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Health Care and the Midterm Elections

By Dr. David C. Pate, News and Community
January 6, 2015

Last week, I shared thoughts on what I think will happen this year in health care. I also wanted to share my thinking about the role of the midterm elections. This fall, Republicans took control of the Senate and increased their majority in the House. Now what?

Affordable Care Act

There are those who will push for a repeal of the Affordable Care Act, but the president would veto any such bill, and though Republicans took control of the Senate, they did not attain enough seats to override a veto. So while there may be symbolic votes, from a practical perspective, the ACA  is here to stay, at least until 2016.

That said, repeal of portions of the ACA and various tweaks could happen. Republicans have indicated a desire to repeal the medical device tax and assuming that they can come up with another source to replace this lost revenue, repeal without the threat of veto should be possible.

Republicans have also opposed classifying workers who work 30 hours or more per week as full-time for purposes of the employer mandate, and they could push to redefine full-time as those workers working at least 40 hours per week. Employers would be very supportive and while Democrats would not like this, I think Republicans may be able to get this through without a veto; I'm less certain of this than the medical device tax, however.

It is likely that the Republicans will try to repeal the entire employer mandate, which they see as a step toward a single-payer health care system. It is arguable how much effect this will have if successful, given that small employers were exempt from the mandate and increasingly are routing their employees to the individual insurance exchanges while  larger employers are expected to continue to offer health insurance benefits, though with continued cost-shifting to employees,  increasing deductibles, and the increasing use of private exchanges. Any effort to repeal the individual mandate is certain to face a veto.

A piece of the ACA that to my knowledge, neither party likes, is the Independent Payment Advisory Board (IPAB), a board that has not yet been appointed. The IPAB membership criteria make it difficult to find members who will be willing to serve. The IPAB is charged with recommending measures to counter increases in rates of healthcare spending that go into effect unless Congress intervenes.

The Sustainable Growth Rate (SGR) Fix

The Sustainable Growth Rate (SGR) formula has been used to make cuts to the Medicare physician fee schedule in response to increases in physician healthcare expenditures.

Expenditures have risen in most every year since enactment of the SGR, and cuts identified, but Congress has intervened each year to thwart these cut, fearing that too many physicians would drop out of the Medicare program. Cuts now have accumulated to the point that physicians face a 21.2 percent cut in March of 2015, when the latest SGR patch runs out.

Elimination of the SGR formula would likely find bipartisan support; the tough part is arriving at what would replace the $130 billion to $140 billion in savings that the SGR would have created if left intact. This could be an opportune time for Congress to act to begin the transition from fee for service to a pay-for-value system of reimbursement and to abandon the unpalatable SGR.

Children’s Health Insurance Program (CHIP)

CHIP was reauthorized in the ACA, but only through 2015. Had Medicaid expansion gone through as originally intended in the ACA, the need for CHIP might no longer exist. However, given the minority of states that have expanded, and the re-election and a few pick-ups of Republican governors, CHIP will be needed, and is likely to get bipartisan support.

Medicaid Reform

Republicans in the Paul Ryan camp favor Medicaid block grants. This would serve the goals of Republican fiscal policy and debt reduction, but likely increase the pressure on fragile state budgets.

Meanwhile, newly elected Republican governors may look to repeal their states’ Medicaid expansions, and re-elected Republican governors will either continue to fight Medicaid expansion or look to waivers from the federal government to enact Medicaid reforms that still allow their states to receive the enhanced federal dollars for expansion.

Medicare Reform

Republicans will want to look at how to cut back on entitlement reforms while not losing support in the 2016 presidential election. Therefore, reforms are not likely to be highly aggressive, especially at a time when healthcare spending has slowed and Americans still feel as though the economy has not recovered.

So we may see efforts to consolidate Medicare Parts A and B and more incentives to drive more people into the Medicare Advantage plans (Part C), but I don’t foresee much else.

The Sleeper Issue

The three “R”s – risk corridor, risk adjustment, and reinsurance – provisions of the ACA are critical to suppressing insurance premiums on the state and federal exchanges, by shielding insurance companies from disproportionate risk and financial losses due to adverse selection for the first three years of the exchanges. We are just starting year two. The prediction is that once these protections go away, insurance premiums will increase, by up to 50 percent. If true, that will destabilize the exchange markets.

Republicans dislike these provisions because they are seen as a bailout for insurance companies. If Republicans voted to repeal these provisions, it's likely the president would veto. But while an extension was possible in the last Congress, I suspect it is impossible now, and for those of us trying to transform health care, that is a good thing.

Why this is important? At St. Luke’s, we often talk about the “yellow box," the period of time during which the proportion of fee-for-service contracts is going from 100 percent to an end-point in which most contracts are at-risk or pay for value. This transition time is very difficult for healthcare providers because rewards under one system of reimbursement are often penalties under the other, and vice versa. Therefore, for those providers that want to be in the new business model, contracting and not prolonging the yellow-box period is best.

In my view, the longer the three Rs remain in place, the slower the transition to value-based payment methodologies, prolonging the yellow box. That is not good, for us, for our communities, or for our patients.

About The Author

David C. Pate, M.D., J.D., is president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.