It has been difficult to predict what repealing and replacing the Affordable Care Act (ACA), the signature legislation from President Barack Obama, will mean for the public and for the insurance and pharmaceutical industries. The lack of Republican consensus behind a single alternative plan and the uncertainty of President-elect Donald Trump’s actions have turned any projection into mere speculation. However, recent Republican steps and political reality are now starting to help clarify what the likely outcome of “repeal and replace” may be.
Repeal Through a Special Budget Process
The highly partisan nature of the “repeal and replace” decision makes it very sensitive to what can be approved in Congress by a narrow majority. Any changes to the law can practically only be done through budget amendments to existing legislation, which can’t be held up by a filibuster by the strongly opposing Democratic minority. For this reason, the Republicans have initiated a special budget process that will provide an opening to make far-reaching changes to the ACA through a simple majority vote in both houses of Congress.
Following the special budget process has implications regarding what can and can’t be changed about the ACA. Margot Sanger-Katz broke it down nicely in The New York Times on Jan. 14. Here’s a summary of the main points with some additional commentary based on Paul Ryan’s and other alternative plans as they are debated on a daily basis:
- Elimination of marketplace subsidies: Subsidies of marketplace insurance premiums are likely to be eliminated if the ACA is repealed. Since a large proportion of Obamacare enrollees qualify for subsidies, the elimination of these subsidies will likely further skew the enrolled population to those with chronic conditions and heavy need for medical care. Regardless of the subsidies, insurance premiums are likely rise rapidly because the ACA’s repeal will further motivate healthy individuals to opt out. Republicans are considering tax credits to help U.S. citizens buy insurance, but the impact will likely be different from the subsidies for lower incomes as lower incomes are likely to benefit less from tax credits.
- Medicaid subsidies: A large part of the ACA’s impact has been the expansion of Medicaid (as well as its ability to increase awareness among already qualifying individuals), particularly within participating blue states under federal subsidies. It’s likely that Republicans will eliminate these subsidies and give more autonomy to states.
- Insurance mandate: The individual mandate—requiring most U.S. citizens to have health insurance coverage or to secure an exemption to avoid a tax penalty—was designed to ensure that there’s a mixed pool of insured individuals, which includes a representative share of healthy individuals. Elimination of the mandate will allow a further selection towards chronically ill individuals in the insured population pool. As a result, insurance premiums may rise dramatically beyond the impact of the elimination of subsidies under item No. 1. Republicans are considering allowing for substantial increases in premiums after coverage lapses to motivate healthy people to stay covered, rather than to wait until they get sick. The plan from Paul Ryan also would allow for certain population groups beyond employers to seek insurance under negotiated terms to reach a broader population with more favorable insurance terms.
- Medicare payment reform: The ACA includes a large number of initiatives to reform payment for medical services and provide incentives to improve quality, as well as to attempt to rein in costs. Accountable care organizations (ACOs) have further incentivized the integration of health services, such as integrated delivery networks and integrated payer-provider networks by providing shared savings to participants. It isn’t clear whether these changes will disappear under the repeal and potential disappearance of ACOs, and whether this would have an impact on similar ongoing changes in the private insurance sector. Cost containment is likely to remain a high priority, but it isn’t a given that the Trump administration will continue to push for CMS’s transition from fee-for-service to performance-based payments.
- Taxes imposed under the ACA: Additional taxes imposed to fund the additional healthcare subsidies may be repealed—including taxes on higher incomes, prescriptions drugs, medical devices and health insurance.
It may be clear from the above that the Republicans’ budget process is likely to emphasize the repeal of the ACA’s elements that currently receive direct federal funding. Republicans may hope to get more collaboration from some Democrats to re-institute select elements of the law that would practically require a 60% majority. Such collaboration may be more likely after the repeal, when many people are standing to lose their insurance. The question is whether Congress will prioritize solutions for the population over their partisan priorities of blaming the other side for failure. We certainly live in interesting times.
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