United States: The Future Of The Affordable Care Act (Week 1): Assessing The New Normal

The Affordable Care Act is the single most important piece of Federal social legislation in the United States in more than a generation, but with the election of Donald J. Trump as President its fate is now uncertain. Its core policy concerns and principal goals, i.e., to expand medical coverage, increase the quality of medical outcomes, and constrain costs, nevertheless remain. What is about to change is the "means whereby" these goals might be accomplished.

Even before the new administration takes office, there is at least one thing that seems certain: there will be no going back to the status quo ante. While the law was the subject of withering criticism by candidate Trump and his proxies, their mantra was and remains "repeal and replace." At the end of the process, it is unlikely that we be back at March 23, 2010 (the date of the ACA's enactment). We will instead be somewhere else. What remains to be seen is the extent to which the replacement resembles the ACA. This post and those that follow will endeavor to chart the arc of the replacement process. In the weeks and months that follow, we plan to report on, and, with the help of a roster of knowable guests, examine both the process and the outcome.

It is difficult to underestimate the stakes: The ACA sits atop a major tectonic plate of the U.S. economy, nearly 18% of which is health care related. Health care providers, commercial insurance carriers, and the vast Medicare/Medicaid complex are among the law's primary stakeholders. They, and their local communities, have much to lose or gain depending on how health care financing is regulated. The ACA is the way it is largely because of them. Far more than any other circumstance, including Mr. Trump's election and the accompanying Congressional majorities, it is the interests of the ACA's major stakeholders, as well as the interests of U.S. citizens and employers, that will determine the law's future. But—to be sure—those interests will be filtered through and steered by the policy preferences of Republican lawmakers.

First Principles

In 2006, the Commonwealth of Massachusetts overhauled its health care financing rules by adopting a market- and regulatory-based approach that included five key components: an individual mandate, an employer mandate, low-income subsidies, a public insurance exchange, and associated tax reforms to pay for it all. The design of the Massachusetts law was due in large part to the work of the right-leaning Heritage Foundation, and the law was the joint effort of a Republican Governor (Mitt Romney) and a decidedly left-leaning democratic legislature. The Massachusetts law served as the blueprint for the ACA, which includes the same five components. That the two laws share the same chassis should surprise no one. In each case the policymakers faced the daunting constraints of a larger political, social, and cultural environment, and they reacted accordingly.

The Massachusetts law and the ACA seek to expand coverage by requiring individuals to have, and carriers to accept all applicants for, health insurance coverage. To enable low- and moderate income individuals to purchase coverage, both laws also provided premium subsidies. Both laws also provided for a technology-enabled platform—in Massachusetts, the Health Connector, and under the ACA, health care exchanges or marketplaces—to assist individuals and small groups to shop for and compare health insurance policies and products from competing vendors.

Since 1945, with the McCarran–Ferguson Act (15 U.S.C. §§ 1011-1015), states have been the primary regulators of insurance. The law was passed in response to United States v. South-Eastern Underwriters Association, wherein the Supreme Court ruled that the federal government could regulate insurance companies under the authority of the Commerce Clause in the U.S. Constitution. Since that time, Congress has encroached on the state's broad regulatory prerogative by enacting piecemeal benefit mandates (e.g., a mandate to cover pediatric vaccines, health care continuation rule, privacy standards, etc.). The ACA went much further, however, by establishing a comprehensive Federal insurance regulatory superstructure that replaced the piecemeal approach of prior law. This history is important going forward, since there are those on the political right (a/k/a the winners in the most recent election cycle) who think balance of power needs to shift away from the Federal government to the individual states to allow greater flexibility in benefit design and, as a consequence, a wider range of benefit options from which consumers can choose.

Lastly, no discussion about changing the ACA would be complete without a mention of Medicaid. Medicaid is a federal government entitlement program that provides healthcare coverage to certain categories of people who have low income and few assets. Each state runs its own version of Medicaid, with slightly different rules and coverage. While states must cover certain groups of people and certain benefits, they have some flexibility to include or exclude some benefits and to set eligibility rules. The ACA greatly expanded the reach of Medicaid, though the Supreme Court later made this portion of the law discretionary. Some 19 states have elected not to enact the ACA's Medicaid changes. Under an alternative favored by republican lawmakers, Medicaid would be reorganized to be structured as "block grants" to the states. A block grant approach would vest states with broad latitude to run the program as they saw fit.

The Trump Agenda

The Trump transition team has issued a statement of principles on the subject of health care, which promises to "repeal the ACA and replace it with a solution that includes Health Savings Accounts (HSAs), and returns the historic role in regulating health insurance to the States." It further advises that the "Administration also will work with both Congress and the States to re-establish high-risk pools – a proven approach to ensuring access to health insurance coverage for individuals who have significant medical expenses and who have not maintained continuous coverage." Tellingly, the statement also acknowledges that "the U.S. health care system did not begin with – and will not end with the repeal of – the ACA." There follows a list of action steps that include:

  • Protect individual conscience in healthcare
  • Protect innocent human life from conception to natural death, including the most defenseless and those Americans with disabilities
  • Advance research and development in healthcare
  • Reform the Food and Drug Administration, to put greater focus on the need of patients for new and innovative medical products
  • Modernize Medicare, so that it will be ready for the challenges with the coming retirement of the Baby Boom generation – and beyond
  • Maximize flexibility for States in administering Medicaid, to enable States to experiment with innovative methods to deliver healthcare to our low-income citizens.

In the next and following posts, we will examine each of these points in turn.

The Near Term Impact of the Election

The promise to "repeal and replace" the ACA was a cornerstone of the Trump campaign as well as the campaigns of most Republication candidates. It will therefore be important to them to deliver on that promise. The Republicans do not have a veto-proof majority in the Senate, so they are not entirely free to repeal the ACA. They can, however, use the reconciliation process to repeal certain of the law's major provisions.

One issue the Trump administration must face is that there are parts of the ACA the people genuinely like. Mr. Trump acknowledged as much, saying for example, that he does not envision abandoning the ACA's ban on pre-existing conditions. (In an interview on 60 Minutes, he referred to that provision as "one of the strongest assets" of the law.) He is also on record as wanting to preserve the rule allowing young adults to remain on their parents' insurance to age 26. This means that neither the Trump administration nor Congress is likely to repeal the ACA during, say, the week following the Inauguration and then figure out how to "replace it." The result would be to leave tens of millions U.S. citizens without coverage. The most likely approach would instead involve an immediate repeal coupled with a transition period that lawmakers could use to develop and pass a replacement that would help people stay insured.

So it is all but certain that the ACA will be repealed, and it is also all but certain that the law will be replaced with something. What is not yet known is the extent to which what follows will be able to accomplish what the ACA set out to do but with different mechanisms. This gets us back to our initial observation about the ACA stakeholders. We are dealing here with nearly 20% of the U.S. gross domestic product. The lobbying on all sides will be intense.

Because immediate repeal with no transition period has the potential for causing such great harm, few are predicting that outcome (during the campaign, Trump said "I won't let people die on the streets"). At the other end of the spectrum, some commentators have predicted a transition period lasting up to three years. This would relieve Republican lawmakers running in 2019/20 of the need to defend the substance of any replacement. They could instead take credit for having repealed the law while reassuring constituents that they are hard at work on a replacement that is in their best interests. But this will also give the stakeholders who favor all or most of the ACA ample time to marshal their resources to defend those provisions—or at least come up with viable alternatives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Alden J. Bianchi
 
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