Leavitt Partners: 5 thoughts on what repealing, replacing the ACA may actually look like

In what former Utah Gov. Mike Leavitt (R) called "the most provocative statement of change that has occurred in my lifetime," Republican candidate Donald Trump was elected the 45th President of the United States, and the GOP maintained control of the U.S. Senate and House of Representatives, signaling a now imminent shift to the right on healthcare policy. This shift in the core ideology that has shaped the healthcare landscape since the passage of the ACA leaves many healthcare leaders wondering how they can reposition their strategic plan for the future.

Much depends on what happens in Congress, and if anything is certain, it's that the process will neither be simple nor straightforward. "Democracy does not happen crisply," Mr. Leavitt said in a post-election webinar hosted by Salt Lake City-based Leavitt Partners, the healthcare intelligence firm he chairs. "It involves discussion, inexactness and uncertainty."

However, there are a number of indicators that can offer leaders an idea of what is likely to happen under a Trump administration. The following five takeaways are based on webinar panel discussion moderated by Rich McKeown, CEO of Leavitt Partners. In addition to Mr. Leavitt and Mr. McKeown, panelists included Vince Ventimiglia, vice chair of Leavitt Partners, Clay Alspach, principal at Leavitt Partners, and Ian Morrison, PhD, futurist and advisor at Health Intelligence Partners.

1. Bill H.R. 3762, the reconciliation bill vetoed by President Barack Obama in January, shows the likely path Republicans will take to dismantle the ACA. "The best indicator of the future is the past efforts made by Republicans to alter [the ACA]," Mr. Leavitt said. The blueprint for this is H.R. 3762.

Republicans in Congress will most likely use the budget reconciliation process to drive changes to the ACA during Mr. Trump's first 100 days in office, according to Mr. Ventimiglia. The reconciliation process has procedural benefits — it only requires 51 votes to pass in the Senate, rather than the normal 60 votes, and there are now exactly 51 Republican senators.

However, despite the procedural benefits, the reconciliation process is limited in scope. The potential changes can be divided into two buckets, Mr. Ventimiglia said. The first bucket is revenue and tax-related provisions. This would involve the revenue-generating taxes included in the ACA like the medical device tax, the health insurance tax and the Cadillac tax. The second bucket is direct spending. This includes entitlement programs like Medicare and Medicaid, as well as premium subsidies under the ACA, according to Mr. Ventimiglia. "Beyond those two buckets, nothing can be done," he said. To make other changes, like reform the insurance exchanges, Republicans will need to attach a sidecar bill, which will be tougher to pass.    

Looking to H.R. 3762 as a blueprint means the revenue-generating taxes under the ACA will likely be repealed, but Medicaid expansion will be left untouched for now, as will Medicare reimbursement cuts. "One of the big reasons for that is to fill a $700 million hole is incredibly difficult," Mr. Ventimiglia said. "And in reconciliation, you have to go positive."

2. Look to red states — like Michigan, Ohio and Indiana — that expanded Medicaid for hints of what may happen to Medicaid expansion. Many Republicans in Congress support repealing at least part of the ACA, so when midterm elections near they can tell their constituents they fulfilled their promise, Mr. Ventimiglia noted. What Republican leaders won't want is tell constituents they are rescinding Medicaid coverage, he said. "Those members [of Congress] will be very resistant to repealing the Medicaid expansion unless there is some other way to cover those folks," Mr. Ventimiglia said.

Mr. Morrison agreed Medicaid expansion in some form may continue because it has been popular among hospitals and health systems. "If you take the typical health system across the country in expansion states, there have been massive increases in Medicaid patients and a reduction of bad debt," Mr. Morrison said.

Until another option to offer insurance to those who were covered under Medicaid expansion is made clear, Mr. Ventimiglia doesn't expect to see a change. Any change to Medicaid expansion, he predicted, isn't likely to happen until Republican governors who expanded Medicaid — like Ohio Gov. John Kasich or Michigan Gov. Rick Snyder — leave office.

