Legislative Update: Happy Birthday, Health Care Reform!

On March 23, 2011 Democrats celebrated — and Republicans mourned — the one-year anniversary of the enactment of a sweeping health care reform law, the Patient Protection and Affordable Care Act (PPACA) (http://tinyurl.com/29ua67h). Last year, Democratic President Barack Obama touted the law as his most significant achievement, while Republicans vowed to pursue all avenues for repealing it.

One year later, after Republicans swept the mid-term elections for the House of Representatives — enjoying the largest majority Republicans have held in the House in more than 60 years — the law is still facing an army of enemies in Congress, in state governments, and in the courts. The American public is still divided in its support of the law,¹ and at least one-quarter of Americans think the law has already been overturned.²

With a divided Congress (Republicans dominate the House, Democrats maintain a slim majority in the Senate), the lion’s share of legislation designed to repeal or dismantle health reform lives in the Republican-controlled House. Similar bills stand little chance of passage in the Democratic-controlled Senate, but President Obama has already promised to veto anything that would ultimately reach his desk.

Republicans see the national health reform debate as their ticket to the White House and are determined to keep the issue at the forefront in the news until the 2012 presidential election. The Republican offensive on health reform leaves Democrats with no option but to constantly defend a large and complex law that never enjoyed universal support even from the beginning.

Lawsuits Abound

Meanwhile, lawsuits challenging PPACA have been filed across the country. In two cases, the court overturned all or part of the law as unconstitutional, leaving its fate uncertain. In six cases, the court upheld the law as constitutional and dismissed the case; four cases were dismissed for lack of standing or procedural problems; one case was dismissed but the court gave the plaintiff the right to refile; and 12 cases are still pending. Legal and political pundits speculate that a case could end up before the Supreme Court in the summer of 2012, just in time for the presidential election.

Some States Want Out

States are major players in the implementation of health reform, since many of the law’s responsibilities fall to state governments. In addition to budget pressures at the state level across the board, 29 states are now led by Republican governors, most of whom oppose the law and will find their own way to disrupt its implementation. For example, Wisconsin, under former Democratic Governor Jim Doyle, had made significant progress toward implementing PPACA. His successor, Republican Governor Scott Walker, reversed the previous administration’s efforts in favor of a free-market approach.

The most pressing issue for states is the pressure to begin creating state health insurance exchanges, which must be up and running by 2014. States must pass legislation this year in order to meet that deadline, a bitter pill to swallow for governors who don’t agree with the law. Some states, like Louisiana, will opt not to create an exchange and let the federal government create one for them. Some states, like California, have already begun the process of constructing their systems. And some states, like Florida, have decided that a court ruling (http://tinyurl.com/68sxdu7) in a case filed on behalf of 26 states that declared the entire law unconstitutional means that they no longer have to implement the provisions of the law.

Who Wants a Waiver?

The Obama administration has so far issued more than 1,000 waivers to businesses seeking temporary exemption from the law’s requirement that employers provide at least $750,000 in coverage to each person in their health insurance plans this year. The State of Maine was the first to receive a waiver from the law’s Medical Loss Ratio requirement that insurers must spend at least 80 percent of premiums collected on benefits. And President Obama supports a legislative change that would allow states with comparable health reform plans to opt out of PPACA by 2014 instead of 2017, as the law currently stipulates.

And with all this talk about waivers, some lawmakers decided that individuals also should have the opportunity to opt out and drafted legislation to that effect. Additionally, legislation emerged in both chambers that would require the Department of Health and Human Services (HHS) to make its waiver granting process public. Former adviser to George W. Bush Karl Rove’s political organization, Crossroads GPS, has filed a lawsuit to force the administration to divulge that information.

How Can They Disrupt the Law? Let Me Count the Ways!

Since full repeal is unlikely, Republican lawmakers are focusing on portions of the law that they could repeal or ways to adjust the current law. The following are some provisions or legislative issues that Congress is targeting for action this year.

Repeal the Individual Mandate
The individual insurance mandate provision is easily the least publicly popular component of health reform. However, the law’s requirements on health insurers to take all comers and cover individuals with pre-existing conditions depends on the expanded pool that the individual mandate promises. It’s a sticky situation that lawmakers don’t yet know how to solve. So far, Republicans are promoting budget cuts to the IRS to prevent enforcement of the provision (part of the House-passed Continuing Resolution) — part of their overall strategy to disrupt the law’s implementation. Democrats are considering ways to incentivize individuals to purchase health insurance (a bill introduced by Oregon Rep. Peter DeFazio). Alternative ideas are in the infancy stage as lawmakers wait to see how the law fares in the court system.

Defund the Law
Republicans are pushing hard to cut funding for implementation of the law through the budget process — targeting both specific provisions and the bill in its entirety.

Block the Rules
Republicans are crafting bills and amendments that would block pending PPACA regulations or prohibit funding for carrying out those rules. Rules targeted so far: Medical Loss Ratio, state-run health insurance exchanges, and defining essential health benefits.

Repeal the Independent Payment Advisory Board (IPAB)
Even some Democrats don’t really like this one — the IPAB (an appointed board) would make binding Medicare and Medicaid reimbursement decisions, a power formerly enjoyed by Congress.

Reform Medical Malpractice
A longtime priority for Republicans, the House is advancing legislation that would cap economic damages at $250,000 and limit attorneys’ fees. Its fate in the Senate is unclear.

Sell Insurance Across State Lines
Republicans endorsed this idea during the 2009 health reform debate as a way to lower health insurance costs and are promoting legislation in the House that would allow it.

Insurance Rate Review
Promoted by Democrats as a way to keep insurance companies from dramatically raising premiums, legislation in the Senate would give HHS authority to intervene if the HHS Secretary deems a rate increase “excessive.”

Abortion Funding
Reviving last year’s fight over federal funding for abortion insurance coverage, Republicans in the House are advancing legislation that would require anyone receiving a federal subsidy for insurance to buy a separate policy for abortion coverage. Republicans also are trying to block federal funding for Planned Parenthood and similar women’s clinics as part of the budgeting process.

Medicare Physician Payment
Congress struggles annually with a budget formula that dictates ever steeper cuts in the Medicare reimbursement rates of physicians, which Congress artificially adjusts to appease doctors who threaten to leave the Medicare program. They will have to deal with this again when the current rate expires January 1, 2012. Republicans have promised a permanent reform this year, but it is more likely that Congress will again pass something temporary.

Medical Price Transparency
The concept of medical price transparency garnered bipartisan support in the previous Congress. Bills could emerge this year that would require public disclosure of hospital prices. Separate legislation introduced in the Senate would make physicians’ Medicare claims public.

What’s Next?

The flurry of activity at the federal level creates confusion for the public and uncertainty for the health care industry’s payers and providers. Major upheaval of the law in the next two years is highly unlikely, but the debate will rage on well into the 2012 presidential campaign season. By the time even an expedited Supreme Court decision emerges on the law’s constitutionality, most businesses, health care providers, and state governments will have already instituted major changes in compliance with the law.

Neither the government nor companies and individuals can continue to absorb the continuing increases in health care costs. Both parties will continue to endorse their opposing views of a free-market solution versus a government-guided system. In 2012, if a Republican president is elected, the House holds its majority, and the Senate becomes evenly split, then the challenge for Republicans is to prove that a market-based system will work. And it is likely that the very first order of business for either administration in the first quarter of 2013 will be to institute changes and deliver some results before the next election.