JAMA Forum: Action on the ACA Next Year? Maybe.

Stuart Butler, PhD (Image: The Brookings Institution)

Stuart Butler, PhD (Image: The Brookings Institution)

What are the prospects for action on the Affordable Care Act (ACA) during the next Congress and presidential administration? There is no easy answer to that question in this unusual election year, although one’s first reaction might be “not much.” As Larry Leavitt, MPP,  noted in the JAMA Forum recently, the presidential platforms suggest fundamentally different, maybe even irreconcilable, approaches.

At the risk of being proven wrong, it also seems reasonable to assume that there will continue to be a political standoff in practice next year, with neither party able to push through its preferred solutions for health care. And the Republican “Repeal Obamacare” mantra seems to leave little space for compromise.

But a standoff could also lead to interesting prospects for some agreement, assuming that repeal of the ACA remains a nonstarter.

Certainly a lot needs to be done. The current problems besetting the exchanges might be one opening for needed revisions. The fear that other plans might follow Aetna out of the exchanges and concern about lackluster enrollment and premium hikes are prompting ACA supporters to raise the ante to trigger legislative action. Some advocate requiring all plans offering individual coverage to do so through the ACA exchanges; others are reviving the idea of a public option to ensure competition and affordable coverage.

Short of repeal, some on the right also have proposals to address shortcomings, including simplifying insurance rules and the subsidy structure that makes exchange coverage costly and unattractive to many young, healthy US residents. One idea is to loosen the age-related premium limits that are said to make coverage too expensive for the young (currently the age ratio for premiums can be no more than 3:1, meaning that insurers cannot sell nongroup coverage to a person aged 64 years or older for more than 3 times the cost of the same coverage sold to a 21 year-old individual). Meanwhile, over the last year or so, leading Republicans in the Senate and House—most recently House Speaker Paul Ryan (R, Wisconsin)— have proposed age-related tax credits for insurance. Credit proposals could be a starting point for a bipartisan conversation on how to modify ACA subsidies or tack on a new refundable credit to make coverage more affordable.

No Kumbaya Moment Expected

Still, don’t expect some grand bipartisan kumbaya moment just yet. But in the messy details of a tax or appropriation bill, there would be an opportunity for at least modest steps to widen coverage by modifying coverage subsidies.

Do expect, however, significant changes in the ACA to be driven by states through the waiver process, including the potentially sweeping modifications permitted under section 1332 of the ACA itself. Section 1332 allows states to request administration waivers from such provisions as the individual and employer mandate, the exchanges, and details of the essential benefits package, provided the state proposal would preserve the central goals and protections of the ACA and be budget neutral for the federal government. The Obama administration has been very open to Medicaid waivers, in part to induce conservative states to adopt the ACA’s Medicaid expansion provisions. On the other hand, by dragging its feet on guidance for section 1332 waivers and narrowly interpreting budget neutrality, the White House has discouraged most states from moving forward with plans to apply for those waivers.

However, there’s bipartisan support for making greater use of section 1332. Many Democrats, see that as an opportunity for blue states to push reform more to the left, allowing such things as a public option and steps towards a single-payer system. They also see it as a political safety valve to reduce opposition to the ACA within some red states. The mirror image on the Republican side is envisioning 1332 waivers as opening the door to such things as a private option for Medicaid—essentially using Medicaid funds for private coverage—and as an “exit ramp” from some of the ACA’s provisions if outright repeal is impossible.

The next Administration is likely to give a clearer green light to 1332 waivers. If a Trump administration is unable to achieve ACA repeal, it could use an expansive interpretation of the section to allow states to escape major parts of the ACA. On the other hand, a Clinton administration could use the provision to advance some of its reforms in parts of the country without having to get the agreement of Congress.

The “Cadillac Tax”

Regrettably, a subject on which there might well be bipartisan support is diluting or repealing the “Cadillac tax,” the 40% excise tax on high-cost employer-sponsored health plans. Many economists on the left and right have long favored a cap on the tax-free status of employer-provided insurance as a way of addressing the regressive nature of the tax treatment and discouraging excessively costly plans. Although such economists generally see an excise tax as a clumsy reform, they also see it as much better than nothing and as crucial to retain; for ACA supporters, it is also an important source of revenue. On the other hand, many business organizations and other stakeholders see it as a burdensome requirement on employers and an unwanted tax on already costly health benefits.

The tax is unpopular in Congress, and its imposition, originally scheduled for 2018, has already been pushed back 2 years, and is a bipartisan candidate for further delay. Delay is actually more attractive to lawmakers of both parties than an outright repeal, since delay allows projected revenues to be counted as an offset to the cost of the ACA or as a reduction in projected deficits.

So the next Congress and administration is likely to take some steps to modify the ACA or allow states to escape some of its provisions. These won’t be elegant steps, and some, like action on the Cadillac tax, are likely to be steps backward. It will most probably be a period of muddling along until the political planets align for a more coherent and structural reform at some point far in the future. Indeed, future historians are likely to look back on the period as yet another example of an expression allegedly offered by Winston Churchill: “You can always count on Americans to do the right thing—after they have tried everything else.”

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About the author: Stuart M. Butler, PhD, is a senior fellow, Economic Studies, at the Brookings Institution in Washington, DC, where he focuses on developing new policy ideas. He is also an adjunct professor at Georgetown University’s Graduate School, and serves on the board of trustees for the Convergence Center for Policy Resolution.

About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.

 

 



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