Mark Weller

As Congress returns: health care fixes

After the Senate failed to pass a version of repeal and replace in late July, Senator Lamar Alexander (R-TN), chair of the Senate Committee on Health, Education, Labor and Pensions (HELP), announced there would be bipartisan hearings in September to try to develop legislation that would address some of the problems in the individual market in state exchanges. The first week after Labor Day, the committee will hear testimony from five governors and five state insurance commissioners on how Congress can help their states. The following week, the committee will hear from other stakeholders.

It is possible that Senator Alexander, along with the committee’s top Democrat, Patty Murray (WA), could craft legislation and try to insert it into a short-term appropriations extension or some other must-pass legislative vehicle that would continue federal payments for cost-sharing subsidies and provide states with the flexibility to attempt to bring down the cost of certain health care plans.

Medicare Extenders

Absent legislative action, certain health care-related provisions will lapse on September 30, 2017, and December 31, 2017. The expiring provisions relate to Medicare, Medicaid, the joint federal-state Children’s Health Insurance Program (CHIP), and private health insurance programs and activities.

Two broad categories of programs are at risk should Congress not act. The first type provides temporary funding, such as Medicare provider payments. The second type authorizes government agencies to act.

Funding for the CHIP program will be foremost among these issues, accompanied by a batch of additional expiring provisions expected to cost around $6 billion. Among these “extenders” is the physical, occupational and speech-language pathology (SLP) therapy cap exception process created by Congress in 2006. Others include funding for community health centers, diabetes programs at the Indian Health Service, teen HIV/STD prevention, and infant and early childhood visitation programs, among others.

CHIP

Mandatory funding for the Children’s Health Insurance Program (CHIP) is scheduled to expire on September 30, 2017. Congress created the program in 1997 and it currently covers over 8 million children. CHIP gives states financial support to expand publicly funded coverage to uninsured children who are not eligible for Medicaid. As a block grant, it provides states with a set amount of funding that must be matched with state dollars. If Congress does not reauthorize the program before October 1, the federal government will no longer be able to provide its payments to states. However, it is possible for states to continue to provide CHIP coverage for another two or three months beyond the expiration date.

 

Six ways the Senate Obamacare replacement plan differs from the House bill

After an eight year effort to dismantle Obamacare, Republicans are closer than ever to redesigning significant portions of the law. While the politics in the Senate are quite similar to those in the House debate–conservative senators want an aggressive repeal and centrists warn of cutting entitlements too much and too fast–the Senate discussion draft deviates from the devastatingly unpopular House-passed bill in six significant ways.

Changes to Medicaid Expansion. Senate centrists oppose the House Medicaid cuts, including a phase out beginning in 2020 of the extra money the federal government has provided to states as an incentive to expand Medicaid program eligibility. The Senate discussion draft would gradually phase out the Medicaid match rate after seven years, not three, through 2024. This important modification should satisfy Republican senators from the 31 states that agreed to expand Medicaid coverage.

Changes in Subsidies, Tax Credits. The House bill replaces Obamacare’s income-based subsidies to help the poor buy insurance on the exchanges with refundable tax credits based on age. Critics argue the House tax credits would make health insurance substantially less affordable since the credit would not increase when premiums increased and there are not additional monies for those in higher-cost areas. The Senate measure uses people’s income, age and geography as the benchmark for helping those without workplace coverage to buy private insurance. The discussion draft also extends Obamacare subsidies down to 0 percent of the FPL which moderates asked for to make sure those cycling off Medicaid expansion would be eligible for the subsidies. However, opponents say the Senate bill could be further improved if it made tax credits more generous, particularly for older patients. The Senate draft set the income threshold at which credits are phased out at 350 percent of the federal poverty level ($42,210), a reduction from the 400 percent of FPL cap in Obamacare and a substantial reduction in general from the $115,000 cap in the House bill (with a gradual phase-out beginning at $75,000).

