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St. Luke’s Health System’s Journey to Transform Health Care

Understanding ‘Repeal and Replace’: a Racing Form for Trumpcare

Horse Race
By Dr. David C. Pate, News and Community
February 16, 2017

Editor’s note: St. Luke’s Health System President and CEO Dr. David Pate prepared the following primer on the factors and potential components of healthcare legislation being considered on the federal level and their chances of success. This is one part of a two-part package that analyzes those elements and their chances. See the companion reference for more detail about each element. 

- Roya Camp


Repeal and Replacement of the Affordable Care Act

In early January, Congress took the first step in a process to repeal and replace the ACA by passing a FY 17 budget resolution in both the House and the Senate to instruct four committees (the Senate Finance and Health, Education, Labor and Pensions committees and the House Energy & Commerce and Ways & Means committees) to write budget reconciliation bills to repeal portions of the ACA that are subject to the reconciliation process (provisions directly impacting spending, taxes and debt) and to include replacement provisions, with a deadline of Jan. 27.

That deadline has come and gone without replacement bills, which is neither surprising nor concerning. Reconciliation bills would then go to the Senate and House Budget committees to draft a single bill for each body.

Racing Form

Those bills would then go to the Senate and House, respectively, for votes that require only a simple majority for passage, and from there to a conference committee to derive the final reconciliation bill. That bill would go to the president, but would not require his signature and would not be subject to veto.

First, the talk was that the ACA would be largely repealed through reconciliation and executive orders, but with an effective date out two to three years to allow for the development and enactment of a replacement bill.

The consensus then changed to the simultaneous, or nearly simultaneous, occurrence of both repeal and replacement. Now, most indications seem to be repeal through reconciliation and executive orders, with bite-size replacement bills passed addressing portions of the ACA.

Most recently, we have heard Senate Finance Committee Chairman Orrin Hatch (R-Utah), Senate Health Committee Chairman Lamar Alexander (R-Tenn.) and House Energy and Commerce Committee Chairman Greg Walden (R-Ore.) make references to “repairing” the ACA. On Super Bowl Sunday, President Trump indicated that repeal will take some time, “maybe it’ll take ‘till sometime next year.”

The more conservative among the Republicans have expressed concern that the full repeal movement is losing momentum and that there are not yet firm ideas and plans for how to get to full repeal and replacement.

In responding to the president’s comments, Sen. John Cornyn (R-Texas), the Senate’s second-highest ranking Republican, emphasized that the initial repeal bill under reconciliation is just the beginning of the repeal process and that a series of smaller bills would follow.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters that his committee is still working toward the speaker’s timeline of moving repeal legislation by the end of March.

Here is my overview of the various healthcare reform proposals and bills that we are starting to see and how I would score their likelihood and desirability on a scale of 0 to 10, with 10 being the most likely/desirable. Explanations, implications and a discussion of how likely they appear to be to end up in the replacement law appear in the accompanying post.

These are my personal opinions; St. Luke’s has not taken any official position on any of them.

Click on any element to learn the details.

ELEMENT

IMPLICATION

LIKELIHOOD

DESIRABILITY

1. Universal Access

Too vague to assess

2

8

2. Guaranteed issue

Allows coverage for preexisting conditions

10

10

3. Employer mandate

Requirement for employers with more than 50 employees to provide ACA-compliant health insurance to their employees

0

2

4. Allow children to remain on their parent’s health plan until age 26

Increases the number of generally healthy young people who have insurance coverage

10

7

5. High deductibles

Increases the patient responsibility for healthcare spending

4

0

6. Annual and lifetime caps

Eliminates the caps on insurance benefits

5

9

7. Decrease essential health benefits

Promotes greater choice of benefits

10

3

8. Health savings accounts

Gives more control to/creates more accountability for individuals over their healthcare spending

9

4

9. Refundable tax credits

A funding mechanism to assist individuals in paying their healthcare premiums and costs

9

4

10. High risk pools

Ensures coverage for certain people with very high-cost preexisting illnesses and decreases the risk for commercial insurers

6

5

11. Association health plans

Allows small businesses to come together to spread risk

5

7

12. Increase age rating band

Allows insurers to charge less to younger insureds and more to older insureds

8

8

13. Restrictions on special enrollment periods (SEPs)

Allows those with life events to sign up for insurance coverage, but discourages those who wait to sign up until they have a medical need

9

10

14. Decrease the 90-day grace period

The ACA provided for a 90-day grace period for insureds to catch up on premium payments before being terminated from coverage

