How the new Congress will try to undermine the ACA

GOP likely to target Obamacare two ways

It’s no secret that the new majority Republican Congress will seek any and every opportunity to undermine the existence and operation of the Affordable Care Act (ACA). But how? One approach seems more likely to me than any other – divide ACA supporters from each other and play to the law’s deepest vulnerability

The tack involves what my favorite political scientist, John Kingdon, calls “issue coupling” – taking two unrelated issues and opportunistically linking them so that the whole might be greater than the sum of the parts.

What are the two issues? First is something called the “Sustainable Growth Rate” (SGR), a poisonous formula governing Medicare payments to physicians; the second is the individual responsibility provision of the ACA, (un)popularly known as the individual mandate. How might these two fit together?

SGR

The SGR is a relic of the 1997 Balanced Budget Act that set an overall limit on fee-for-service payments to physicians in the component of Medicare known as Part B. Under SGR, when overall physician payments grow below the spending target, physicians get rebates and smile; and when payments exceed targets, automatic payment cuts happen – unless Congress forestalls them. It was a Republican idea, advanced by then House Ways & Means Chair Bill Thomas.

Because the late 1990s were days of lower medical inflation and high economic growth, docs got rebates and smiled. Beginning in the early 2000s, both trends reversed. In 2002, Congress allowed a cut to happen and took grief from docs all over the nation. Every year since, Congress has forestalled payment cuts with short term “patches,” 15 of them since 2003, totaling $153 billion in “SGR patches” or “doc fixes.”

Why doesn’t Congress just repeal SGR? It’s because Congress needs to come up with a giant wad of cash to finance the requisite 10-year-cost of repeal. During the time of the ACA’s drafting in 2009 and 2010, the Congressional Budget Office (CBO) calculated the 10-year cost at $210 billion, far too heavy a load to fit into the already hefty ACA bill. Since then, because of unexpected and dramatic reductions in the projected rate of Medicare growth, the estimated cost is now $118.9 billion; if docs are also given a smidgen of payment growth, the 10-year tab rises to $140.2 billion. It’s a bargain, relatively speaking, yet still too expensive for this divided Congress to agree on a fix.

In 2014, both the Democratic Senate and Republican House agreed on a legislation to repeal SGR and to establish new ways to incentivize physicians to improve their quality and efficiency. Both parties agreed – an astonishing development – with one problem: There was no agreed upon way to finance the $140 billion deal. So instead, last March, Congress approved yet another short term “doc fix” that expires on March 31, 2015. No deal after that, and docs will face an estimated 21.2 percent payment cut on April Fools’ Day, unless Congress kicks the can again by passing yet another patch.

The Individual Mandate

Strand B of the tale is the so-called individual mandate, also known as individual responsibility, whose mission is critical and fundamental to the ACA’s structure. If its story weren’t so sad, it would be funny.

The idea to mandate that all Americans must purchase health insurance was of conservative Republican pedigree from the 1980s via University of Pennsylvania economist Mark Pauly and Stuart Butler of the Heritage Foundation. During the 1993-94 Clinton health reform debacle, the Republican alternative, championed by the likes of Republican Senators John Chafee of Rhode Island, John Danforth of Missouri, David Durenberger of Minnesota, and Bob Dole of Kansas centered on a federally imposed individual mandate. Between 1994 and 2008, the individual mandate as the best path to universal health insurance was as close as one could come to Republican orthodoxy. That is why Mitt Romney, during his time as Massachusetts governor, was so comfortable championing it as the cornerstone of the 2006 Massachusetts health reform law; he was following, not bucking, the GOP party line.

If anyone disliked the mandate, no one stood out in 2008 more than did then-Sen. Barack Obama as he attacked his presidential primary rival, Hillary Clinton, for her health plan that, unlike his, included a Massachusetts-style individual mandate. Obama didn’t officially back off from his opposition to a mandate until June of 2009, about six months into his presidency.

As steadily as Democrats began climbing up the gangplank of the USS Individual Mandate, Republicans already on deck started jumping over the rail on the other side of the ship. None of the leapers stood out as much as Sen. Chuck Grassley of Iowa, who on Fox News in June 2009 supported the mandate, saying “there’s no free lunch,” and who then said just three months later, in September 2009, again on Fox, that the reason he opposed health reform legislation was because “individuals should retain the freedom to choose…” In 2009, opposing an individual mandate became the new Republican orthodoxy, and remains so for the new Congressional majorities.

Windows of Opportunity and Chaos

Repeal of the ACA’s individual mandate has one gigantic factor in its favor. According to the CBO, it reaps big savings for the federal treasury. Last year, CBO scored a five-year mandate delay at $151 billion. Ten years of savings from full repeal would reap anywhere from the low $300s up to $463 billion (according to maddeningly different CBO estimates for different legislative proposals). It is a tempting target for this reason alone. Why does it save money? Because an estimated 13 million fewer uninsured Americans would buy private health insurance or enroll in Medicaid, thus saving the federal government those costs. (Importantly, RAND estimated back in 2012 that mandate repeal would cost the federal government more because they would still provide full subsidies, at a much higher per person cost, to qualified individuals and families – though in this game, only the CBO numbers count.)