Modifies Preexisting Condition Provisions. The House bill was criticized for ripping away Obamacare’s protections for people with preexisting conditions. The politics got far ahead of the reality (the House bill includes essential health benefits and community rating), but the House plan did give states the option for applying for waivers from these two provisions if they can show the waivers will lead to lower premiums and broader coverage.  The Senate discussion draft leaves in place the popular ObamaCare market protections like pre-existing condition protections, community ratings and essential health benefits. But the Senate draft also broadens the flexibility available to states under the ACA’s Section 1332 waivers including opting out of essential health benefits. Critics question whether the Section 1332 waivers set a higher barrier for states as compared to the House structure. However, Health and Human Services Secretary Tom Price has assured Senators that he has plenty of administrative flexibility in the 1332 waiver process to accomplish the goals the Republican conference are seeking.

Extends Cost Sharing Reduction (CSR) Subsidy Payments.  The Senate discussion draft would provide money to insurance companies to offset the out-of-pocket costs for millions of lower income individuals through 2019. The “cost-sharing” reductions (which prompted a 2014 lawsuit from the House of Representatives) are available to the approximately 7 million consumers who fall between 100 percent and 250 percent of the poverty line to cover co-pays and deductibles. The House passed bill eliminates the CSR subsidies entirely. The Trump Administration has been threatening to discontinue these payments ($135 billion projected 10 year cost), and some insurance companies have cited uncertainty as a reason they are abandoning some markets and raising premiums.

Establishes a Short-Term Stabilization Fund. The Senate bill appropriates $50 billion over four years to try to stabilize ObamaCare’s exchanges. More specifically, the language seeks to “fund arrangements with health insurance issuers to address coverage and access disruption and respond to urgent healthcare needs within states.” Critics like Senator Rand Paul (R-Ky.) say the stabilization funding is a “new entitlement.” The stabilization money, combined with the continuation of ObamaCare’s cost-sharing reduction subsidies through 2019, have lead some conservatives to say the bill keeps too much of ObamaCare in place.

Creates Association Health Plans. The Senate discussion draft includes a provision that would allow small businesses to purchase large group coverage through associations largely free from state insurance regulation. Insurers could offer coverage regulated as large group coverage to small employers through these association plans, encouraging a Trump campaign promise to allow the sale of insurance across state lines. The House bill did not include these provisions, although the House has passed association health plan legislation in the past. It’s likely this provision will face a point of order challenge to being included in reconciliation since it’s an insurance provision that affects neither government revenue nor outlays.

Contrary to statements that the House bill was dead on arrival in the Senate, the new discussion draft does not rewrite the House bill – it simply modifies some of the more unpopular House provisions.  Leader McConnell has considered how to fix the troublesome parts of the House bill so it will pass the Senate.  He’s accomplished the first goal of tacking the unpopular House provisions, even as the politics surrounding Senate passage remains a challenge.

For Republicans who have made erasing ObamaCare a marquee pledge, failure in the Senate is not an option. And for millions of Americans who will suffer as the ObamaCare markets continue to deteriorate, failure is not an option, either.

Why repealing Obamacare is proving so difficult

“Do not confuse motion and progress. A rocking horse keeps moving but does not make any progress.” Alfred A Montapert

Alfred Montapert’s quote about not confusing motion and progress is an apt description of current House effort to get the failed Obamacare replacement process–one of the most significant setbacks for the Trump Administration–back on track.  The behind-the-scenes negotiations to craft a new version of the House GOP replacement bill have yet to produce progress on a consensus bill.

Republicans are struggling to repeal and replace Obamacare for three primary reasons. First, the stated goal of providing better coverage at a lower cost is exceedingly difficult if not impossible. Second, without Democratic support, Republicans face procedural rules that limit the scope of what can be changed. Finally, the Republican Caucus is not monolithic and deep policy disagreements  among hardliners and moderates have made consensus challenging.

