Featured Health Business Daily Story, Jan. 31, 2012

Republican Candidates Want to Repeal Reform, but Replacing It Would Be Messy

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.

By ,
January 23, 2012Volume 22Issue 3

If elected, each of the remaining four Republican presidential candidates has vowed to immediately pack up the health reform law and kick it to the curb. But some provisions of the law are popular with the public, and repealing the law, or even parts of it, could lead to significant new problems that Congress would need to fix.

“All of the scenarios out there are just a tangled mess. Then you also have to throw in the Supreme Court, and that makes it even more of a tangled mess,” says Bob Laszewski, a former insurance executive who heads the consulting firm Health Policy and Strategy Associates.

Former Massachusetts Gov. Mitt Romney — who championed his state’s health reform law upon which much of the federal reform law is based — has promised to issue an executive order “paving the way for waivers from Obamacare for all 50 states,” according to his website. He will then call on Congress to repeal the reform law.

“Repeal and replace” has been the mantra of Republicans since the health reform law was enacted nearly two years ago, and each presidential candidate offers relatively vague strategies for replacing it, based on a scan of their websites and speeches. Some of their strategies, such as association health plans, tax credits, tort reform and allowing health coverage to be sold across state lines, have been around for years.

“It’s important to remember that when the Republicans controlled Congress and the White House under [George W.] Bush, Republicans tried to pass all of those things,” says Laszewski.

Republicans Vow to Reform Reform

While he notes that there is “only so much you can glean from a bullet point,” Mike Franc, vice president for government studies at the right-leaning Heritage Foundation, says there appears to be a good deal of agreement among Republican candidates when it comes to health policy. “It seems clear that they want to move away from a third-party-based health care system to one where individual consumers have more control and power in how they access health care and who they purchase it from,” he tells HPW. Here’s a look at some strategies being proposed by Republican presidential candidates to reform the reform law:

  • Let consumers buy health coverage across state lines: Former House speaker Newt Gingrich (R-Ga.) says his administration would let Americans purchase insurance across state lines, which he says will increase price competition in the industry. But before such an idea can move forward, barriers such as guaranteed issue, state mandates and regional price variations for care would need to be torn down. The Health Care Choice Act of 2005, cosponsored by Sens. John Shadegg (R-Ariz.) and Jim DeMint (R-S.C.), proposed transforming 50 state health insurance markets into a single national market. The idea was part of Sen. John McCain’s (R-Ariz.) 2008 presidential health reform proposal.

  • Expand the use of health savings accounts (HSAs): Sen. Rick Santorum (R-Pa.) says his administration will “strengthen patient-driven health coverage options” such as HSAs paired with high-deductible plans. Gingrich says he would make HSAs available to Medicare and Medicaid enrollees. Rep. Ron Paul (R-Texas) pledges to make all Americans eligible for HSAs and “remove government-imposed barriers” to obtaining them. Laszew-ski says he’s not sure what more can be done to expand the use of HSAs, which were made available in late 2003 as part of the Medicare reform law. Although they have grown steadily over the past eight years, HSA-based health coverage still represents about 5% of the market, he says (see brief, p. 8).

  • Reform Medicare: Gingrich, Santorum and Romney — as well as Texas Gov. Rick Perry, who dropped out of the race Jan. 19 — propose increasing the eligibility age for Medicare. While Romney and Gingrich initially opposed House Budget Committee Chairman Paul Ryan’s (R-Wis.) plan for revamping the Medicare program, both candidates appear to agree with a revised blueprint that has support from Sen. Ron Wyden (D-Ore.). The Ryan-Wyden plan would allow seniors to choose between traditional fee-for-service Medicare and new private insurance programs that would use defined-contribution vouchers. Under Ryan’s earlier proposal, seniors would have received vouchers that they could use to purchase coverage. Franc notes that the Ryan-Wyden proposal can trace its lineage to the National Health Reform Act, a 1980 bipartisan proposal from Reps. Dick Gephardt (D-Mo.) and David Stockton (R-Mich.). That proposal included a defined contribution for Medicare, and President Ronald Reagan (R) proposed a similar approach for Medicare in his fiscal-year 1981 budget proposal, according to the Heritage Foundation. “The idea is radical in that it changes the status quo quite a lot, but it’s not radical in the sense that it’s brand new,” says Franc.

  • Issue block grants for Medicaid: Gingrich supports giving more power to states to define their Medicaid programs through the use of block grants. On his website, Santorum says the use of block-grant Medicaid would mean states won’t be “burdened by unfunded, crippling, one-size-fits-all federal mandates.” Romney supports block grants and says his administration also would offer the states resources to help the chronically ill.

If the Republicans win control of the Senate, maintain control of the House and win the White House, Congress could try to use the reconciliation law to identify reform-law provisions tied to the budget and pass a resolution to end them. A resolution needs only a majority vote.

The challenge, Franc says, might be in scoring a three-year-old law that projected deficit savings over 10 years. “At a technical level, it’s very achievable to go work through that reconciliation process and repeal a lot of the law,” he says. Even if President Obama is re-elected, congressional Republicans are likely to push for reforms to the Medicare and Medicaid programs, says Laszewski.

Court Decision Could Add a Wrench

If the Supreme Court rules against the reform law, or pieces of it, and Obama is re-elected, Congress will need to fix it…and that could make it worse, particularly if both houses of Congress are led by Republicans.

“If the Supreme Court throws out the Medicaid expansion [provision], for example, does that mean that suddenly people who would have been eligible for Medicaid [e.g., up to 133% of the federal poverty limit] are eligible for subsidies offered through an insurance exchange?” Laszewski asks. “That would cost a lot of money that’s not in the budget but is required under the law.”

Moreover, if the court determines the individual mandate is unconstitutional, consumers could wait to buy health coverage until they need medical care. “If they throw out the individual mandate, I don’t know how they can’t throw out the rest of the insurance reforms,” he adds.

While the Supreme Court has scheduled three consecutive days of oral arguments in March, the court might determine that it can’t issue a ruling until after 2014 when someone is fined for not having coverage. The federal Anti-Injunction Act prevents courts from undoing tax laws before they take effect.

Editor’s note: In a Jan. 10 blog post, Laszewski takes a look at the future of the reform law based on potential election outcomes and the Supreme Court’s ruling. Visit http://healthpolicyandmarket.blogspot.com.

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