. Either path could lead to voter retribution that would be devastating to the short- and long-term interests of the Republican party.

A GOP strategy may be emerging that aims to avoid this rock and that hard place. The idea involves passing repeal legislation as close to President Trump’s first day in office that is legislatively possible, but delaying the effective date of that legislation by a year or two. This enables Republicans to keep their promise to repeal Obamacare “on day one,” yet gives them time for the more difficult task of working out a replacement to the ACA. It’s a political two-step Joanne Kenen has dubbed “TBDCare.”

Yes, this would cast a dark cloud over the health insurance market for some considerable time and raises a host of questions: Is Congress capable of passing workable and meaningful health care reform? What happens if they don’t? What would those reforms look like? Who would the winners and losers be under Republican-style reform?  Not knowing the answers to these questions is terrifying. For GOP leaders trying to avoid the wrath of voters, however, living under a frightening dark cloud for a couple of years might look better than ushering in the health care reform apocalypse.

The repeal part of this two-step strategy is simple: Republicans in Congress eviscerate the financial mechanisms critical to the ACA through the budget reconciliation process. This type of bill requires only 51 votes, which means no Democratic support is needed. Meanwhile, President Trump dismantles other elements of the law by either revoking President Barack Obama’s executive orders or issuing new ones. Both the legislation and executive orders become effective at the end of either 2017 or 2018 to allow for a “smooth transition.”

Then the replace portion of the program would begin. Much of any new health care reform legislation would need to go through the normal legislative process and be completed before the effective date of the repeal. Given the Senate’s filibuster rules this means securing at least eight Democratic votes in the upper chamber. (Here’s a list of the Democratic Senators most likely to be recruited by Republicans).

Both Jennifer Haberkorn on Politico.com and Albert Hunt on Bloomberg.com do a great job in reporting on this evolving strategy.  Meanwhile, opposition to TBDCare is already building as evidenced by this editorial in the Denver Post.

What should not be overlooked in all this pain aversion is that the Affordable Care Act was neither the cause nor the solution to America’s deep-seated health care problems. Long before Senator Obama became President Obama everyone knew the key to successful health care reform was reducing medical costs. A few provisions in the Affordable Care Act address costs, but the legislation focused primarily on health insurance reforms because, well, reforming the health insurance market is a lot easier than reducing health care costs. If you were a politician, who would you rather take on, insurance companies or doctors, hospitals and pharmacy companies?

Whether using poetry or prose then, it would be nice if, once they get past the politics of health care reform, Congress and the new Administration addressed the substance of health care reform. Let’s hope that’s not asking too much.

Please check out my magazine on Flipboard for a curated collection of news and opinion concerning health care reform.

 

Republican Health Care Reform: Destruction or Refinement?

capitol-at-dusk

With the (surprising) election of Donald Trump as America’s next president I’ve been asked by quite a few folks what this might mean for the Patient Protection and Affordable Care Act, especially as it relates to individual health insurance. It’s been over seven months since I posted anything in this blog (been busy launching a couple of companies), but I thought I’d use this space to provide my perspective on the answer.

For the impatient among you, that answer is: either a complete disaster or some modest fixes that actually improve the ACA. Dramatic, but non-lethal changes, are unlikely.

As for the details: Mr. Trump’s call to repeal and replace the ACA was core to his campaign. His official health care reform platform promised to:

  1. Repeal Obamacare in its entirety.
  2. Permit the sale of health insurance across state lines.
  3. Allow individuals to fully deduct their health insurance premiums.
  4. Promote Health Savings Accounts.
  5. Require all health care providers to publish their pricing.
  6. Provide block-grants to states for Medicaid expenses.
  7. Remove barriers that delay the introduction of new drugs.

Some of these ideas, such as promoting HSAs and increasing pricing transparency, have merit. Some, like enabling carriers to sell across state lines, are nonsensical for several reasons I described in a February LinkedIn post. None, however, offer much solace to the 20+ million consumers in danger of losing their individual coverage if the ACA is repealed. Mr. Trump and his Republican allies in Congress will need to do more.