First, President Trump has said he wants to broaden healthcare access and provide better coverage for Americans at a lower cost. But these goals are inconsistent. The Affordable Care Act created new markets for the uninsured – with subsidies for those with moderate incomes to make insurance affordable – and it offered the states money to expand the Medicaid programs. But it’s simply not possible to roll back coverage and not affect healthcare access. Also, it’s equally difficult to improve access or coverage without increasing beneficiary out-of pocket or federal costs. Americans across the political spectrum support health coverage for the uninsured and a legislative push to reduce Obamacare’s substantial costs will ultimately impact beneficiary coverage. This is one of the reasons that curtailing entitlements is politically challenging.

Second, Obamacare repeal faces procedural barriers. Many Republican candidates campaigned on complete repeal of Obamacare. The fact remains that full repeal of Obamacare would take 60 Senate votes to overcome a Democratic filibuster.  To counter Democratic opposition, Republicans can proceed under budget reconciliation procedures that end filibusters with only 51 votes. However, those procedural rules limit provisions to items that directly affect federal revenues or outlays. Under Senate reconciliation rules, various insurance market reforms are prohibited. House conservatives bristled at the idea that key elements of Obamacare were not repealed under Speaker Ryan’s American Health Care Act (AHCA). They could not understand why an unelected Senate Parliamentarian should decide the content of their Obamacare repeal legislation.

The second time around we expect to see a House bill that is much broader in scope, the reconciliation rules be damned. The current House thinking appears to be to repeal portions of the ACA and attempt to lower costs regardless of whether those provisions impact outlays. Under this approach, the House will pass a broader bill and let the Senate figure out the budget procedures.

Third, consensus on how to proceed in the House remains elusive. Several modifications to the Ryan’s AHCA replacement have been discussed. First, conservatives are particularly interested in rolling back Obamacare’s essential health benefit requirements, which they believe dramatically increased health premiums. The White House conceding to repeal the essential health benefits in the AHCA caused problems with Republican moderates. Second, conservatives are pushing for state flexibility on Obamacare’s “community rating” provisions which require insurance companies to charge the same premium price to individuals regardless of health condition.  The new bill likely will give state waivers from ACA insurance if they can show that exemptions would improve coverage and lower costs. However among non-Freedom Caucus Republicans, there’s opposition to changes that would let insurers charge higher premiums to older adults, and many disapprove of cuts to Medicaid for low-income people. Third, moderates had raised concerns about the prior bill replacing the ACA’s subsidy system – created to help low and some middle income families purchase insurance on the state exchanges – with refundable tax credits.

On the advent of President Trump’s Inauguration, we expected a drawn out Obamacare fight between Republicans and Democrats, but not a major fight within the GOP. Obamacare repeal efforts in the House are far from dead. Speaker Ryan reminded participants in a donor event in Florida before Easter that Obamacare repeal and replacements were a major campaign promise made by President Trump and scores of GOP members in last year’s election. But Ryan’s AHCA was criticized for making the individual insurance market even less stable than under Obamacare. And every concession to Republican hardliners created additional problems for moderates, which is one reason Ryan’s AHCA failed to gain traction. Health care changes may slip on the national agenda but will reemerge because the ACA’s problems are not going away. The trick is to craft Obamacare alternatives that prove to be more popular- and that can pass Congress.

Medicaid the lynchpin in Obamacare replacement debate

As Obamacare replacement legislation moves through the House and Senate, one issue will continue to shape the debate: the level of Medicaid spending which impacts more than 72 million low-income Americans.

The battle lines within the Republican caucus are clearly drawn. At the conservative side of the spectrum, Freedom Caucus members see the House replacement legislation as too much like Obamacare and they chafe at the provisions that allow states to continue to expand Medicaid until 2020. Moderate Republicans, and several senators representing the 31 states whose Republican governors took the ACA’s expanded Medicaid funding, balk at the idea of rolling back Medicaid coverage and significantly overhauling the program. At stake is a large portion of federal spending and perhaps the success or failure of Obamacare replacement legislation.

