Health Policy After the Election

Published November 9, 2012

Health Affairs

In the short time that has passed since the election, there have been numerous pronouncements that the struggle over the future of American health care is now more or less settled. And it is certainly true that, over the next four years, full-scale repeal and replacement of the Patient Protection and Affordable Care Act (PPACA) is not in the cards. The president is determined to move ahead with full implementation, of course, and he will not readily sign onto major changes to his signature domestic initiative.

But the 2012 election did not produce a return to 2009. The Democrats do not have supermajority control of the House and Senate, as they did in the 111th Congress when the PPACA was passed. Indeed, in 2013 and 2014, Republicans will have a rather sizeable majority in the House, along with 45 votes in the Senate. In addition, there are now 30 Republican Governors in the states, who will have much to say about health care policy in the coming years, too. So, unlike the birth of the PPACA, its implementation will proceed at a time when Republicans are controlling many levers of power.

Moreover, the president and Congress will be forced by circumstances to address very significant budgetary questions in the coming months and years. In less than two months, the combination of tax and spending policies that constitute the “fiscal cliff” are scheduled to go into effect–against the wishes of leaders in both parties. And early next year, the federal government is again expected to bump up against the statutory limit on federal borrowing. Whether they like it or not, these events will force the president and congressional leaders to engage in a difficult and contentious discussion about how to narrow the massive gap between expected revenues and expected spending commitments in coming years.

Any conversation about the government’s medium and long-term fiscal situation will necessarily center heavily on health care matters. The rapid rise in health entitlement spending over the past three decades is a primary reason for the pronounced fiscal pressure we are experiencing today, and the problem is about to get much worse over the coming two decades.

Everything Must Truly Be On The Table

During his 2011 budget talks with House Speaker John Boehner, the president famously said that “everything was on the table” for discussion, but, in reality, he and his aides made it clear that the PPACA was not on the table. They wanted Republicans to accept the PPACA in its current form as a fait accompli and only negotiate on other elements of the budget. In other words, they wanted to construct a bipartisan budget agreement with Republican leaders, but on a foundation which had as a primary feature a health care plan written entirely by one party.

Republicans should not enter into budget talks with the president with those kinds of preconditions. If putting “everything on the table” for consideration is considered necessary to open up new possibilities for agreement, then everything–including all aspects of health care–must really be on the table too. And, if everything really is on the table, it is entirely possible–indeed probable–that significant amendments would be made to Medicare and Medicaid and even the PPACA.

There are also significant questions surrounding the implementation of the PPACA. Only a small subset of states have really moved ahead aggressively to construct the exchanges that are so central to reform. The administration says that it will move ahead with a back-up federal exchange in states that decline to participate, but it’s not hard to imagine this becoming a slow-motion administrative train-wreck that mars the program’s launch. The administration would clearly prefer to have the states take the lead in this process, but that is unlikely to occur in many parts of the country without real and significant concessions to Republican governors.

Implementation could be further complicated by adverse selection in the exchanges. The law was built around the assumption that the individual mandate would create the perception among citizens that they have an obligation to sign up with insurance, and thus millions of people would do so. But the Supreme Court ruled that Congress had no authority to impose such an obligation. Rather, citizens have a choice: they can buy insurance, or pay the tax. And both are perfectly legitimate choices.

This subtle difference could have profound implications on PPACA implementation if fewer young and healthy people sign up for insurance and instead choose to pay the tax. If that were to occur, premiums in the exchanges would be far higher than projections from the Congressional Budget Office would indicate.

A Deep Divide But The Potential For Bipartisan Agreement

No one should underestimate the difficulty of bridging the deep divide between the parties on health care, which is mainly a disagreement over how best to slow the pace of rising costs. One side favors empowering the federal government to impose more cost controls, while the other side wants to put consumers in functioning marketplaces in the driver’s seat. In deliberations over restraining projected federal budget deficits, these different visions are sure to collide.

This does not mean that bipartisan agreement is beyond reach. It isn’t. Indeed, if ever there were a moment for bipartisan accord, this is certainly it. There are big problems that must be confronted–problems that are difficult if not impossible for one party to ever fix by itself. The president, with re-election behind him, will have every reason to make 2013 a highly productive legislative year because his power will only diminish with time. And House Republicans want to demonstrate to voters that they are as interested in governing as in checking the excesses of the administration. So it would not at all be surprising to see both sides show more flexibility in the coming year than they have shown in the past.

The only thing that is certain, however, is that the issue of health care is not going away. The nation’s budgetary problems are too big and pressing to be avoided any longer, and it will prove impossible to fix those problems without significant revision to future health care spending commitments.

James C. Capretta is a fellow at the Ethics and Public Policy Center and a former Associate Director at the White House Office of Management and Budget.

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