I hesitate to predict how Mr. Trump will lead as president. He seems to be  a “big picture guy” who leaves details to others. So let’s assume he lets Congress take the lead on repeal and replace. In December 2015, Republicans in Congress passed legislation aimed at gutting the ACA. President Barack Obama vetoed the bill, but its major provisions are instructive:

  1. Repeal the federal government’s authority to run health care exchanges.
  2. Eliminate premium subsidies available to individuals purchasing through the exchange.
  3. Eliminate penalties on individuals for not buying coverage and employers who failed to offer their worker’s health insurance.

Combined with Mr. Trump’s campaign promises, these elements of the Republicans’ repeal and replace legislation, give a glimpse to the starting point of GOP-style health care reform. Add House Speaker Paul Ryan’s call earlier this year for high-risk pools and the hazy outlines of a possible reform package begins to emerge.

Given Mr. Trump’s commitment to start the repeal and replace process on the first day of his administration and Senate Majority Leader Mitch McConnell’s statement yesterday that getting rid of the ACA was “pretty high on our agenda,” health care reform is coming — and soon.

Whether the result will be an outright, actual repeal of President Obama’s signature legislative accomplishment is no sure thing. Supporters of the ACA are already vowing to defend the law. And while Republicans will hold majorities in both chambers of the new Congress, they are a long way from having 60 votes in the Senate. And that’s problematic.

Senate filibuster rules require 60 votes to cut-off debate and allow legislation to come to a vote. This means the most powerful person in Washington on health care reform may not be President Trump, Speaker Ryan, or Senator McConnell, but the Senator needed for that all important 60th vote. Yes, the first through 59th supporters are important, but their support means little if a 60th vote is not found. As a result, the 60th Senator can have a tremendous impact on the final language in the bill simply by offering (implicitly or explicitly) a favorable vote in exchange for whatever is important to that Senator.

In 2017, the 60th Senator for repeal and replace will be a Democrat. A Republican is expected to win Louisiana’s run-off election giving the GOP a 52 seat majority in the upper chamber. Assuming Republicans vote as a block — something they’ve become quite adept at in the past eight years — eight Democratic votes will be needed to end a filibuster. The requests of each of the first seven will need to be considered and addressed, but it’s the demands of the eighth Senator, that 60th vote, that ultimately matters. Unless …

The Senate can temporarily eliminate the possibility of a filibuster against a bill under the rules of budget reconciliation. However, reconciliation bills must address the federal budget; a vague definition that Congress has interpreted with varying strictness throughout the years. Clearly, eliminating funding for exchanges, taxes, and monetary penalties impact the budget. Much of the ACA, however, doesn’t. For example, requiring carriers to issue individual policies to all applicants regardless of their health conditions (what’s called “guarantee issue”) has no impact on the budget.

This creates a dangerous, even apocryphal, situation. Just one example: Republicans use the reconciliation process to eliminate penalties paid by consumers who fail to purchase health insurance, but not the guarantee issue requirement. Under this situation, few consumers — especially young, healthy consumers — will likely obtain coverage until they get sick or injured. This adverse selection would be cataclysmic and few, if any carriers, would want to participate in such a market. After all, insurers are in the business of spreading risk across a broad population. Guarantee issue without an obligation to buy coverage guarantees a concentration of risk across a narrow population.

President Trump can significantly impact the Affordable Care Act through Executive Orders, but the risk is the same as a partial repeal through legislation. The ACA is a multi-faceted construct with interlocking pieces. The wrong changes can cause devastating unintended consequences.

Republicans in Congress and President Trump may not care. The ACA has taken on nearly mythic proportions as the symbol of all that is evil with the liberal, big government side of politics. However, doing so would not only be irresponsible, it would risk the wrath of millions of voters tossed out of the individual market. Those votes matter. Keep in mind, Donald Trump’s election was close. He lost the popular vote. His leads in Wisconsin and Michigan add up to a combined total of less than 40,000 (as of today).

Yet failing to repeal Obamacare after making it so central to their 2016 campaigns could be a political disaster as well. Republicans jumped on replace and repeal in 2010 and over the past six years this position helped deliver durable GOP majorities in both houses of Congress. Many in their ranks may not care about the consequences of dismantling the law.