Why are the Medicaid provisions important?

Obamacare addressed the U.S. health insurance marketplace in two major ways. First, in the individual insurance market (for those not receiving insurance through their employer, Medicare, the VA or Medicaid), Obamacare provided people earning less than $30,000 generous subsidies to lower health premiums and deductibles. Over 85 percent of people enrolled in Obamacare exchange plans receive subsidies which help keep premiums to no more than 9.6 percent of their income. In 2016, those subsidies averaged $291 per month.

Second, provisions in the 2010 Obamacare law also expanded Medicaid eligibility and funding. Legal residents with incomes up $16,400 a year could qualify for coverage. The federal government paid 100 percent of the cost of Medicaid eligibility expansion in 2014, 2015, and 2016. Under current law, the federal government would pay 95 percent of Medicaid expansion in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond.

The current House Republican bill goes beyond just changing the individual health insurance market. It freezes the Medicaid expansion and changes the way its funded by sending states a fixed amount of money per enrollee, known as a per capita cap. The proposed changes are significant because of the 23 million Americans who have received health coverage under Obamacare, over 12 million received coverage from the ACA state or federal health exchanges. The remainder – around 11 million of the newly enrolled since 2010 – obtained coverage from the ACA’s Medicaid provisions and enhanced federal match. Almost half of those who have received health coverage under Obamacare have done so under Medicaid expansion.

Conservative concerns with Obamacare’s Medicaid expansion. For some Republicans, Medicaid expansion is not as problematic as mandated coverage provisions and the requirement that all health plans contain certain essential benefits. But deficit hawks face a vote on a stop-gap funding bill for fiscal 2017 that currently expires on April 28. The Trump Administration is also advocating for a 10-year $1 Trillion infrastructure bill with no apparent pay-for and a tax reform bill likely to increase the deficit. Simply put, Republicans who think Congress has done little to reduce long-term debt have difficulty overlooking Obamacare’s Medicaid expansion given the current opportunity to curtail health spending.

Moderate concerns with the Replacement Bill’s Medicaid cuts. The counter argument, which is the foundation of Democratic opposition to Obamacare repeal, is that the House proposal would reverse recent gains and increase the ranks of the uninsured. Opposition to the Republican replacement plan has gained momentum since the CBO predicted that House bill would cut the deficit but also reduce the number of people with health coverage by24 million over the next decade. CBO said the House replacement plan would cut Medicaid spending by a quarter over the next 10 years, a reduction of $880 billion. The predicted drop in coverage is also due to the less generous GOP tax credits for those receiving subsidies under current law and resulting increased premiums for those in the individual marketplace.

Medicaid and the House Bill

The original House bill that was approved by two key House committees, would freeze Obamacare’s Medicaid expansion in 2020. As noted, instead of the current open ended entitlement, states would also get a capped payment based on Medicaid enrollment in an effort to make federal Medicaid spending limited and predictable.

The House committee debate illustrated the divide over Medicaid in the Republican caucus. One provision in the House bill was designed to placate Republican governors in Medicaid expansion states. The provision gives expansion states two more years to enroll the expansion population. Conservatives do not like the additional time, because they argue other states will rush to expand and therefore increase the size of the Medicaid program. Former Committee Chairman Joe Barton (R-TX) offered and then withdrew a conservative Republican Study Committee amendment during the Energy and Commerce Committee mark-up that would have frozen Medicaid enrollment under Obamacare in 2018, not 2020.

To help win over fiscally conservative Republican governors who did not take advantage of the Obamacare federal dollars to expand Medicaid, another House bill provision authorizes $10 billion over five years. A state’s funding share would be determined by the percentage of residents in the state with incomes under 138 percent of the federal poverty limit.

