Outlook for 2017: Healthcare re-reform

2017 had been shaping up as a year focused on fixing the Affordable Care Act's insurance markets, slowing prescription drug price hikes, expanding Medicaid, improving mental healthcare and spreading value-based payment and delivery.

Suddenly there's a new, more conservative agenda. And almost everything in healthcare is up in the air.

Insurers and providers were counting on continuing to add paying customers under the ACA's premium subsidy framework, with more states expanding Medicaid to low-income adults. But after the surprise presidential victory of Republican Donald Trump, industry groups have no clear idea what the new framework will be if Trump and the Republican Congress make good on their pledge to repeal and replace Obamacare.

Beyond that, there's great uncertainty whether and at what level Republicans will fund a wide range of health programs, including medical research, mental health and addiction services, public health, community health centers and the Children's Health Insurance Program. Trump's picks for cabinet-level posts, notably Rep. Mick Mulvaney (R-S.C.) at the Office of Management and Budget, are no fans of government social spending.

“It's hard to plan a business with this many outstanding questions,” said Ceci Connolly, CEO of the Alliance for Community Health Plans, which represents not-for-profit insurers.

Republican experts say there's no question Congress will push to repeal the ACA via a party-line, expedited budget bill. It's likely they'll also try to erase or roll back the law's Medicaid expansion. But these observers acknowledge that congressional GOP leaders themselves don't know what they're going to put in the ACA's place—or precisely how they'll do it.

“They're working through that,” said Dean Rosen, a Republican lobbyist who formerly served as a senior Republican Senate staffer. “Republicans will own the changes, and they have to be very careful they don't find themselves in the same position as the Obama administration, defending an unpopular, partisan piece of legislation.”

Other observers warn that Republicans may not fully realize what a daunting task they're taking on, and how it could get in the way of their other legislative priorities such as job creation, tax reform, immigration and trade.

Adding to the challenge, the Trump administration and Congress will have to weigh whether to take action to keep the individual insurance market stable until they establish an alternative system—or let it crash and try to blame Obamacare. All the while, congressional Democrats will be blasting the GOP's actions as taking away healthcare from tens of millions of Americans, with an eye on winning the 2018 congressional elections.

Healthcare re-reform “has the potential to swamp any presidential administration because of its complexity and the extraordinary emotional context of people's lives and health,” said Tom Daschle, the former Democratic Senate majority leader who helped craft the ACA. “Republicans will find themselves in a very defensive position if they can't meet the American people's expectations.”

Chip Kahn, CEO of the Federation of American Hospitals, said his group and the American Hospital Association commissioned a study before the election of the dire impact repealing the ACA would have on hospitals—not thinking they'd ever have to use it. Hospitals and other stakeholder groups accepted a “grand bargain” of industry taxes and pay cuts in return for the promise of more paying customers.

Now the ACA's coverage expansions and additional federal funding are in jeopardy, with no promises that they will be replaced and that providers' ability to serve the poor and uninsured will be supported. “The key question is whether Republicans can be flexible enough to realize it's not something we can just undo,” Kahn said at a Modern Healthcare event last month.

That real-world impact is why some experts are skeptical Republicans will be able to get the 51 Senate votes needed to pass expedited repeal legislation. “I'm not assuming this is a done deal,” said Jeff Goldsmith, a national adviser to consultancy Navigant Healthcare. “It's going to be a real education for these new folks how hard this is. You want to take something away from a $3.4 trillion industry? It's going to cost you.”

The political price could be even higher if Republicans follow through on plans by House Speaker Paul Ryan and HHS secretary-nominee Dr. Tom Price to try to pass major cost-saving overhauls of Medicaid and Medicare in 2017. Some predict Trump will wobble if polls show he's losing support among his base of older voters.

“We had a presidential race where Medicare wasn't even an issue,” said Tom Miller, a Republican health policy expert at the conservative-leaning American Enterprise Institute. “When the real live ammo starts firing, let's see if Trump still says, 'Whatever Congress does is fine.' ”

On Medicaid, providers, state elected officials and patient advocacy groups will fight fiercely if Republicans try to roll back the ACA expansion and turn Medicaid into a system of capped federal payments to the states, ending any entitlement to benefits.

Repealing the expansion would cost states billions of dollars, creating budget strains for both Republican and Democratic governors. Critics warn that switching to a system of flat federal payments would force states to slash eligibility, benefits and payment rates to providers. It also could set off a huge battle over how to calculate the amount of federal money each state receives.

Governors think Medicaid block grants would enable them to control their budgets better, said Kahn, who believes states would make “wrong decisions” about how to spend the money. But the end result would be a lot of inequity in distributing money to the states. “I hope that's when the bottom falls out of this concept.”

Despite the formidable political obstacles, Miller predicts Republicans will charge ahead on Medicaid restructuring. That's because it may be the only politically viable way to score the big budget savings they need to pay for their proposed tax credits to replace the ACA's income-based premium subsidies.

“If you can't get savings out of Medicaid, I don't know where else you can get them and put out new benefits to other people and make them happy,” he said.

The outlook is murkier for action by the administration or Congress to rein in prescription drug prices, given GOP opposition to government intervention in markets. With consumers, hospitals and insurers seething over these higher prices, Rosen, the GOP lobbyist, said modest policy action is possible to increase drugmakers' cost transparency and speed the process for getting generic products to market.

Such cost-related measures could be attached to must-pass legislation in the second half of 2017 to reauthorize the Food and Drug Administration's user fees for drug and medical device approvals.

But Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, signaled at the Modern Healthcare event last month that his industry would fight any such moves because the proposed policy solutions “aren't viable.”

Some believe Trump himself may weigh in on the issue in light of his statement last month that “I'm going to bring down drug prices.” Just as he pressured Carrier Corp. after the election not to relocate several hundred factory jobs from Indiana to Mexico, he could try to “Carrierize” drug companies through tweets or other public comments if they raise prices.

“You don't need government price controls to create a climate where prices increases are a political problem,” Goldsmith said.

Trump and congressional Republicans have promised the business community broad relief from federal regulation. That sounds sweet to healthcare industry groups and may prompt them to accept some immediate financial pain and cut deals on ACA repeal and other GOP policy priorities. That could bring them greater leeway to innovate, such as using telehealth to expand access to Medicare Advantage patients in rural areas. It also might mean more freedom to merge or partner with other organizations.

Industry groups may have considerable bargaining leverage this coming year, because Trump and his fellow Republicans know they can't afford to fall short on their campaign promises on healthcare.

“The lesson of health policy legislating is there's always a way for a desperate majority to get to its end result,” Miller said. “The alternative is failure and being thrown out of office.”