3. Partisanship was a continuous threat to the ACA, so any successful replacement plan will have to be bipartisan. It was the consensus among panelists that one of the great shortcomings of the ACA and its longevity was the partisanship that came with it, which Republicans will want to avoid. A lack of bipartisan approval around healthcare policy makes it incredibly vulnerable when there is a change of power.

Finding bipartisan agreement right now may seem unlikely — the country feels more divided than ever. Leading up to the election, the public became increasingly polarized. Last year, 53 percent of Republicans held consistently conservative views, compared to 31 percent in 2004, and 60 percent of Democrats held consistently liberal views, compared to 49 percent in 2004, according to Pew Research. Polls conducted in late October show 55 percent of registered voters expected political divisions to deepen if Mr. Trump won, according to Pew. But the passage of the Medicare Access and CHIP Reauthorization Act shows both Republicans and Democrats have recently reached consensus on significant healthcare policy. "There is a real need not to overreach and not to try to move too fast and to try to bring people together in a collaborative way," Mr. Alspach said.

4. Market trends and MACRA indicate value-based care and many associated programs are here to stay. Both sides of the aisle agree fee-for-service medicine has to change and coordinated care is better than uncoordinated care, Mr. Leavitt said.

"It is important to remember that the movement away from fee-for-service and toward value is not being simply driven by political policies. Economics — not just domestic, but global — put pressure to reduce the percentage of GDP directed toward healthcare," Mr. Leavitt said. "There's not a place on the economic leaderboard for a country that spends 20 to 25 percent of its GDP on healthcare."

The difference in value-based care going forward may simply be what drives it. Right now the main impetus for value comes from CMS' Innovation Center, which was created by the ACA to implement programs like ACOs and bundled payments.

But even while considering an ACA repeal, the programs created by CMMI will likely continue. This is because the bipartisan passage of MACRA, which takes effect in January, relies on the existence of the programs put forth by CMMI, according to Mr. Alspach. "If CMMI were shuttered or limitations were added, it would be a big difficulty [for MACRA]," Mr. Alspach said. The political conversation around restructuring CMMI will likely focus on two aspects: money and authority.

First, the ACA allotted $10 billion every 10 years for CMMI. That funding could be taken away, but "the Congressional Budget Office believes CMMI is going to save a tremendous amount of money," Mr. Alspach said, "tremendous" meaning $40 billion in savings for every $10 billion spent. This indicates the funding for CMMI is likely to continue, but it may be put under a shorter appropriation cycle, according to Mr. Alspach.

Second, the conversation around CMMI will focus on the amount of authority given to the executive branch. Through CMMI, the executive branch is able to implement and mandate a number of pilot programs and policies. Such ample executive authority is not a hallmark of Republican administrations, so power could redistributed under Mr. Trump's leadership. "We are going to have to think through whether the philosophical and intellectual commitment to growing, refining and improving those systems will remain at CMS," Mr. Ventimiglia said.

5. Current premium pricing problems will remain a challenge. Any issues with premium prices and payer competition on the exchanges will not go away overnight. Premiums are going up for individual plans on the federal exchange by an average of 25 percent in 2017, and HHS reported earlier this month that 8.4 million individuals, who buy insurance on and off the exchanges, will shoulder significant premium hikes.

Mr. Trump will inherit this problem, even as his administration works to dismantle the ACA. The exchanges will need to be actuarially sound to survive a transition to a new scheme. Replacing a tax-based system would take the IRS at least 18 months to process, so the exchanges will need to last at least that long, according Mr. Ventimiglia.  

Then if the Trump administration is able to replace the ACA exchanges with something else, pricing problems will persist until bigger economic issues are addressed. Mr. Trump has indicated he wants to keep provisions that require insurers to cover people with pre-existing conditions and allow beneficiaries under age 26 to stay on their parents' plans. However, Mr. Trump also campaigned on a platform that opposed the ACA's individual mandate to buy insurance coverage. "In a world of guaranteed issuance with weak mandates, you will run into pricing problems," Mr. Morrison said. "That problem is going to linger for the Trump administration." What is left for the next administration to figure out is how to preserve guaranteed issuance and still make insurance affordable, according to Mr. Morrison.

 

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