What to expect over the next 60 days

Republicans find themselves in a political box. They can’t renege on campaign promises to repeal Obamacare. Repeal was core to President Trump’s campaign and there is no excuse for not replacing the law given House and Senate majorities in Congress. But the replacement bill has policy implications that could bring political consequences for Republicans in 2018, 2020 and future elections.
Two House bill developments are likely over the next 60 days.

  • Bill revised before House consideration. Speaker Ryan has acknowledged that the House bill will be amended before it comes to the floor. He can only afford 21 Republican defections with no Democratic support for the bill. Speaker Ryan and VP Pence have floated changes to the House bill, and general agreement was reached March 17 on two significant modifications. House conservatives and the White House agreed to give states the option to impose work requirements on Medicaid recipients. States also will have the option to receive block grants instead of the per capita cap. There could be additional revisions to move up the Medicaid expansion freeze by one year to 2019. Republicans also are considering dropping a provision to charge higher premiums for people who have a gap in coverage lasting longer than two months.
  • Revised House bill squeaks by the House; bogs down in the Senate. Changes to shore up conservative support are likely to alienate moderates. There will likely be additional revisions in the Senate as leadership reaches out to moderates. Again, the Medicaid provisions loom large. (See Senator Portman and other moderate Republican’s letter to Senate Majority Leader McConnell.) We expect to see an increase in the tax credits currently in the House bill to help individuals purchase insurance along with other changes if those changes are not included in the House-passed bill.

Leadership will attempt to balance competing demands in the Republican caucus and the political reality of reductions in federal health care spending inevitably leading to higher rates of people who will be uninsured, including those currently on Medicaid. If Obamacare replacement legislation falters, it will be a political debacle for Republicans and fracture the Administrations relationship with Congress. The consequences are significant for a new President who wants to quickly pivot to tax reform and infrastructure investments. President Trump has talked about an open negotiation, which means he’s willing to do what he needs to do to reach the 216 vote threshold in the House (with two vacancies).
After heated debate and delay in the Senate, we expect the Obamacare repair to pass the Senate but it won’t be pretty. And the political stakes are high. Health care can be complicated, who knew?

Obamacare repair, not replacement: more than a change in messaging

Last week Republicans on the House Energy and Commerce Health Subcommittee held a hearing on four Obamacare replacement bills. The move is consistent with recent Republican leadership comments that  they plan to replace the Affordable Care Act with a series of small measures instead of one major replacement bill.

But at the same time President Donald Trump in a Fox interview said that an Obamacare replacement may take until 2018. And now House Speaker Paul Ryan leading committee chairs are saying they want to “repair” the ACA, not “repeal and replace” the law.

Legislating is hard

What’s going on here? The President is acknowledging what many policy makers already knew. Despite the campaign rhetoric that Obamacare would immediately be repealed and replaced, the process could have serious political repercussions if not done right.

There appears to be general agreement about moving away from the ACA’s insurance benefit mandates.  Also, the aforementioned House subcommittee explored popular issues like how to deal with people with pre-existing health conditions, how to spur people to keep continuous coverage throughout their lives, and loosening age-rating bands. Alongside Democratic taunts that Republicans don’t know what to do after the “dog has caught the car,” or in some versions is actually trying to drive the car, the simple fact is finding a consensus on how to replace the ACA will take longer than expected.

 Individual mandate is instructive

The repeal of the individual insurance mandate provides a perfect example of the dilemma Republicans face. The mandate that individuals purchase health insurance or face a penalty is a core feature of Obamacare. Republicans hate mandates and see the provision of as symbolic of Obamacare overreach in attempting to correct deficiencies in the individual insurance market.

There is broad agreement that the law should bar insurers from discriminating against people with medical problems as long as they remained enrolled in an insurance plan. But if you eliminate the mandate that people buy insurance, you’re left with a worsening and dysfunctional market that attracts high risk enrollees and leaves insurers with a pool customers who are older and less well.

