Republicans seek spending cuts

December 1, 2010

The worst case scenario for health plans would be if the planned expansion of healthcare coverage under the Patient Protection and Affordable Care Act evaporates, leaving insurers with added fees, onerous market regulations and fewer customers

WASHINGTON-The Republican wave that swept many long-standing Democrats out of Congress and state houses last month could produce some unusual challenges for health plans and insurers.

The worst-case scenario for health plans would be if the planned expansion of healthcare coverage under the Patient Protection and Affordable Care Act (PPACA) evaporates, leaving insurers with added fees, onerous market regulation and fewer customers.

With new leaders controlling the House of Representatives, and Democrats holding a narrower majority in the Senate, Republicans will be looking to deliver on promises to cut government spending and to repeal or revise PPACA. That will not be an easy task, as many provisions are popular among consumers, such as requiring insurers to cover patients with pre-existing conditions and provisions for closing the donut hole in the Medicare drug benefit.

REPEAL OF OBAMACARE

To satisfy candidates who ran against "Obamacare," the new House leaders are gearing up to vote for a wholesale repeal of PPACA early next year. This will be largely a symbolic gesture because repeal is unlikely to pass the Senate or override the president's veto.

Insurers might be relieved because the law's individual mandate is key to extending coverage to 30 million uninsured-revving up business in an otherwise static market. Without a sizeable penalty to complement the mandate, however, consumers might wait until they are sick to purchase health insurance, opting to pay a low penalty instead of a high premium in the meantime.

Instead of a total repeal of PPACA, the new Congress will be looking to challenge specific provisions in the bill. Insurers would like to roll back the billions in added taxes imposed on premiums and "Cadillac" plans. They are concerned about curbs on health savings accounts and would like more time to implement the new medical loss ratio policy.

"The age-rating restrictions will result in massive premium increases for younger workers and families," says Robert Zirkelbach, spokesman for America's Health Insurance Plans (AHIP), "and the $200 billion in Medicare Advantage cuts will result in loss of coverage, benefit cuts and fewer choices for millions of seniors."

One piece of low-hanging fruit that even Obama agrees should be modified is a cumbersome tax-reporting provision that requires businesses to file 1099 forms with the Internal Revenue Service (IRS) for payments for goods and services worth more than $600 during the year.

IPAB REMAINS UNPOPULAR

Another prime target for the axe is the Independent Payment Advisory Board (IPAB), which has broad powers to set payment policy for Medicare and to recommend changes in private sector payment systems. Doctors and hospitals are leery of IPAB's authority to implement rate cuts, and pharmaceutical companies fear the board will propose price cuts. Congress will provide $15 million to start up IPAB in 2012 and have it functioning by 2014, but that may not happen. Several industry groups have vowed to lobby against the board.

In addition to attacking select PPACA provisions, Republicans also will move to starve implementation of new health reform programs. Rep. John Boehner (R-Ohio), slated to be the next speaker of the House, talks of cutting the federal budget by $100 billion, which will bring government outlays down to 2008 levels.

Part of this strategy is to curb appropriations needed by the Department of Health and Human Services (HHS), the IRS and other agencies to establish new PPACA initiatives. Republicans might try to block new regulations before they go into effect. Complicating this budget-cutting scenario, though, is the need for Congress to immediately deal with some high-cost issues. Congress left town in the fall without finalizing the federal budget for fiscal year 2011, which now is months overdue.

Physicians have been warning for months that Medicare fees will plunge by 30% on January 1, 2011, unless the legislators extend that deadline for another year-a move calculated to cost about $275 billion. And Bush-era tax breaks, which Republicans are eager to retain, also expire December 31 unless Congress renews or extends them.

LEADERSHIP COMMITTEE CHANGES

One likely result of the Republican takeover of the House is more intense scrutiny of administration policies by the committees responsible for health and biomedical programs. The new leaders of the House Energy & Commerce Committee are eager to grill HHS Secretary Kathleen Sebelius and her top aides on health-reform cost estimates and the impact of specific new policies on employer coverage, premiums and benefits. Rep. Darrell Issa (R-Calif.) is in line to chair the House Oversight and Government Reform Committee, where he will be able to issue subpoenas to access government documents.

Although Democrats retained control of the Senate, there will be notable changes in health-related committees. Sen. Orrin Hatch (R-Utah) will play a more prominent role in seeking health reform changes as the ranking Republican on the Senate Finance committee, where he replaces Sen. Charles Grassley (R-Iowa).

While the economy and continued unemployment were the top issues stirring voter discontent, healthcare reform emerged as a factor when unhappy Americans went to the polls.