What now for Obamacare?

Introduction

With the Republicans having completed a convincing victory in the 2014 mid-term elections and most importantly taking control of the Senate. This is keeping a lot of attention on . Whilst the GOP want to use their power in the Congress to at least water down Obamacare the president naturally wants to make this a part of his legacy. This article looks at the future of the Patient Protection and Affordable Care Act (PPACA).

Please note there has been no attempt to deal with the fiscal implications on the US Federal Government’s spending and deficits. There are numerous projections available from the Congressional Budget Office (CBO) and the General Accountability Office (GAO) and many others. It is an extremely complex topic that is fiercely debated by supporters and opponents of the PPACA. It will be covered in separate post in the near future.

About the PPACA

First before discussing the PPACA further it is helpful to understand some key facts about the legislation.

Overview of Provisions

  • Guaranteed issue prohibits insurers from denying coverage to individuals due to pre-existing conditions. In addition insurers are required to offer the same premium price to all applicants of the same age and geographical location without regard to gender or most pre-existing conditions (excluding tobacco use).
  • The PPACA establishes minimum standards for health insurance policies.
  • Under the individual mandate all individuals not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs are required to secure an approved private-insurance policy or pay a penalty, unless the applicable individual has a financial hardship or is a member of a recognized religious sect exempted by the Internal Revenue Service. The law includes subsidies to help people with low incomes comply with the mandate.
  • Health insurance exchanges are portals for individuals and small businesses in every state to compare policies and buy insurance (with a government subsidy if eligible). The next enrollment period is scheduled to be November 15, 2014–February 15, 2015.
  • Low-income subsidies are available for individuals and families whose incomes are between 100% and 400% of the federal poverty level. They receive federal subsidies on a sliding scale if they purchase insurance via an exchange.
  • Medicaid (health care for low income families and individuals) has been expanded to include individuals and families with incomes up to 133% of the federal poverty level, including adults without disabilities and without dependent children.
  • The Medicare (health insurance for Americans 65 and over) payment system has been reformed with the intent of promoting greater efficiency in the healthcare delivery system by restructuring Medicare reimbursements from fee-for-service to bundled payments.
  • The employer mandate applies to businesses which employ 50 or more people but who do not offer health insurance to their full-time employees. These businesses will have to pay a tax penalty if the government has subsidized a full-time employee’s healthcare through tax deductions or other means. The Internal Revenue Service delayed enforcement of this provision for one year in July 2013.

Twenty one new taxes

The PPACA created twenty one new taxes. Here are some of them.

  1. Individual mandate
  2. Employer mandate
  3. Medical device manufacturers tax
  4. Indoor tanning services tax
  5. Excise tax on charitable hospitals which fail to comply with the requirements of the PPACA
  6. Tax on brand name drugs
  7. Tax on health insurers

There are also targeted tax credits available. The full list of new taxes introduced under the PPACA is here.

The Independent Payment Advisory Board (IPAB)

This 15 member board is responsible for achieving savings in Medicare whilst maintaining coverage and quality.

Legal Challenges

There have been many attempts in US courts to derail Obamacare. The most well known being the 2012 case heard by The United States Supreme Court (SCOTUS) which ruled on the legality of the legislation. The Obama administration won by a narrow 5-4 majority.

King vs Burwell

SCOTUS has taken on this important case. At the heart of this latest legal challenge to Obamacare is whether or not the Federal Government has the right to distribute insurance tax credits in certain states. The case will be heard early in 2015 with a ruling in June. For a more detailed legalistic description of the case go here.

The Wall Street Journal in its reporting on this story explains what has happened in the courts previous to SCOTUS getting involved in King vs Burwell and alleges that Harry Reid broke Senate filibuster rules to appoint liberal judges one of the courts that ruled on the case in July 2014.

The Fourth Circuit Court of Appeals ruled in favor of the government, though the opinion said it was a close call. A 2-1 panel of the D.C. Circuit ruled the other way, only to have the decision vacated by the entire D.C. Circuit, which voted to hear the case en banc in the coming months.

Mr. Reid broke Senate filibuster rules to add three liberals to the D.C. Circuit with the expectation that the en banc court would favor the Administration. At a July 22 press conference, Mr. Reid boasted about his filibuster play and proclaimed that, “It seems clear to me that that decision will be overturned.” Then there would be no splits between the circuit courts, and the Supreme Court would be less likely to take the case.