6

9

15. Cadillac tax/employer tax exclusion cap

A tax on high-value employer health plans/a limit on tax exclusion for employers for the cost of insurance they provide to their employees

0/3

0/2

16. Narrow networks

Restrictions on the number of providers in a network, leading to price concessions that in turn lead to lower premiums

3

9

17. Sale of insurance across state lines

The intent is to increase competition and decrease premiums

10

0

18. Medicare privatization and premium support

Uses free-market principles to drive greater efficiency and lower costs

1

5

19. Allow Medicare to directly negotiate prices with pharmaceutical companies

Applies market power pressure to reduce prescription drug costs

1

7

20. Allow the importation of drugs from other countries

Allows U.S. citizens to purchase their medications at the lower prices for which these drugs sell in other countries

1

3

21. Medicaid block grants

The intent is to give states more control and flexibility, while limiting and decreasing the federal expenditure

8

2

22. Privatization of Medicaid

Allowing states to contract with commercial insurance carriers to administer private health insurance for Medicaid beneficiaries, usually through a managed care product

2

2

Lack of clarity.

It is still not clear what elements will be in the replacement bill that the president, the speaker and the Senate leader will get behind.

It remains unclear when the repeal would become effective, and whether there will be a full replacement bill introduced at the same time as a repeal bill, or whether replacement will happen in bite-size pieces.

It is also unclear whether full repeal can actually be achieved given the partisan divide, or whether Republicans will just have to mortally wound the ACA through reconciliation and executive orders and then allow it to collapse after its legs are cut out from under it.

It is also far from clear that the Republicans can get a replacement bill passed, other than those limited provisions that could be enacted through the reconciliation process. And all of this uncertainty, if not clarified soon, will lead to market changes.

Aetna has already announced that it anticipates withdrawing from all the ACA marketplaces in 2018 due to this uncertainty; at a minimum, it won’t enter into any new ones. Cigna has indicated that it is conducting a full analysis to determine whether it will offer plans on the public exchanges next year after pronouncing that the exchanges are “unsustainable.”

And then there is the elephant (pun intended) in the room. How will Republicans pay for their new healthcare reform law? Some lawmakers favor keeping some or all of the prior ACA taxes. Most despise those taxes. However, Republicans also don’t want to add to the federal deficit. As a replacement bill takes shape, watch for Congressional Budget Office pronouncements regarding the budget and deficit impact and Republican reaction.

Timeline. 

We are seeing an uptick in the number of replacement bills being introduced. President Trump has indicated that the bill he, the speaker and the Senate leader have been working on would not be introduced until after Rep. Price is confirmed as HHS secretary.

The Republican retreat in Philadelphia at the end of January did not seem to yield a lot of decisions, but reporters were told to expect a vote on the House floor in March. The Senate can initiate its 2018 budget resolution on April 1. The deadline for the concurrent budget resolution is April 15.

These dates are important, because insurers participating in the public exchanges must submit their plans and rates for 2018 at the beginning of May. If Republicans repeal or weaken the ACA without having a replacement bill that encourages insurers, we could see a large exodus of insurers from the exchanges, and this would undermine the individual, non-group market. It appears that Republicans do not want this to happen.

Impact to Idaho. 

It is difficult to know impacts to Idaho without knowing the final features of what will now be labeled Trumpcare.

Recall that the uninsured rate in Idaho fell from 17.7 percent in 2010 to 11 percent in 2015, without Medicaid expansion, and that 109,000 Idahoans obtained health insurance coverage as a result of the ACA. The costs incurred through the county and state’s catastrophic healthcare funds dropped from $55 million in 2012 to less than $34 million in 2016. The state’s share of those costs dropped from a record-high sum of $33.9 million to just $16.6 million over that same time period.

The Catastrophic Health Fund has returned more than $40 million to the state general fund since 2012 due to these savings resulting from having more Idahoans with significant illnesses or injuries insured.

A lot is at stake for insurers, providers, businesses, our state and county budgets, our state’s economy and the people of Idaho. As a state, we literally cannot afford to lose the benefits we have seen accrue to Idaho over the past half-dozen years. At the same time, we must further address those problems that remained after implementation of the ACA and design thoughtful solutions through the enactment of Trumpcare.

It bears repeating. The healthcare reform debate and potential repeal and replacement of the ACA does not alter St. Luke’s strategy – it impacts the degree of difficulty we may face in executing our strategy and may require some new or different tactics.

In the end, it is difficult to imagine that whoever figures out how to offer the best possible outcomes at the lowest total cost of care doesn’t win. And when St. Luke’s wins, the members of our communities are the real winners.

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.