Recent Developments in Affordable Care Act Reform

To: NAAOP Members and Friends

From: Peter W. Thomas

Date: January 25, 2017

Subject: Recent Developments in ACA Reform


Since the beginning of the New Year, there has been significant activity in the area of health care from a legislative and executive perspective, particularly focused on repeal and replace of the Affordable Care Act. The following is a summary of key developments:

  • Budget Reconciliation Bill: The House and Senate have already passed a “budget reconciliation” bill that enables Congress to consider in the future repealing and replacing the Affordable Care Act through expedited procedures. A reconciliation bill allows the Senate to pass legislative provisions with only 51 votes, rather than the 60 required for other legislation. With only 52 Republicans in the Senate, Senate Republicans would not be able to pass an ACA repeal without using this budgetary procedure.
  • “Repeal and Replace” Takes Hold: Republican leaders were pressing for a quick repeal bill coupled with a two- or three-year implementation period, when Congress could fashion an ACA replacement. But in recent weeks, the message of ACA supporters to not repeal without replacing the ACA at the same time has taken hold. The professed goal at this point is to pass both a repeal and a replacement of ACA by the end of April.
  • House and Senate Begin Drafting Repeal and Replace Bill: The House Ways & Means and Energy & Commerce Committees and the Senate Finance and Health Education Labor and Pensions (HELP) Committees are currently examining specific proposals to repeal and replace the Affordable Care Act through this reconciliation legislative vehicle. Individual groups of Senators are also beginning to introduce different versions of replacement legislation. The earliest the Congressional committees could report ACA repeal and replacement proposals is January 27, but indications are that these committees will bring forward public proposals in February or March.
  • Reconciliation Bill Contents: A reconciliation bill is limited in terms of its contents. The only provisions that can be included are those provisions that impact the federal budget in a positive or negative direction. This means that any budget neutral provision in the Affordable Care Act cannot be addressed through this mechanism. This means that while Congress can include in the reconciliation bill a repeal of federal subsidies to help purchase insurance, for instance, they may not be able to include a repeal of many of the consumer protections, which may be determined not to have a direct impact on the federal budget. While it will only take 51 votes to repeal key portions of the Affordable Care Act through the budget reconciliation bill, it will take at least 60 votes to pass any type of replacement legislation.
  • Setting Expectations: Wildly different statements have emerged over the past three weeks in terms of the scope of the ACA replacement plan. President Trump, Vice President Pence, Secretary of Health and Human Services (HHS) Nominee, Tom Price, and various legislators have all sent signals that the “rug will not be pulled out” from under current ACA enrollees; preexisting condition exclusion protections will continue in some form; the 20 million that currently have ACA coverage will continue to have coverage; “We’re going to have insurance for everyone”; and other statements that do not seem to be reconcilable with the repeal of the individual mandate and other key provisions including federal subsidies to help purchase insurance for low income individuals. Nonetheless, the congressional committees continue to do their work.
  • HHS Secretary Nominee Tom Price: Congressman Price has now been through two different hearings and will soon be scheduled for a vote to confirm his nomination. Timing for this vote is likely to be in early to mid-February. Democrats have raised a number of ethical concerns and have been frustrated by the lack of specificity of his responses to committee members’ questions. Congressman Price has suggested that the repeal and replace legislation is the prerogative of Congress and that he will administer whatever Congress passes. In the hearings, he did not reaffirm support for his own legislation to repeal the Affordable Care Act (which he introduced in the 114th Congress) and avoided specific endorsement of block grants for Medicaid and moving Medicare toward a defined contribution, rather than a defined benefit, program. Because his confirmation only requires 51 votes, he is expected to have a favorable vote.
  • Executive Order on ACA: President Trump’s first Executive Order issued on January 20th consisted of a directive to all federal agencies which states, in relevant part:

“To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.” [Emphasis added.]