To cover those with existing health conditions, Republicans have floated the idea of continuous coverage–requiring everyone to maintain health coverage throughout their lives–although that sounds like a mandate to many and the GOP is still figuring out how to do it. Other ideas like levying a surcharge on those who fail to sign up for insurance or to automatically enroll individuals eligible for subsidized coverage who don’t signup don’t sit well with the conservative wing of the GOP.

Crowded Congressional Calendar

The Congressional calendar looms large in the analysis of how to repair or replace Obamacare. During the Republican retreat in Philadelphia Speaker Ryan said he planned to bring the a budget reconciliation package–that requires only 50 votes to pass rather than the usual 60–to the House floor by the end of March. This measure is expected to contain repeal and some replacement elements.  But a leaked recording from the same GOP retreat last month shows a party that remains divided and uncertain about how to move forward.

The delay on ACA “repair” pushes back legislative activity on almost every other priority. In addition to action on Obamacare, Republicans want to address an overhaul of the tax code and a massive infrastructure bill.  On top of that, Republicans hope to pass all 12 fiscal year 2018 appropriation bills before Oct. 1 —including funding for a wall on the Mexican border. Congress hasn’t passed its appropriations bills in two decades. In addition, there are several must-pass deadlines. Congress needs to fund the government before money runs out on April 28 and raise the debt ceiling by this summer. There is widespread concern that Trump and GOP leadership have simply identified too many big-ticket, politically thorny items to tackle in year one.

On Obamacare, expect a drawn out fight, not just between Republicans and Democrats but within the GOP. The Obamacare alternatives being considered may not prove any more popular.

Trump names turn-around pro Ross for Commerce

The selection this month of billionaire investor Wilbur Ross as Commerce Secretary designate continues a notable trend for President-elect Donald Trump, who has almost singularly eschewed conventional experience in government in favor of success in the private sector.

Ross, who served as chairman and founder of the private equity firm WL Ross and Co, is something of a turn-around specialist. His estimated $2.9 billion net worth was acquired through the purchasing of troubled companies in industries such as steel, textiles, coal, and auto parts and restructuring them. In 2002, he combined several troubled steel companies, including Bethlehem Steel, Republic Steel and LTV Steel, into the International Steel Group. He later sold that company to Mittal Steel.

Ross was a political donor and longtime associate of the president-elect, helping Mr. Trump turn around his Taj Mahal casino company after it went bankrupt in the early 1990s.

Ross supports corporate tax reform to reduce pressures from foreign competition. Like Trump, Ross has criticized free trade deals in the past. The Department of Commerce main’s purpose is to create jobs and promote economic growth. Commerce oversees the country’s international trade rules and operations as diverse as the Patent and Trademark Office and National Oceanic and Atmospheric Administration.

The man behind the man behind the man: Pence chief Josh Pitcock

Vice President-elect Mike Pence this week named longtime aide Josh Pitcock to serve as chief of staff. The mild-mannered Pitcock is one of Pence’s longest-serving staffers, dating to the vice-president-elect’s time in the US House before eventually rising to the role of chief of staff for the then-congressman.

After Pence’s election as governor of Indiana in 2012, Pitcock remained on special detail in Washington to serve as the state’s federal lobbyist. During the presidential campaign and transition, Pence again leveraged Pitcock to serve as a senior policy advisor.

With the incoming president’s relative lack of Beltway experience, veteran Washington hands believe that Pence, as a skilled legislator, will play an increasingly pivotal role in the new administration as a liaison between sometimes-fractious congressional Republicans and the White House. That added responsibility for Pence fostered the expectation, both within and without the transition, that Pitcock would assume the top post, given his closeness to the vice-president elect and his experience in navigating the pitfalls of the Capitol Hill.

Pitcock is a graduate of DePauw University in Indiana and earned his law degree from Wake Forest University.