Elections determine healthcare's future

August 1, 2012

The GOP is looking to gain control of the White House and Congress to restructure healthcare.

WASHINGTON-Since the foes of "Obamacare" failed to kill health reform in the courts, they're looking to gain control of the White House and Congress to accomplish the job. Many state governors are holding off on decisions until after the November elections.

Payers and providers say they are moving forward to implement programs established by the Patient Protection and Affordable Care Act (PPACA), but are concerned about severe funding cuts on the horizon.

While states are eager to gain federal support for broader Medicaid programs, they likewise don't want to expand without assurance on funding. Those that prefer to hold off on expansion are uncertain if they can seek support for broader programs in the future.

The House approved legislation in July to repeal PPACA in its entirety-an action universally regarded as an empty gesture because it stood no chance of consideration by the Democratic-controlled Senate.

More significant damage could come from Congressional Appropriations bills that eliminate federal funding for agencies and offices charged with implementing health reform programs. The Labor/Department of Health and Human Services (HHS) spending bill for 2013 approved by the House Appropriations Committee in July cuts billions from HHS operations, namely: the Agency for Healthcare Research and Quality (AHRQ); and the Centers for Medicare & Medicaid Services (CMS).

But those cuts were put on hold for six months just before Congress left Washington for its August recess. A rare agreement by Democrats and Republicans aims to continue funding government operations at current levels through March 2013, largely to avoid a government shut-down just before the national elections. Congress will approve the funding extension in early September.

Congress faces a packed "lame duck" session in November and December, as a combination of higher taxes and additional cuts in federal government spending threaten to fuel another political and economic crisis. Federal Reserve Chairman Ben Bernanke warned Congressional committees last month that failure to avoid these developments could send the nation back into a recession, with loss of jobs, wage cuts and reduced investment.

Legislation enacted in 2011 to curb the federal budget deficit sets the stage for automatic spending cuts totaling $109 billion for the coming year unless Congress offers an alternative cost-cutting process by Jan. 2, 2013. This budget "sequestration" provision cuts Medicare funds by 2% and will hit hospitals, providers and plans doubly hard, coming on top of rate reductions already authorized by PPACA.

At the same time, most Americans face a sharp rise in income taxes and paycheck withholding if Congress allows a set of tax cuts enacted during the Bush administration to expire at year-end, as scheduled. Efforts to reach a compromise on tax policy has been stymied by Democrats' insistence on retaining higher taxes for the wealthy (incomes over $250,000), and unanimous Republican opposition to any tax increases.

The federal government "fiscal cliff" has become a prime campaign issue, with both sides claiming to be best positioned to deal with the political stalemate and economic implications.

COST CONTROL CRITICAL

The federal budget crisis has strengthened calls to curb spending on healthcare. PPACA cuts costs primarily by reining in insurance premiums and seeks more revenues by imposing premium taxes on health plans. Consumers may applaud rich "essential benefit" requirements, but these policies threaten to make plans more costly.

Mark McClellan of the Brookings Institution said at a Health Affairs briefing in July, even if health reform is fully implemented, it's not clear if exchanges will offer plans that are affordable to young, healthy individuals. The penalty for not purchasing coverage is also a subject of debate.

There was much discussion at the briefing about adopting value-based purchasing strategies and changing systems for paying providers.