Are Republican lawmakers aware of this? Yes. Should I worry about giving them incendiary ideas? They already know.

In March, the Republican-controlled House passed the “SGR Repeal and Medicare Provider Payment Modernization Act” on a heavily party line vote of 238 to 181, with not a single Republican voting “nay” and only 12 Democrats voting “aye.” The legislation would have repealed SGR and implemented bipartisan physician payment reforms, fully financed by a five-year delay of the individual mandate. The legislation went no further because the Democratic-controlled Senate would not bring up the measure because of the individual mandate repeal. CBO estimates that the mandate repeal would result in 13 million fewer Americans obtaining health insurance by 2019 and an increase in health insurance premiums of 10-20 percent as a direct result.

To ACA supporters, individual mandate repeal would be close to a mortal blow, potentially more devastating than a US Supreme Court ruling invalidating premium subsidies to states with federally-run health insurance exchanges (as the Court will consider early next year). Without the mandate, too many younger and healthier Americans would drop health insurance coverage and wait until they believe they will need it before purchase.

Importantly, this repeal strategy would leave in place the ACA’s “guaranteed issue” requirements that health insurance must be sold without regard to pre-existing medical conditions – something Republicans say they don’t want to repeal. As demonstrated in the 1990s in states such as Massachusetts and New York, guaranteed issue without a mandate triggers an insurance “death spiral” where the insurance risk pool becomes disproportionately composed of older and sicker individuals and premiums shoot way beyond any affordability formula. It gets worse each year – hence the spiral.

To ACA opponents, what’s not to like? If you don’t think Republican senators would do this, please check out Utah Sen. Orrin Hatch’s “American Liberty Restoration Act,” which proposed simple repeal of the individual mandate (he has 27 Republican colleagues listed as co-sponsors).

In 2014, the House-approved bill never had a prayer in the Senate, and thus interest was low. In 2015, Republicans will control the Senate and will not need 60 votes to move this legislation out of the chamber if they approve it via budget reconciliation, which requires only 51 votes, and cannot be filibustered. Permissible provisions in any reconciliation bill must have a real impact, up or down, on the federal budget. For SGR repeal and the individual mandate, that’s no problem. Given the size of potential federal budget savings, they could add repeal of other despised ACA provisions, such as the employer mandate (CBO cost: $151 billion) and the medical device tax (CBO cost: $29 billion).

But won’t Obama veto this? That’s a safe guess, though the process would be steeped in uncertainty and peril. Consider two critical stakeholders whose prior positions on the ACA might flip.

The US health insurance industry, represented by America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association, has been among the most vociferous opponents of Obamacare, investing more than $100 million over years to oppose the law and to undermine support for it, even as this same law now delivers many millions of dollars in new customer premiums into their pockets. On mandate repeal, there is no doubt on which side they will be on – Team Obama. But how much?

Now consider America’s physicians, represented by the American Medical Association and a thick stew of other doc groups. They tepidly supported the ACA, with lots of grumbling, as they passionately and unsuccessfully fought for SGR repeal for more than a decade. Can they resist climbing aboard the Republican bandwagon? And add to the list the business community opposed to the employer mandate and the medical device industry wanting a stake in the heart of the medical device tax and it begins to look like Health Reform Armageddon II.

It all comes together by March 31 or SGR-Cliff Day, something John Kingdon refers to as a “focusing event.” This year, SGR-Cliff Day will come right in the middle of federal tax season, which will be enlivened by the first ever tax penalty enforcement of the individual mandate, as well as recoupment of tax credits to ACA enrollees who got more benefit in 2014 than they were entitled to receive. Whispers suggest that both confusion and unready IRS systems will create one more implementation nightmare, just as Republicans move in for the kill.

All things being equal, neither the House nor Senate will see enough Democrats support an override of a likely Obama veto. Republicans will have 244 House seats, 36 shy of a veto-proof majority (they attracted only 12 Democrats to their 2014 mandate repeal bill) and 54 in the Senate – assuming they win the Louisiana seat – 13 shy of a veto override. The moderate Democrats who lost on November 4 were their most likely prospects. Sen. Joe Manchin, a West Virginia Democrat, supports mandate repeal, though he appears to be an outlier.

If, for all their labors, Republicans come up empty-handed on the policy side, they will claim many notches on the political side. Democrats will stand up for the dreaded individual mandate, the only part of the ACA vociferously disliked by most Americans, and will vote against full repeal of the loathsome SGR.

For Mitch McConnell and John Boehner, it’s better than full ACA repeal – no need to argue about pre-existing conditions, the Medicare doughnut hole, and the other well-liked ACA reforms. Instead, they push a surgical, tactical strike that would trigger collapse of the signal achievement of the Obama era.

Can Democrats stand and resist? Might they finally, after all this time, mount a credible public defense of the growing list of accomplishments of the biggest policy achievement of the Obama era? What might this credible defense look like?

Meet the Author

That will be the subject of my next column.

John E. McDonough is a professor at the Harvard School of Public Health and the author of Inside National Health Reform.