Tom Bulleit, Ropes & Gray health care partner, discusses what the effect of the Trump administration will be on health care, and in particular on the Affordable Care Act.
Since November, we in the Ropes & Gray health care practice have heard lots of questions from clients about what the effect of the Trump administration will be on health care, and in particular on Obamacare, or the Affordable Care Act. It is pretty unambiguous that the Affordable Care Act is going to be "repealed and replaced," but besides being able to say that Congress will pass, and President Trump will sign, a bill that will have the word "repeal" attached to it, there are so many proposals floating around from so many members of Congress, and as of today, still nothing specific from the President, that its anybody's guess exactly what even "repeal" will look like, let alone "replace." But looking at those proposals, and at what the President has said, there are a few common threads that might help us answer a few questions with some degree of certainty.
First, let's review the bidding on how this can get accomplished procedurally. Generally, no legislation can pass the congress without 60 votes in the Senate due to the filibuster. An important exception is the process of budget reconciliation, under which provisions that have an impact on the federal budget may pass with a simple majority. Since the Senate has 52 Republican members, reconciliation is a vehicle to repeal many of the provisions of the Affordable Care Act that Republicans particularly dislike, including the hated individual mandate, all of the taxes (pharma, medical device, the insurer's Cadillac tax), Medicaid expansion, and the taxpayer subsidies for premium support (cost of coverage) and cost-sharing (cost of care). As I understand the budget rules, it's not clear that this could include de-funding CMMI and its value-based initiatives, because that is projected to save money. Before the inauguration, both houses of Congress passed budget bills to set this up procedurally. By the way, there isn't even consensus on that; for example, some deficit hawk Republicans say we need to keep the taxes until other funding is put in place, and some say the taxes have to go right away. But taking away the taxes and the Medicaid expansion and the premium and cost-sharing supports would leave a lot of people (something like 20 million) without insurance. So doing repeal alone is not really an option, and Speaker Ryan, HHS designee Tom Price, and President Trump has said that they want to do replace "concurrently" of "simultaneously."
Replacing Obamacare can't be done without 60 votes in the Senate, so at least eight democrats need to be on board. While there are minor points of disagreement, the various Republican models generally share several features:
- expanded tax benefits to help buy private insurance and to encourage health savings accounts;
- increased competition by allowing sale of insurance across state lines;
- some continuation of pre-existing condition protection, though it may be based on continuous coverage rather than out of the box, with federal support of high risk pools to help with those who can't qualify based on pre-ex conditions.
I am not sure how much room I see for Democratic support of those ideas, so we may be looking at a game of chicken: the republicans pass a reconciliation repeal with 51 votes but delay the effect for several years, and dare the Democrats to do nothing while the individual insurance market unravels.
So what are the implications of all of this for health care and life sciences clients? I think the inescapable conclusion from the current state of things is that nothing can be predicted with any degree of confidence. We know there will be a "repeal" but we don't know what it will include or what schedule it will be on. We have even less idea of what a "replace" will be. So I think almost regardless of what your health care business is—provider, product maker, insurer, something else—it will be pretty hard to get out in front of this. I would be watching closely but not making any major changes to the business plan I had adopted before the election. A good example might be the movement towards value-based healthcare and bundled payment programs. Tom Price doesn't like mandatory programs, but the private sector was moving this way even before Obamacare, and the logic of bending the cost curve is pretty compelling. So I'd say medical device companies should stick with their plans to become total solution providers for their customers, expanding their consulting and management businesses; and while the pharma lobby has been much more successful at staving off anything other than pass-through payments (CMMI cancelled its proposed demonstration just last month), they ought to be looking at strategies to survive in a value-based world.
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