 

The question now is how this executive directive will be interpreted by the federal agencies. Many of the provisions of the ACA were regulated and can only be materially altered through public notice and comment rulemaking. There is also speculation that those actions the HHS Secretary could take unilaterally may be deferred until Congress acts in a more comprehensive fashion.

  • Memorandum from White House Chief of Staff on Federal Regulations: Also on January 20th, Reince Priebus, Assistant to the President and Chief of Staff issued a Memorandum to the heads of the Departments and Agencies placing a moratorium on federal regulations for sixty days, with certain exceptions, pending agency review. This will clearly impact health care regulations, including Medicare and Medicaid, but will not impact public comment periods for currently pending regulations. Early indications are that the freeze in regulations is being interpreted broadly government-wide. Numerous regulations have been placed on hold or withdrawn pending further review. Some will emerge in altered form while others are likely never to be published.
  • Impact of Executive Order: The key question for incoming Secretary Price is whether he will use these executive authorities to limit or eliminate federal subsidies under the Affordable Care Act or otherwise eliminate the individual and employer mandates. Congressman Price was asked this specific question at the Finance Committee hearing yesterday and essentially did not answer the question.
    • Factors weighing against implementation of this Executive Order to invalidate the ACA through the regulatory process include the fear that if certain portions of the ACA are no longer in effect, the whole system may implode. There is significant discussion in the insurance community about the insurance “death spiral” that may occur if the individual mandate is lifted and the federal subsidies are halted, but certain requirements and consumer protections are maintained. In this event, the cost of insurance is expected to immediately increase dramatically and many are expected to lose coverage. Republicans profess that this is not their intent but once the ball is set in motion it is not completely within their hands. The insurance markets and consumers will respond and react according to their own self-interest.
  • Additional Executive Orders: Most recent statements from the Administration indicate that President Trump will order additional Executive Orders to roll-back the ACA. There is a possibility that Republicans will have to replace the ACA without votes from Democrats, meaning they will likely maximize their regulatory authority to roll back ACA regulations while issuing directives to stabilize insurance markets. There appears to be an emerging consensus to extend the ACA for two years with no coverage changes under the ACA repeal and replace legislation in order to promote market stability.
  • Recent ACA Findings: Recent findings by various organizations are raising the level of pressure to find an ACA replacement plan that can attract eight Democratic votes in the Senate, including:
  • With respect to a repeal bill that would eliminate the individual and employer mandate but keep the insurance market reforms in place, the Congressional Budget Office issued a report on January 17 which states:

“The number of people who are uninsured would increase by 18 million in the first new plan year following enactment of the bill. Later, after the elimination of the ACA’s expansion of Medicaid eligibility and of subsidies for insurance purchased through the ACA marketplaces, that number would increase to 27 million, and then to 32 million in 2026. https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52371-coverageandpremiums.pdf

    • “Repealing the Affordable Care Act will kill more than 43,000 people annually.”       Washington Post, January 23, 2017.
    • “Five percent of people with chronic illness [i.e., heart disease, diabetes, cancer] gained coverage in 2014 when the law’s individual mandate and coverage expansion took effect.” Annals of Internal Medicine, The Affordable Care Act and Americans with Chronic Disease; www.annals.org.

It will be an extraordinarily busy year from a legislative and regulatory perspective. Assuming HHS Secretarial Nominee Tom Price is approved by the Senate, Seema Verma, the Nominee to become Administrator of the Centers for Medicare and Medicaid Services (CMS) will undergo the Senate’s advice and consent process. Not only is Congress aiming to approve a reconciliation bill containing ACA repeal and replace by April, but they will also have to figure out how to fund the federal government by the end of April through the remainder of fiscal year 2017. After these major pieces of legislation, Congress is expected to address comprehensive tax reform which may be “budget neutral.” This means that Congress will seek to save money in entitlement programs (e.g., Medicare and Medicaid) and in other ways in order to provide tax relief without creating additional deficit spending.

NAAOP will continue to keep its members informed as key developments occur.

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