Greg Sargent writing in the Washington Post makes some pertinent points about where the GOP would stand if SCOTUS finds against the Obama administration.

As the Kaiser Family Foundation’s Larry Levitt explains it, a SCOTUS ruling gutting the subsidies could easily be rendered “moot” in one of two ways: Either Congress fixes the law, or governors in those states set up state exchanges to keep the subsidies flowing to their constituents. “A simple fix from either Congress or Republican governors would allow people to keep their benefits,” Levitt says.

The prospect of so many of each of these governors’ constituents losing insurance would theoretically put pressure on them to make things right. The same might be the case for GOP lawmakers in Congress. One possibility might be that the two parties use this as an occasion to enter into negotiations over the law’s future, in which Republicans try to leverage the need for the fix to get other changes to it they want — which could be dicey for the law but perhaps not too much of a threat to it.

Of course, these lawmakers would also face intense pressure from the right not to fix it. And for all I know, they might let the law’s subsidies disappear for millions. How bloody minded are the Republicans willing to be?

If the case is lost by the Obama administration it will be fascinating to observe how the GOP in Congress deals with millions of people who face being disadvantaged financially.

Possible deconstruction of Obamacare by Republicans

This is certainly a pet topic with Republicans post the mid-term elections. So how will the GOP potentially attempt to attack Obamacare?

Repeal – Pass a bill through the House and Senate repealing the PPACA lock stock and barrel. This will be symbolic gesture because only as Barack Obama will veto a repeal bill.

Scrap the Medical Devices Tax –  A 2.3% tax on devices the manufacturers say are threatening their competitiveness. There is a real chance the Republicans can get enough Democrats in Congress to support them and have a majority.

The thirty hour rule – Republicans strongly oppose this section of the ACA which has defines a full working week as 30 hours instead of 40 hours. Plenty of powerful industry lobby groups are gearing up in Washington DC to support the GOP on this one.

IPAB – It’s close to a sure thing that the Republicans will try and scrap this board of bureaucrats. There are also Democrats who aren’t totally convinced of the IPAB’s worth. So a majority may exist in the Congress.

Repeal the Individual Mandate – Getting rid of this would certainly make a dent in Obamacare. Possibly some Democrats may support this.

The Employer Mandate – This is very interesting possibility for the GOP as it is unpopular with business owners. This provision is directly tied to the thirty hour rule. If it isn’t possible to repeal there could well be room for GOP leaders and the Obama administration to talk turkey about modifying it.

Remember the presidential veto, so the GOP will have to somehow find a way to force Barack Obama’s hand. The Republicans can use the budget reconciliation process to aid their cause.

Because Republicans lack the 60 seats needed to beat a Democratic filibuster, McConnell can’t force a vote on a simple, straightforward repeal bill. But he has said several times he would use the budget reconciliation process, which only requires 51 votes, to pass anti-Obamacare measures. Reconciliation probably can’t be used to pass a clean, repeal-it-all proposal—and Obama would veto it if it did—but by pushing the measure, Republicans incumbents inoculate themselves against charges that they let the party’s least-favorite law stand, as well as fulfill campaign promises.

Comment

If the Republicans want to make any changes to Obamacare they’re going to have to figure out how to get enough leverage to force Barack Obama to go along with them. They will also need to achieve a unity purpose in their own ranks, something that they don’t currently have, this was covered in a previous post. The prize of the presidency looms and the GOP needs to be constructive and not in the words of Charles Krauthammer be the “party of no”. Having solid and sound alternatives to improve the US healthcare system will be imperative if they’re are to convince the voters to support them. The weakness is so far they haven’t achieved this.

For the Democrats a useful strategy would be to go along with reasonable change to make it more workable in practice so make it more difficult for the Republicans to make a case for repeal the law at a later date. It needs to be added that a full repeal is probably going to require the Republicans to hold the presidency and both houses of Congress post the 2016 election. The longer the PPACA remains in force the more confident Barack Obama will be that in his mind it is cemented in as a key part of his legacy. To achieve this he may need to be flexible and agree to well thought out modifications to the PPACA.

Sources

Patient Protection and Affordable Care Act (PDF)

Wikipedia article on the PPACA

Seven provisions of Obamacare

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