Assuming a desire to address health care reform in a responsible way will require the help of at least eight Senate Democrats. Fortunately for Republicans, ten Democrats have an incentive to responsibly neutralize the ACA issue in 2017. All are up for election in 2018 and hail from red or nearly red states.

  • Senator Tammy Baldwin of Wisconsin
  • Senator Bob Casey, Jr. of  Pennsylvania
  • Senator Joe Donnelly of Indiana
  • Senator Heidi Heitkamp of North Dakota
  • Senator Tim Kaine of Virginia
  • Senator Angus King of Maine (officially an Independent, but he caucuses with Democrats)
  • Senator Joe Manchin of West Virginia (and arguably the most conservative Democrat in the Senate)
  • Senator Claire McCaskill of Missouri.
  • Senator Debbie Stabenow of Michigan
  • Senator Jon Tester of Montana

The important question, then, is not what Republicans want to replace the ACA with, but what will it take to get enough of these Senators to come along? A task that could be extremely difficult if new Senate Minority Leader, Charles Schumer, doesn’t make it politically impossible for many of these Senators to break ranks.

Republican then have two choices:1) go nuclear and gut the ACA through the reconciliation process, but keep in place market reforms like guarantee issue; or 2) pass something palatable to eight Democrats, but which they sell as “repeal” to their base. Clearly the first option is irresponsible, but these are not necessarily responsible times. Nuking the ACA will appeal to many in the party, both in Congress and in their districts.

The more responsible choice, repealing the ACA in name only, makes the law more palatable and workable. This last point is critical: once they repeal and replace the ACA, the GOP will own health care reform. It darn well better be clear by say, October 2018, that the new system is working.

Which result — destruction or refinement — is most likely? We’re in a new and wacky world. We’ll find out soon enough.

Update: The Supreme Court and Transparency

The United States Supreme Court recently rendered its decision in a case known as Gobeille v Liberty Mutual Insurance Company. The Court decision rests on an interpretation of ERISA. Nonetheless, in a result illustrative of the tangled complexity of health care coverage, the most profound impact the Court’s opinion may have is to undermine states’ efforts to control health care costs by making medical treatment expenses more transparent.

In an earlier post I provided some background on the case and discussed the import of the (then) pending Supreme Court decision. Now that decision is here and it’s time for a brief update.

Simply put, the Court, on a 6-2 vote, decided that ERISA overrode Vermont’s interest in requiring self-insured health plans to report claims data into a state’s all-payer claims database. As Ronald Mann lays out in his analysis of the case on SCOTUSblog, the Court majority found that Vermont’s requirements were inconsistent with ERISA’s preemption of all but the most trivial state record keeping requirements.

While the decision rested solely on the Court’s interpretation of ERISA, the case will have a substantial impact on the ability of states to use transparency to hold down medical costs. As Erin Fuse Brown and Jame King note in their post on the Health Affairs Blog, “63 percent of America’s workers with employer-sponsored health insurance are in self-funded plans. In Vermont, the ruling eliminates data from 20 percent of the total population ….” In some states this percentage will no doubt be much higher. Self-funding is the approach of choice for many employers with a large number of workers; Vermont has relatively few of these employers compared to other states.

States have sought to establish all-payer claim data bases to enable research into the variation in costs for similar medical procedures. The Court’s decision means these data bases will be unable to capture data from all-payers. It’s hard to see how America’s health care system can become more cost-effective in the future without the means to accurately measure how cost-ineffective it is today.

The majority on the Supreme Court indicated that ERISA may empower the Department of Labor to require self-funded plans to report claims data to state databases. The key word here is “may.” The Court isn’t definitive on the validity of this workaround. Any attempt by the Department to impose this requirement could wind up before the Supreme Court in another few years.

For now, however, Gobeille v. Liberty Mutual will make analysis of cost differences in America’s health care system much tougher.

 

Supreme Court May Undermine State Transparency Efforts

When it comes to health care, costs matter. This may seem obvious, but it’s remarkable how often this reality gets lost in the arguments of the day. Yet consider: depending on the market segment, the Affordable Care Act requires that 80%-to-85% of every premium dollar be spent on medical care. This means the more medical care costs, the more insurance policies cost. One might hope that higher health care prices also correlates with better medical outcomes. One might hope that was the case, but one would be wrong.

