Putting the Florida Legal Ruling in Perspective
The media is full of stories this morning about the ruling yesterday of Judge Vinson, not only that the Individual Responsibility Requirement (IRR) of the ACA is unconstitutional, but also that the entire law must fall as a result. While this sounds dramatic, there is rather less than meets the eye.

Essentially the ruling has no immediate practical significance other than providing fresh ammunition for the attack dogs who were quick to seize on it. It doesn’t really change the calculus with regard to implementation. Federal regulators will certainly move ahead and the situation is not much different in the states. Since all or most of the ACA that pertains to states is likely to survive the legal challenges, the consequences of inaction are too significant for state government to sit back and do nothing while the court cases play out. For example, state administrations politically opposed to the ACA who want to use this ruling as an excuse for inaction risk turning over the operation of the Exchange (and the keys to Medicaid eligibility) in their state to the federal government.

The main concern about the ruling is that it opens up new ground on the far right, moving the Virginia ruling — which struck the IRR while upholding the rest of the law — into the center. This could create cover for the Supreme Court to follow suit in dumping the IRR while upholding the rest of the law.

If it comes, a Supreme Court ruling along the lines of the Virginia decision would create a major challenge for ACA backers. If the law, minus the IRR, remains intact, there could be significant adverse selection in private insurance pools. Technically, there are a number of alternatives that could be put in place to allow ACA implementation to move forward without major disruption.

The challenge is political. Bipartisan cooperation would be needed to enact an alternative. Republican opponents of the ACA could demand other major changes in return for an agreement to enact an alternative mechanism to prevent adverse selection.

During the debate on expiring tax cuts, Congressional Republicans showed themselves willing and able to avail themselves of this type of “hostage taking” opportunity to preserve tax breaks for the wealthy. They seem likely to attempt a similar strategy both with regard to completing the work on the FY’11 budget and the upcoming vote to raise the federal debt ceiling (see below). During the tax debate, neither the Obama administration nor Democrats in Congress were willing to play hardball. It remains to be seen whether the same dynamic plays out with respect to health care.

Stay tuned for more detail on the Vinson ruling.

The Next Dragon in the Road
The much-hyped House vote on ACA repeal is already fading into the rearview mirror. While Senators Reid and McConnell jockey over scheduling a similarly symbolic Senate vote, far more significant threats loom ahead that advocates must be prepared to meet. One critical fight that is rapidly approaching is a likely vote on whether to amend or repeal the Medicaid Maintenance of Effort (MoE) requirement contained in the ACA.

The ACA prohibits states from reducing Medicaid eligibility or putting in place new administrative enrollment barriers for most adults prior to 2014 and for kids until 2019. Recently, Republican Governors sent a letter to President Obama and Congressional leaders calling for repeal of the MoE. Even more recently, the National Governors Association (which includes all of the nation’s governors — Democrats as well as Republicans) sent another letter that, while less explicit in calling for repeal, also took a stance in opposition to the MoE requirement.

Medicaid is the foundation on which the ACA rests. The repeal attempt on the MoE is the opening move in what will be a sustained effort to undermine both the ACA coverage expansion and the entitlement nature of Medicaid itself, which is why we can be sure that Congressional opponents of the ACA will push it.

MoE repeal would not only lead to an increase in the number of uninsured, it would also create new barriers to full expansion in 2014. States that rolled back coverage would have to reinstate that coverage at their regular Medicaid match rate, making the 2014 expansion more difficult. Politically, moderate Senate Democrats, especially those up for reelection in 2012, may be reluctant to hold the line on eligibility given the poor fiscal condition of states and the looming expiration of enhanced federal Medicaid matching dollars. MoE is an especially hard vote for ACA supporters because, unlike total repeal, MoE repeal, will be scored by CBO as a budget saver, making it attractive to Senators eager to burnish their credentials as deficit cutters or for use as a “pay for” for another priority that has a price tag attached.

They just can’t help themselves
Although posing as defenders of Medicare helped Republican candidates rack up positive vote margins with older voters, some members of the House GOP caucus seem eager to cough up those gains. Republican House leaders are considering a measure to convert the Medicare program into a voucher system as part of the House budget proposal, which could take shape within a month. The proposal being considered would convert Medicare into a voucher by 2021 and would also raise the eligibility age for Medicare to 69 (a change that would add substantially to employer health costs). The same idea is likely to be advanced during the debate over an increase in the debt ceiling expected to occur this spring.

