On health care in 2020, the GOP is likely to play small ball

Having failed to repeal and replace the Affordable Care Act (ACA) when they controlled Congress in 2017, Republicans claim it’s still their goal. Earlier this year, President Trump said he would soon unveil a new replacement plan that would be so popular it would lead voters to see the GOP in a new light, as the party of health care. Not surprisingly, no such plan has emerged, or is likely to before the 2020 election. Instead, Republicans seem destined to push incremental and less politically risky ideas while criticizing the more aggressive reforms endorsed by their Democratic opponents.

 

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Republicans couldn’t pass a health-care bill when they had the chance because of internal divisions and their unwillingness to grapple realistically with the existing insurance system. While the ACA has many flaws, it expanded coverage by providing generous federal funding for a Medicaid expansion and for subsidies that lowered private insurance premiums for households with incomes below 400 percent of the federal poverty line. Republicans could never find a formula that matched the ACA’s coverage numbers at less expense to taxpayers.

The 2017 debate left many in the GOP feeling burned. They spent the first crucial months of the Trump presidency trying to get a bill through Congress but emerged politically vulnerable and empty handed. Very few Republicans are willing to repeat that experience.

According to several news stories, the Trump administration has had internal discussions this year about a new replacement plan, with at least one proposal getting scuttled as it was being readied for the president’s review. The obstacles that doomed the effort in 2017 have not been removed. Many Republicans want to scale back the regulation and spending of the ACA but doing so leads to higher numbers of uninsured Americans, which is politically toxic. GOP Senators from Medicaid expansion states are particularly sensitive about legislation that could leave many of their poorest constituents without realistic options for getting insurance.

In the House, a group of ten Republicans released a white paper this year outlining a reform plan. It would replace the ACA with: a regulatory structure under state control; Medicaid per-capita payments to the states combined with a rollback of enhanced funding for program expansion; and a liberalization of Health Savings Accounts that authorizes account holders to buy their own coverage with premium payments. While certainly bold, this plan is unlikely to garner widespread support among Republicans because of the controversy it would generate if embraced by the president or leaders in Congress. The combined effects of its provisions would be to leave many lower income households without ready access to health insurance. The number of uninsured would spike.

Political reality will force the administration and its allies in Congress to search for safer ground to stand on. What is likely to emerge is a strategy focused on political messaging rather an actual plan, with an emphasis on the regulations and administrative actions taken by the president during his term. There also will be vigorous attacks on whatever reforms are endorsed by the eventual Democratic nominee.

The following are the higher-profile initiatives of the administration that Republicans are most likely to tout as they attempt to counter Democratic plans for publicly-run coverage expansion:

Changes to Health Reimbursement Arrangements.  The Trump administration has finalized a rule that will allow employers to pay individual coverage premiums for workers through health reimbursement arrangements (HRAs). Employer contributions to HRAs are tax-free to the workers. The rule change could lead more employers to offer premium payments for their employees. The Treasury and Health and Human Services Departments estimate the rule will reduce the number of uninsured Americans by 0.8 million at the end of ten years. It would also increase enrollment in individual market plans by 2.7 million people in 2021 and 11.4 million in 2029.

Short-Term, Limited Duration Insurance. The administration also liberalized the rules for selling short-term, limited-duration insurance (STLDI) plans, increasing their allowed length from three months to three years. STDLI plans are exempt from the ACA’s insurance rules pertaining to covered benefits and underwriting. The Congressional Budget Office (CBO) estimates there will be 1.6 million enrollees in short-term plans in 2024, and that the rule will contribute to expanded insurance enrollment, on a net basis, by appealing to consumers who are healthy and would otherwise go uninsured.

Price Transparency. The Centers for Medicare and Medicaid Services (CMS) has finalized new rules requiring hospital systems to disclose prices for the services they provide to patients. The disclosure covers both undiscounted “chargemaster” rates as well as those that have been negotiated with insurance plans. Facilities also must state pricing for 70 common, and “shoppable,” interventions, as defined by CMS, and another 230 as specified by the hospitals themselves. A separate proposed rule requires insurers to disclose cost-sharing to patients prior to the receipt of services. While these regulations could be delayed (or rescinded) by a legal fight, the administration will, with some justification, tout them as among the most significant, pro-consumer initiatives undertaken in recent years.

Drug Pricing. President Trump came into office promising to lower drug prices for consumers. He has yet to deliver a significant regulatory or legal change that delivers on that commitment. However, the administration is set to release new rules that may limit its political vulnerability on this issue. One would allow states to develop programs for purchasing drugs at lower international prices (often called “reimportation”). A second would institute an international price index that constrains what Medicare pays for drugs under part B of the program. Both concepts face practical barriers. Drug manufacturers are unlikely to sell sufficient supply at lower international prices to meet the demands of both foreign customers and U.S. residents. Further, an international price index is only as good as the price data fed into it. Multi-national drug companies will seek to inflate the prices they charge to Medicare by providing discounts to foreign customers outside of official price disclosures. Still, these proposals, which are supported by most Democrats, might help insulate the president from the criticism that he did nothing to fulfill his campaign pledge.

Other prominent administration initiatives, including liberalization of association health plans and state-initiated work requirements in Medicaid, are now in litigation and will be of less value in the 2020 campaign.

Republicans have always found it easier to say what they are against in health care rather than what they are for. Next year will be no different, with the GOP focusing most of its energy on criticizing the Democratic nominee’s ideas. In the rough and tumble of a polarizing election, that might be sufficient.

James C. Capretta is a resident fellow at the American Enterprise Institute.