Health Care after the 2012 Election

After nearly two years of constant campaigning, almost $6 billion in total spending on federal elections, and hearing the words “I approve this message” more than we ever wanted, the 2012 election is finally over. Now what? For health policy, maintaining the status quo in Congress and the White House means much more certainty for the health care industry about the policies that will shape the future of the health care landscape.

Moving forward, the election brings the following issues and challenges to the forefront of the health policy world:

• A new potential for bipartisan compromise
• A muddled verdict on voter preferences for Medicare reform
• An emphasis on the states for the implementation of the Patient Protection and Affordable Care Act’s (PPACA) insurance exchanges and Medicaid expansion
• The health care industry’s shifting focus from expanding insurance to reining in medical costs
• PPACA’s guaranteed survival

New Potential for Bipartisan Compromise

With rejuvenated political capital and a new session of Congress ahead, President Obama’s reelection gives him the opportunity “to make bold leadership moves toward a bipartisan compromise on health care and the economy.” The fiscal cliff, an automatic set of major tax and spending policy changes beginning January 1, 2013, has put ample pressure on both sides to realize their wishes of bipartisanship.

Immediately after the election, both President Obama and Speaker Boehner made statements expressing such a willingness to work together on spending, debt, and health care entitlement reform:

– On November 8, Speaker Boehner stated that the alternative to going over the Fiscal Cliff involves making “real changes to the financial structure of entitlement programs, and reforming our tax code to curb special-interest loopholes and deductions.”

• He went on to explain that “for purposes of forging a bipartisan agreement that begins to solve the problem, we’re willing to accept new revenue, under the right conditions… In order to garner Republican support for new revenues, the president must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt.”

– The next day, President Obama stated: “I intend to work with both parties to do more, and that includes making reforms that will bring down the cost of health care, so we can strengthen programs like Medicaid and Medicare for the long haul.”

• President Obama argued further that “if we’re serious about reducing the deficit, we have to combine spending cuts with revenue. And that means asking the wealthiest Americans to pay a little more in taxes… I want to be clear, I’m not wedded to every detail of my plan. I’m open to compromise. I’m open to new ideas… but I refuse to accept any approach that isn’t balanced.”

The fiscal cliff rhetoric from President Obama and Speaker Boehner – the main two players in the negotiations – signals a renewed attempt at a bipartisan approach of increased revenues on the wealthy, reduced discretionary spending, and reforms to the cost of Medicare and Medicaid. To help both parties reach an agreement, the Bipartisan Policy Center (BPC) has proposed clear action the 112th Congress can take in the lame duck session to avoid the “fiscal cliff” and establish a framework for achieving comprehensive reforms in 2013.

Muddled Verdict on Voter Preferences for Medicare Reform

By preserving the current balance of power, the election – which brought Paul Ryan’s premium support plan to the national spotlight – did not clearly give either side a mandate on reforming Medicare. BPC Senior Vice President Bill Hoagland observed that “the result is muddled… The Democrats’ complaint [on premium support] didn’t have much leverage. But the result will be short of an endorsement [of the reform plan] by voters.”

Regardless, barring interruption to PPACA’s implementation, Medicare will undergo significant changes under the law as:

• New consumer health coverage protections are instated
• Preventive care benefits are increased for Medicare recipients
• The Independent Panel Advisory Board (IPAB) is created to make recommendations to Congress to restrain Medicare spending that do not directly affect beneficiaries
• $716 billion in reductions to Medicare’s future payments to insurers and providers are implemented from 2013 to 2022. These cuts will not target current retirees’ benefits or eligibility. Instead, the reductions focus on payments to private insurers given through Medicare Advantage and bring down the projected growth of Medicare reimbursements to hospitals, insurance companies, and drug manufacturers. The federal government’s total Medicare spending will still increase annually, but at a slower rate

States Weigh in on PPACA’s Insurance Exchanges and Medicaid Expansion

Now, the primary focus of PPACA implementation shifts to the states. Governors and state lawmakers have crucial decisions to make on whether they implement PPACA’s state health insurance exchanges and Medicaid expansion.

Insurance Exchanges

As noted previously, states must implement these exchanges in one of three ways: 1) setting up and running their own state-based exchange, 2) forming a partnership exchange with the federal government, and 3) opting for a federally-facilitated exchange operated by the Department of Health and Human Services (HHS).

HHS originally required states to submit an “Exchange Blueprint” by November 16, 2012, outlining which insurance exchange option the state prefers. In a letter to state governors on November 9, 2012 and a follow up letter to the Republican Governors Association on November 15, HHS Secretary Sebelius extended this blueprint deadline to December 14, 2012.

These insurance exchange deadlines have caused problems for many states – mostly Republican – that waited until the election to take action in hopes that Governor Romney would win and repeal PPACA. Post-election, many health care lobbyists are shifting their attention away from federal agencies and Capitol Hill to the 50 state legislatures responsible for building their health insurance exchanges.

Check out Kaiser Family Foundation’s interactive up-to-date map to see where states currently stand on health insurance exchanges.

Medicaid Expansion

As previously discussed, the Supreme Court’s ruling on PPACA established that states are no longer required to expand Medicaid coverage to those earning up to 133 percent of the federal poverty level (FPL). Of the 32 million who stood to gain coverage under PPACA, nearly 17 million – half – were supposed to be covered by Medicaid. With the expansion now optional, it is up to the states to decide who will be covered.

Unlike with the insurance exchanges, HHS abstained from setting a deadline for states to make their choice on the Medicaid expansion. States and the federal government have many conflicting incentives at stake in making decisions on the Medicaid expansion. The federal government has economic and political incentives to see all 50 states fully expand Medicaid to 133% of the FPL. States, in contrast, have split incentives to either 1) expand fully for the sake of their uninsured, hospitals, and providers, 2) opt-out for cost considerations, or 3) push the federal government to allow a partial-expansion.

Check out the Advisory Board Company’s updated map to see where states currently stand on the Medicaid expansion.

Health Industry Shifts from Expanding Insurance to Reining in Costs

Karen Ignagni, President and CEO of America’s Health Insurance Plans, reports that with the presidential election decided and PPACA set to increase coverage through the insurance exchanges and Medicaid expansion, the health care industry will change its focus from expanding the insurance market to reining in health care costs.

Ignagni elaborates that “[successful reform means] making sure that care is affordable a year from now and making sure that employers who are providing coverage and individuals who are buying are not disrupted.”

Alongside the health care industry, BPC is working to address the critical issue of rapid, unsustainable health care cost growth. Led by former Senate Majority Leaders Tom Daschle and Bill Frist, former Senate Budget Committee Chairman Pete Domenici, and former Congressional Budget Office Director Alice Rivlin, BPC’s Health Care Cost Containment Initiative is exploring and evaluating strategies to contain health care cost growth on a system-wide basis that have the greatest potential for bipartisan support and political success in 2013. The initiative’s recommendations will focus on improving the quality of care, making health insurance affordable, supporting personal responsibility, and developing a sustainable approach to health care financing.

Conclusion: PPACA Survives

Above all, President Obama’s reelection and the sustained Democratic majority in the Senate guarantees PPACA’s survival. With only a majority in the House of Representatives now, Republican hopes of fully repealing PPACA are no longer realistic. Speaker Boehner confirmed this himself when he remarked recently that “Obamacare is the law of the land,” indicating that while the GOP remains opposed to the law, the House will not attempt to fully repeal it anymore.

In immediate terms, as outlined by Ignagni, “the reelection of President Obama gives the [health] industry certainty that PPACA’s implementation will proceed.”