Eyes of the Beholder
Did CMS Actuary Richard Foster validate the supporters or opponents of the ACA (or some of both)? Both Democrats and Republicans claim that Foster’s testimony before the House Budget Committee bolstered their views of the ACA. Democrats say that Foster agreed that the ACA would reduce the budget deficit. Republicans point to his statements relating to overall health costs and whether people could stay on their current plans as support for their criticism of the ACA. Let’s take a closer look at these two latter statements.

First, Foster said the claim “if you like what you have, you can keep it” is not true in all cases. Given the way he qualified his statement, on this point, he seems obviously correct. Although Foster may have had changes to Medicare Advantage in mind, conceding that the ACA will force junk insurance off the market isn’t anything that ACA supporters should apologize for. Sooner or later (and generally speaking the sooner, the better) plans that take subscribers money without offering them either reasonable value or adequate financial protection in the event of a serious illness will be forced off the market. People who have them now and like them only like them because they are cheap, and will only like them as long as they don’t get really sick. Just because it’s cheaper to have cars without working brakes or airbags does not mean they should be allowed on the streets.

The more serious contention is that the ACA will not contain health care costs. The statement rests on the Office of the Actuary’s (OACT) projection of total health spending under the ACA and whether the Medicare cost containment provisions will actually be implemented.

The OACT is quite pessimistic about the cost containment potential of the ACA relative to other analysts like the CBO or Council of Economic Advisors. This is a general tendency of the office, not unique to the ACA. For example, the OACT overestimated the cost of Medicare Part D by 25 percent. Nonetheless, their analysis concludes that the ACA will expand coverage to over 30 million uninsured people with virtually no net increase in health spending. Since uninsured people get only about half the care of the insured, this large coverage expansion with a negligible increase in cost is actually an endorsement, rather than a rejection of the ACA’s cost containment effect.

Most importantly, Foster is making a political rather than analytic judgment that the Medicare cost containment provisions won’t be sustained. The endless replay of the drama around how to prevent the cuts in physician fees mandated by the Medicare Sustainable Growth Rate would seem to bolster his view, but, as Paul Van de Water of CBPP points out, the SGR is the exception rather than the rule when it comes to Medicare cost containment efforts. Notwithstanding the routine fee increases approved by Congress, savings from reductions in Medicare physician fees still exceed the levels projected at the time of SGR passage.

Don’t hold your breath
While the repeal and harass parts of the repeal, replace and harass strategy seem well underway, replace seems to be lagging and the likelihood of a coherent replace strategy emerging is much lower. The problem is that most of the ideas previously advanced by House Republicans don’t actually work—having at most a modest effect on health spending and even less on coverage, while failing to adequately protect those with preexisting condition exclusions. Even McCain advisor Douglas Holtz-Eakin, a vociferous critic of the ACA says, “If it’s all they do, it’s not a serious effort.”

Nonetheless the old Boehner bill constitutes too much government intervention for some in the incoming class of freshman Republicans. As a result, coming up with an alternative to the ACA is likely to prove much harder than trying to unravel it by picking at the less popular provisions. In addition, an alternative acceptable to the House majority may not be very popular with the American people who like most of the provisions of the ACA.

In their own little corner
The health care debate in the rest of the country may be focused on repeal, replace, defund and harass or on the fiscal challenges facing state budgets, but a different story is unfolding in Vermont. Newly elected Governor Shumlin campaigned on single payer, and he is taking the issue seriously. Shumlin contracted with William Hsiao, who, among other things, helped design the national health system in Taiwan, and Jonathan Gruber, who modeled coverage expansion costs in Massachusetts and for Congress during the ACA debate, to help design a single payer plan for Vermont. Their report, released a week ago, showed that a single payer system would significantly lower health care costs and create jobs while covering more people with coverage at least as good as offered by the ACA. (They also modeled the ACA and found that it too would create jobs and lower health care costs relative to the status quo, but not as much.)

Even with a supportive governor and a Democratic legislature, there are still many legal, operational and political challenges ahead. How the plan is received by the provider community, whether there would be a role for the state’s Blue Cross plan (which now has a 75 percent market share), and the distribution and reaction of winners and losers among employers in the proposed shift from premiums to payroll taxes, are all likely to play a large role in the ultimate fate of the effort. To date, the national news media have paid relatively little attention to the Vermont effort, but if the state succeeds in establishing a single payer plan, VT could become the mouse that roared in health policy terms.

– Michael Miller, Policy Director