Obamacare survived – Now What?

POLITICO Pro, by David Nather –

November 07, 2012:

It has now survived two near-death experiences. The Supreme Court could have   struck down the law, but it didn’t. And with President Barack Obama in the   White House for four more years, it’s not going to be repealed — or even   gutted.     Now it has to work. If it does, more Americans might come to accept it — and   even be glad it passed.     If it doesn’t, Obama’s legacy will be tarnished. And Republicans will say “we   told you so” for years to come.     Either way, Americans will now see what the law — the Affordable Care Act —   is supposed to look like. The big pieces, including coverage of pre-existing   conditions and the hated individual mandate, won’t kick in until 2014. Until   now, all Americans have seen are the warm-up acts — like letting young adults   stay on their parents’ plans — that aren’t really central to the law.     “We’ll have a real-world test of the Affordable Care Act and whether   employers accept it, whether the public accepts it,” said Drew Altman,   president and chief executive officer of the Kaiser Family Foundation. “That   will change the entire discussion about the Affordable Care Act, because up   to this point, it really hasn’t been a discussion of what the Affordable Care   Act really does.”     Here’s what is supposed to happen in 2014: Everyone will be able to get   health insurance, even if they have pre-existing conditions. Most people will   have to be insured, unless they really can’t afford it. Subsidies will help   many people pay. Every state will have a health “exchange” — a marketplace   run by either the state or the feds or both — where people can get coverage   if they don’t have it through the workplace or a government program like   Medicare. Medicaid will expand to cover more low-income people.     What are the odds that everything will go according to plan? Pretty close to   zero.     If the price of health coverage in the exchanges is too high, for example,   conservative critics expect a backlash.“I think people will be in for serious   rate shock, especially in those individual markets that have been relatively   lightly regulated,” said Douglas Holtz-Eakin, president of the American   Action Forum.     Democrats, however, are sticking with the theory they’ve had from the   beginning: that Obamacare will become broadly accepted, and politically   untouchable, once Americans experience the benefits. “Once people get the   benefits, you can never take them away,” said longtime Democratic strategist   Bob Shrum. “This will go well beyond a 50-50 issue.”     Here are some potential land mines to watch for over the next two years:     What else will opponents do to fight the law?     Republicans and other opponents aren’t just going to wave the white flag.   They’ll still try to repeal parts of the law, ramp up investigations and   target sections they see as legally vulnerable.     One fight already under way centers on whether people will be able to get   subsidies in health exchanges that are run by the feds, or only when the   states themselves run them. There’s also a pending legal challenge from   Liberty University against the requirement that would make most businesses   with more than 50 workers provide health coverage or pay a fine. Liberty says   that requirement is unconstitutional — and yes, it has vowed to fight all the   way to the Supreme Court.     The lawsuits against the Obama administration’s contraception coverage   requirement, issued under the health law, are also piling up. They wouldn’t   take down the whole law, but they remind people of things they don’t like   about a big government health care law.   How many states will set up their own health exchanges?     We should know quickly. States are supposed to tell the Department of Health   and Human Services by Nov. 16 whether they will set up exchanges in time for   the January 2014 launch, apply for “partnerships” in which the feds and   states will divide up the exchange functions or let the federal government   step in with a fallback.     So far, 13 states and the District of Columbia have said they’ll definitely   set up their own exchanges, and there are “somewhere between 20 and 30”   states that could either build them or seek partnerships, according to Joel   Ario, managing director of Manatt Health Solutions and the former director of   the HHS Office of Health Insurance Exchanges. The rest will let the feds do   it.     The Obama administration would like to keep the number of federally run   exchanges low because it’s a strain to run too many. Ario predicts HHS will   look the other way if some states need time to finalize their applications.     Will the subsidies be cut?     Before we get to 2014, there’s a fiscal cliff to be avoided and a deficit   reduction deal to be cut. One obvious place lawmakers could go for savings —   and a concession Republicans might demand — would be the tax credits that   will help people pay for coverage.     Right now, the law will give subsidies on a sliding scale to people with   incomes up to 400 percent of the federal poverty line. This year, that’s   $92,200 for a family of four. Most Republicans think the subsidies are way   too generous, another expensive entitlement the nation can’t afford.     But “if you cut the subsidies too much, you start to play with the   effectiveness of the law,” Ario said. Without help paying for insurance,   fewer healthy people would sign up for coverage, so premiums could rise for   everyone else.     Will the exchanges work?     To be successful, the health exchanges have to attract a mix of healthy and   sick people so that the costs balance out. There’s a risk that some won’t   attract enough healthy people. That means the people who do join will be   those with health problems — leading to high premiums and the “rate shock”   Holtz-Eakin warned about.     