Over the years there have been several studies demonstrating this disconnect between medical costs and quality of care. A Health Affairs Blog post authored by Jonathan Skinner, David Goodman and Elliot Fisher in analyzing a recent report provides links to others done over the years. Then there’s a study by Castlight Health showing the cost of mammograms in Los Angeles ranging from $86-to-$954–the pricing disparity in other cities such as Dallas and New York were even greater.

Advocates assert that medical pricing transparency will lower insurance premiums by promoting competition among medical providers and allowing consumers to shop for the lowest cost quality care. Payers like large employers, insurers and the government, could also use this information to negotiate lower charges for health care services.

Yet America’s health care system is amazingly opaque when it comes to pricing. As Steven Brill reported in his Time Magazine cover story, so is the method providers use to set their prices.Cost effectiveness leaves the room when there’s little rhyme or reason for how physicians and hospitals set prices.

Key to effective pricing transparency is meaningful data and lots of it. As the National Association of Health Underwriters puts it, the need is for “current, accurate, unbiased and relevant data” available in “a format and process that is user-friendly.” Which is why 18 states have laws requiring self-insured companies and other payers to contribute patient claims data to a pricing database.

Some of these self-insured companies, however, are pushing back. They fear the costs of complying with differing state requirements. Liberty Mutual Insurance Company is one of those companies. They sued the state of Vermont claiming the state could not demand claims data from them because ERISA denies them the power to do so.

The Second Circuit Court of Appeals agreed with the company. The case, Gobeille v. Liberty Mutual Insurance Company (often referred to in the media as Liberty Mutual v. Gobielle) is now before the Supreme Court, which heard oral arguments on December 2, 2015. Tyler Vandeventer and Jason Ottomano provide specifics concerning the case and the arguments on Cornell University Law School’s Legal Information Institute site.

The Supreme Court’s decision in this case will have a significant impact on pricing transparency and, consequently, the affordability of health care coverage. Without claims data, cost comparisons simply aren’t possible. This isn’t the case of garbage in, garbage out. This is nothing in, nothing out.

The Court’s decision will also clarify how states can interact with self-funded plans under ERISA. This too could have far-reaching impacts.

There are many more high-profile cases before the Supreme Court than Gobeille v. Liberty Mutual. None of those, however, are likely to have a greater impact on transparency and the cost of health insurance.

No date for a decision in Gobielle v. Liberty Mutual has been set.

A version of this post appeared on my LinkedIn page.

Zenefits Adds Domain Expertise to Leadership Team

David Sacks, the new CEO of Zenefits, just announced extensive changes to the company’s leadership team, an important step in his efforts to reshape the company. By adding individuals with backgrounds in the services the company delivers to consumers, this looks to be a move in the right direction.

Previously I’ve criticized Zenefits for a lack of expertise concerning benefits, payroll, or human resources among board members or top executives. While Zenefits is primarily a technology company, the services they deliver–what their customers pay for–are tools to help companies manage these important business operations. That no one among Zenefits most senior leaders had experience in these areas is one reason, I believe, Zenefits faces the problems they do today.

The Zenefits board is still composed only of men with backgrounds in finance and technology. The former executive team, at least those deemed worthy of being listed on their website, shared this narrow expertise, broadened only by the time some of them spent as business consultants. In a post on the company’s blog today, Mr. Sacks announced 14 members of the “new executive team,” three of whom had experience in benefits, payroll or human resources before joining Zenefits:

  • Jeff Hazard, VP of Sales and Agency Principal Agent is in charge of all the company’s sellers. Previously Mr. Hazard was a divisional vice president of sales at ADP.
  • Colin Rogers, VP of Carrier Relations worked at Accenture Consulting helping develop their Consumer Driven Healthcare practice. He was also at Extend Health (now part of Towers Watson).
  • Josh Stein, Chief Compliance Officer served as senior vice president and general counsel at OptumRx, a part of UnitedHealth Group.

It will not be easy for Mr. Sacks to achieve his goal of changing the culture at Zenefits. Expanding his leadership team and include individuals who understand the services the company delivers to customers, however, shows he is serious and off to a promising start.