Magazine Article | October 29, 2014

What A Republican Senate May Mean For Health Policy

Source: Life Science Leader

By John McManus, president and founder, The McManus Group

Just days before the election, the president’s approval ratings are at an all-time low, and Democratic Senate candidates are running against the president, with the Democratic candidate in Kentucky refusing to disclose whether she even voted for him, claiming a constitutional right to privacy. If the trajectory holds, the Republicans should take the Senate and control both houses of Congress.

What would this mean for health policy for the last two years of the Obama presidency?

A new Republican Senate majority will likely move early to try to repeal Obamacare. But even in the minority, a unified Democratic conference can block an up or down vote from proceeding. Even if Republicans peel off the necessary Democrats to reach the 60-vote filibuster-proof super-majority, the president will be sure to veto a repeal of his most cherished domestic legislative achievement that now bears his name.

Following this fruitless exercise, Congress could tackle real issues.

The present “SGR [sustainable growth rate] patch” blocking massive, pending Medicare payment cuts for physicians is set to expire March 31. Congress achieved a rare bipartisan breakthrough on replacing and reforming that payment formula earlier this spring, but could not agree on whether or how to finance the $120 billion price tag of eliminating those unsustainable cuts. March is probably too soon for a new Congress to develop bipartisan consensus on an offset, and a sixmonth punt may set up a more serious Medicare bill for the fall.

A newly installed House Ways and Means Committee Chairman Ryan may try to tie SGR reform to broader Medicare reforms such as consolidating Parts A and B’s disparate cost-sharing and move Medicare to a more competitive premium support model. Such a package could move through the Senate under “budget reconciliation” — a parliamentary tactic that requires only a 51-vote majority, so long as the provisions have a fiscal impact.

But don’t necessarily expect bold action from Senate Republicans in 2015. Republicans will be defending 23 seats in 2016 and wary about exposing vulnerable members to controversial votes that can be demagogued as “ending Medicare as we know it.” Many of these seats will be in Democratleaning states such as Pennsylvania, Illinois, and Maine. Moreover, several sitting Republican senators will be running for president (e.g. Cruz, Paul, and Rubio) and have more interest in laying out an agenda for the 2016 election than bipartisan lawmaking with the current president.

Perhaps a more interesting conundrum will be how a Republican Congress reacts to an imminent Supreme Court decision, which may prohibit premium subsidies flowing to individuals who enrolled in health insurance through the Federal Exchange. Earlier this year, three federal courts issued conflicting opinions on whether the statutory language providing subsidies for “an exchange established by the State” permits the IRS to funnel subsidies to the vast majority of Americans living in the 36 states that refused to establish state exchanges. Those individuals obtained coverage in the federal exchange through the portal, infamously inoperable for weeks, known as Healthcare. gov. Several other states, including Nevada and Oregon, are presently abandoning their dysfunctional state exchanges and enrolling their residents in the federal exchange.

"Perhaps Republicans could find common ground with a president who may be more interested in building a legacy than appeasing his base."

The September U.S. District Court ruling for Pruitt v. Burwell, invalidating subsidies in the federal exchanges, is important because it establishes another split in the lower courts and may prompt the high court to take a closer look at the case and consider whether to take it up immediately or wait for pending appeals to conclude.

Federal Judge Ronald White, who issued the Pruitt ruling, dismissed political arguments in the previous cases, stating “This is a case of statutory interpretation. The text is what it is, no matter which side benefits. … Such a case does not ‘gut’ or ‘destroy’ anything. On the contrary, the court is upholding the act as written. Congress is free to amend the ACA to provide tax credits in both state and federal exchanges, if that is the legislative will.”

Would Chief Justice Roberts hold a similar view that clear language means something? Or would he contort language to divine legislative intent just as he did in his landmark decision upholding the constitutionality of the individual mandate, where he deemed the word “penalty,” which appeared 27 times in the Affordable Care Act statute, actually meant “tax?” Who knows?

But a Supreme Court decision that upholds Pruitt lands the issue squarely in the Republicans' lap. How do they respond?

Republicans would likely be unwilling to amend the Affordable Care Act to authorize subsidies through the federal exchange. They could make a federalism argument and suggest that each state has the ability to decide whether to establish its own exchange and the subsidies that would flow. But many of those states are the very same conservative strongholds that refused to expand Medicaid even though the federal government was picking up 90 to 100 percent of the tab.

What would be the political fallout of turning the subsidy spigot off for millions of lower and middle income people who finally obtained health insurance coverage? This is precisely why Republicans were fixated on dismantling Obamacare before the subsidized coverage commenced in January 2014. It’s always easier to block theoretical benefits than take away tangible benefits people say they currently depend upon. If Republicans do not quickly develop a concrete and coherent alternative to Obamacare, Democrats may finally be able to turn the tables and blame Republicans for taking away coverage that people relied upon.

Perhaps Republicans could find common ground with a president who may be more interested in building a legacy than appeasing his base. Putting Medicare and other entitlements on a more sustainable course requires bipartisan cooperation so neither party can be unfairly maligned. It’s an issue House Republicans like Ryan are eager to take up.

But progress also can be made in more incremental fashion. Targeted fixes to the ACA can be foreseen, such as repealing the medical device tax — a measure that has strong bipartisan support. A delay of the individual mandate is a priority for Republicans and yields substantial revenue that could be used for SGR reform or other fixes. It’s hard to see how the president maintains his opposition to this penalty, when delays have already been granted to employers. A repeal of the Independent Payment Advisory Board (IPAB) has been a priority for the health industry, because it is empowered to inflict arbitrary and nonreviewable Medicare cuts to healthcare providers and pharmaceuticals alike.

Of course, all of this speculation of a Republican Congress and legislating on simmering health policy problems may be wishful thinking. Many of the Senate races will be decided by a percentage or two, and the final outcome may not be known until January after several states have runoffs. There is still a good chance that Democrats retain control of the Senate (by the slimmest of margins), and the nation grinds through a couple more years of virtual gridlock while we wait for a new president.