Where will Obama draw the line on GOP bills to roll back reform?

Big Republican election gains in Congress will position the GOP to aggressively challenge Obamacare in 2015. Now the questions are how sweeping Republican efforts will be to roll back the law, and whether the party will pursue its longstanding goal of restructuring Medicare and Medicaid. Everyone will be watching where President Barack Obama draws the line with his veto pen.

Repealing the Patient Protection and Affordable Care Act was a key campaign issue propelling Republicans to gain control of the Senate and their largest majority in the House since the Great Depression. Sen. Mitch McConnell (R-Ky.), who is expected to be the new Senate majority leader, has vowed to dismantle Obamacare “root and branch.”

Most political observers say the GOP-controlled chambers are likely to vote to repeal the law shortly after convening in January. But given that Republicans won't have a veto-proof majority in either the House or Senate, repeal legislation almost certainly will die with a stroke of a presidential pen. That could tee up healthcare as a marquee issue in the 2016 elections.

Republicans are likely to then turn their focus to picking off controversial provisions of the law. At the top of the list are the 2.3% medical-device tax and the employer mandate. They also may move to change the definition of full-time workers, whom employers have to cover, from 30 to 40 hours a week, and abolish the Medicare Independent Payment Advisory Board, which conservatives have excoriated as a “death panel.”

At a news conference last week, Obama set down some markers. “On healthcare, there are certainly some lines I'm going to draw,” he said. “Repeal of the law I won't sign. Efforts that would take away healthcare from the 10 million people who now have it and the millions more who are now eligible to get it, we're not going to support.” While he said he's open to some changes, he said he would not sign anything that would “undermine the structure of the law.”

But certain GOP proposals may have some Democratic support. Scrapping the medical-device tax won the backing of some liberal Democrats in the past, passing the Senate by a 79-20 non-binding vote last year. But repealing the tax would cost $29 billion over a decade, and there is no agreement on how to fill that funding gap.

“That widespread support was easy to have when there was no way in hell it was going to pass,” said Joe Antos, a health policy expert at the conservative American Enterprise Institute. “Democratic support for that is going to erode rather rapidly.”

Joel Ario, a managing director at Manatt Health Solutions, thinks there could be common ground between Congress and Obama in abolishing the employer mandate. Analysts at the left-leaning Urban Institute concluded this year that scrapping the mandate would not significantly reduce coverage and would eliminate distortions in the labor market.

Republicans will use the budget reconciliation process as a way to dismantle key pieces of Obamacare, said Stephen Northrup, a partner at lobbying firm Rampy Northrup who formerly served as health policy director for Republican leaders of the Senate Health, Education, Labor and Pensions Committee. That's because such votes can't be filibustered in the Senate and therefore don't require 60 votes.

But major changes to the Affordable Care Act would cost the Treasury tens of billions of dollars, which could force Republicans to propose ways of offsetting the revenue losses. Switching the definition of full-time work from 30 to 40 hours a week, for example, would cost $83 billion over a decade in lost employer penalties and increased federal premium subsidies, according to the Congressional Budget Office.

House Republicans previously sought a five-year delay in the individual mandate to pay for a permanent repeal and replacement of Medicare's sustainable-growth rate formula for physician payment. Northrup expects them to look to that source again to pay for changes to the Affordable Care Act. Delaying the individual mandate would save roughly $170 billion in subsidy payments over a decade. But it would also mean 13 million fewer Americans would have coverage by 2018, according to the CBO.

At his news conference, Obama warned that eliminating the individual mandate is “a line I can't cross.” He explained that the mandate is inseparable from the provision barring insurers from rejecting people with pre-existing conditions because it prevents consumers from waiting to buy coverage until after they get sick.

Jeff Goldsmith, a veteran healthcare consultant based in Charlottesville, Va., predicted Republicans would target obscure but significant ACA provisions such as the Patient-Centered Outcomes Research Institute and the CMS Innovation Center to offset revenue losses from their proposed changes. Republicans “are not going to leave this alone,” Goldsmith said. “So if they don't have the votes to kill it, how can they cripple it?”

Beyond the Affordable Care Act, Republican congressional leaders will be on the hook to address the perennial issue of Medicare's oft-postponed caps on physician pay. The latest “doc-fix” expires at the end of March. Few political observers expect Republicans to try to enact a permanent repeal, largely because they would need to come up with a way to cover the $130 billion price tag. That would deeply disappoint physician groups.

Eric Zimmerman, health partner at McDermott Will & Emery, said Republicans will seek to cut spending on Medicare and Medicaid to reduce the federal deficit. “Both Medicare and Medicaid are very much on the table,” he said. Cuts in provider payments likely would be part of that discussion.

Still, Republicans may struggle to stay united on healthcare, with their more pragmatic leaders understanding the political perils of attacking popular entitlement programs and potentially causing millions of Americans to lose benefits.

The past two years of GOP control of the House made it clear how hard it is to keep tea party conservatives in line.

That could prove equally true for McConnell, as Sens. Ted Cruz, Rand Paul and Marco Rubio consider presidential runs, which may cause them to value media attention over being good Republican foot soldiers.

“A lot is going to depend on the ability of both the House and Senate leadership to organize their troops,” said Henry Aaron, a senior fellow at the Brookings Institution who supports the Affordable Care Act.

Antos predicted that McConnell will be firmer in cracking the whip on wayward members than House Speaker John Boehner (R-Ohio) has been. Antos points to Sen. Orrin Hatch (R-Utah), who will chair the Finance Committee, as a potentially positive influence on healthcare issues, given his policy expertise and ability to work with Democrats. “Orrin Hatch believes he is in town to make law and to make deals with the other side,” Antos said.

The bottom line is that the sweeping Republican election victory makes it likely that Congress will put bills on the president's desk. Whether he will sign them remains to be seen.

“It's going to be a busy time for health policy,” Zimmerman said.

Follow Paul Demko on Twitter: @MHpdemko