That didn’t happen in Massachusetts, though, where the exchange that’s the   model for the national law — the one created by Mitt Romney’s health care law   — has a good balance.     How it’s shaping up should be clear when enrollment opens next October.   Kaiser’s Altman expects a mixed verdict, because states are so diverse.   “There will be great success stories and there will be failures, and a lot of   state exchanges that will fall somewhere in the middle,” he said.     Still, he added, “It’s hard to imagine that the exchanges won’t be a vast   improvement over the individual [insurance] market and the small group market   that we have now. Both of those markets are completely broken.”   Will the individual mandate work? And will people accept it?     It was the big constitutional question that could have taken down the law in   the Supreme Court. But it didn’t. So nearly all Americans will be required to   have health insurance, whether Obamacare opponents like it or not.     But the mandate is being phased in. The first year, the penalty for ignoring   it is only $95, or 1 percent of income, whichever is greater. But the health   plans have to start covering everyone with pre-existing conditions in 2014.   The penalties rise by 2016, but that makes two years that the insurers have   to take in everyone, before the higher penalties help bring more healthy   people their way.     There’s also, of course, the bigger political question: How many people will   just refuse to get insurance, and pay the penalty, in protest? Just because   it’s constitutional doesn’t make it popular. Massachusetts’s residents accepted   that state’s mandate — but as Romney reminded voters at every opportunity,   Massachusetts isn’t like the rest of the country.     “There will be a point in time where we know how people are reacting to the   mandate,” Altman said. “In Massachusetts, there was not an uprising. People   did not run off to Rhode Island or New Hampshire. But we do not know what the   reaction will be when it’s implemented nationally.”     How much will the subsidies really cost?     It’s a bit of a wild card, but it matters — because once the law is in place,   it will be that much harder for Congress to cut subsidies if they become too   expensive. The Congressional Budget Office has already raised its cost   estimates by $112 billion — to $574 billion between 2012 and 2019 — before   they even start.     CBO noted that the total price tag for expanding coverage will drop, because   some states might not expand Medicaid. But Holtz-Eakin predicts in a recent   report that costs will soar as employers drop coverage and workers turn to   the exchanges.     Will the law control health costs?     Remember the days when Obama was saying the health care law would save $2,500   per family? That hasn’t happened. Premiums are still going up, and they’re   going to keep going up. But the health care law does fund experiments aimed   at slowing the growth of spending by encouraging health care providers to   coordinate better.     The law also tests ways of paying to encourage higher quality care. But it’s   too soon to know how well models like accountable care organizations will   work — or even if they could backfire by spurring health industry   consolidation that drives costs up, not down.   Will employers drop coverage?     Some employers will surely decide it’s cheaper to stop covering their workers   and let them get coverage through the exchanges instead. The only question is   how many — and whether it’s something that affects enough Americans to sink   the law in the eyes of the public.   Continue Reading     But the private studies on this have been all over the place. Romney often   used a worst-case scenario estimate from the CBO. But even the CBO says   between 4 million and 6 million fewer people could have coverage through the   workplace because of the law.     And every time a business floats the idea of dropping coverage — like when   Darden Restaurants announced it’s testing the use of more part-timers so it   doesn’t have to give them health benefits — it generates damaging headlines.     How many states will expand Medicaid?     Thanks to the Supreme Court, states aren’t required to broaden their Medicaid   programs for low-income people. They get a boatload of federal matching funds   if they do, but there’s no penalty if they don’t.     A handful of red-state governors, like Texas Gov. Rick Perry and Florida Gov.   Rick Scott, have ruled out expansion. But a lot of the 26 states that went to   the Supreme Court to prevent mandatory expansion are still weighing their   options. Some have hinted that they might expand if they can do it on their   terms, meaning a lot more state flexibility.     “I think when the dust settles, you’ll have most states opting in,” said   Ario.     What happens when the Medicare cuts really kick in?     You probably heard Romney mention the law’s $716 billion in Medicare cuts.   That’s a major source of funding for the law’s expanded health coverage, and it   comes mainly from trimming Medicare payments to providers and paying less to   Medicare Advantage plans in high-spending areas.     The catch is, about 70 percent of the first wave of Medicare Advantage cuts   are effectively being masked right now through a separate program giving   plans quality bonus payments, according to the Government Accountability   Office. Over the next two years, the bonuses offset less of the law’s cuts.     If the Medicare Advantage plans still do well a few years out, the Obama   administration can breathe easier. But if enrollment drops, Republicans will   be able to tell voters, “We warned you.” And if providers say their own   Medicare payment cuts are too deep, and they go out of business or stop   treating Medicare patients — Republicans will be able to say they sounded the   alarm about that, too.

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