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Targeting the Health Care Overhaul

By Rebecca Adams, CQ HealthBeat Associate Editor

November 29, 2010 -- It's been a long time—more than 20 years, actually—since lawmakers have considered repealing a major piece of health care legislation. And in that case, they really didn't have any choice. The 1988 measure provided new Medicare prescription drug coverage and protections from catastrophically high medical bills, but it required about 40 percent of seniors to pay higher income taxes to finance it. Public opinion was clear: In Chicago, House Ways and Means Committee Chairman Dan Rostenkowski had to run from a pack of screaming seniors who blocked his car and shook their canes at him in protest. Startled lawmakers cleared a repeal 16 months after it became law. Only 66 House members dared to vote against it. Not one senator did.

This time around, opponents of the new health care law must wish they could generate that kind of public outrage. Polls show that the public is pretty evenly divided about the law. And opposition to it is not based on experience—many of the law's provisions don't kick in until next year or later.

Moreover, the new law is far more complex than the 1988 measure. It remakes every aspect of the health care system at the federal, state and local level through an interlocking and interdependent web of provisions. As a result, efforts to unwind the measure are as fragmented as the health care system itself, with challenges rising in Congress, the states and the courts. The question is whether any of them will pull a thread that unravels the fabric of the law.

Congressional Republicans do not expect to be able to overturn the law in its entirety. They could succeed in moving a repeal bill through the House, but even if it survived the Senate, President Obama would be waiting with his veto pen to kill it.

Republicans know that. But they are under pressure to fulfill campaign pledges to gut the law and are committed to keeping the issue in front of voters until the 2012 elections. They see the symbolic votes, hearings and investigations ahead as useful campaign ammunition.

More substantive action might take place in the states, where governors and state lawmakers who have to implement major portions of the law will have wide latitude to interpret it. State legislatures are charged with passing legislation authorizing major changes, such as the new "exchange" marketplaces that the law requires in every state by 2014. State officials may not want to implement the law according to the vision of the Democrats in Washington who wrote it. They are already pressing the Obama administration to waive key elements of the law.

The most unpredictable challenges are in the courts. Attorneys general in two separate cases have challenged the constitutionality of the law, meaning its final fate may rest with the Supreme Court.

The goal of congressional Republicans is to convince voters that Democrats are thwarting the public's will as expressed in polls and in the midterm election "shellacking." And that's where the hearings and votes come in, as each one will underscore Democrats' continued support of the law.

"We may not be able to bring about straight repeal in the next two years, and we may not win every vote against targeted provisions, even though we should have bipartisan support for some," said Senate Minority Leader Mitch McConnell of Kentucky. "But we can compel administration officials to attempt to defend this indefensible health spending bill and other costly, government-driven measures."

Democrats mostly are clinging to the hope that once voters learn more about what is actually in the law, perceptions will change. They note that some parts of the law are popular, including tax credits for small businesses and insurance rules that require plans to cover dependents up to age 26 and prevent insurers from dropping patients' coverage once they get sick.

Obama cited support for those types of provisions in a post- election news conference Nov. 3. "I don't think that you'd have a strong vote for people saying, you know, 'Those are provisions I want to eliminate,''' Obama said, adding that he still feels confident that enacting the law was "the right thing to do."

After Republicans demonstrate that they don't have the votes to get a full repeal through to Obama, they can be expected to line up targeted attacks against specific provisions in the law. One of the first opportunities will come during the debate on the fiscal 2012 budget resolution, because it tends to frame the issues for the coming year and because health care and budget issues are so intertwined.

This could present a problem for the GOP. The Congressional Budget Office (CBO) has estimated that many of the provisions in the health care law would save money, so undoing them would be seen as adding to the deficit. Some provisions could be repealed without offsets—for instance, Medicaid expansions and subsidies to help people who earn up to 400 percent of the federal poverty limit to buy insurance starting in 2014—but for many others, the Republicans would have to pay for the changes or face charges of hypocrisy on the deficit.

"They're going to have to deal with the rhetoric that the first thing you do as Republicans is repeal the health care law that some people support and, more importantly, you're adding to the deficit," said G. William Hoagland, a longtime Republican Senate Budget aide and now vice president for public policy for Cigna Corp. "So how do they pay for the repeal? I don't know the answer. They're in a box here, it seems to me. Just flat-out repeal would be scored as a cost, and I'm not sure how they get out of that box."

A Question of Money

Some GOP health care proposals that could replace the law would save some money, but not enough. For instance, medical malpractice changes could save about $54 billion over a decade, according to the CBO. Eliminating or limiting the subsidies for insurance and curbing the law's expansion of Medicaid would save hundreds of billions of dollars. But those savings would be consumed by ripping out provisions such as tax changes, payment growth reductions to providers, and penalties for employers who don't offer coverage or individuals who don't buy it.

Republicans also might press the CBO to revisit its estimates, especially since the term of the current CBO director, Douglas Elmendorf, runs out in January. Elmendorf may be reappointed. If he's not, the Senate Budget Committee, which is controlled by Democrats, would take the lead in recommending a replacement. But either way, Republicans hope CBO will give previous estimates a second look.

Another option for Republicans is to attach provisions blocking implementation of the law to "must-pass" legislation. Congressional rules bar lawmakers from making substantive authorization changes to appropriations bills, but riders that prevent agencies from working on a policy for one year might make it through. Critics also could try to kill regulations stemming from the law by using a tool known as the Congressional Review Act.

All of those attempts would be opposed by Obama. It is possible, however, that Congress could adjust tangential elements of the law by tucking changes into a broader must-pass bill. Obama has already signaled a willingness to reconsider a requirement that businesses file reports, known as 1099 forms, documenting any vendor receiving more than $600 in a year.

Some moderates who voted for the law but were never enthusiastic supporters are up for re-election in 2012, including Democrats Ben Nelson of Nebraska, Kent Conrad of North Dakota, Jon Tester of Montana and independent Joseph I. Lieberman of Connecticut. They might be convinced to target specific provisions. After all, even the Democrats who wrote the legislation never intended it to become the law of the land as it did. After unexpectedly losing a Senate race in Massachusetts and therefore the 60th seat needed to defeat a GOP filibuster, Democrats rushed to pass legislation without going through a conference with the House. The law is a cobbled-together mesh of the Senate version of the bill and a secondary bill aimed at cleaning up some of the biggest problems in the original.

A Tight Weave

A potential vulnerability of the law is the fact that it does not contain the severability clause often included in legislation to ensure that if a court strikes down one aspect of the law, the rest stands. As a result, some attorneys say successful challenges to the constitutionality of certain provisions could bring down the full law. On some occasions, however, the Supreme Court has acted on its own to sever a law by specifying which portions stand and which don't.

Attorneys general are seeking to overturn provisions that require most people in the United States to buy health insurance and force states to expand Medicaid, the federal-state partnership to provide health coverage to low-income Americans.

Democrats wrote the legislation with close attention to previous court rulings on the Commerce Clause of the Constitution, attaching an extensive "findings" section aimed at defending the law from constitutional challenges.

Regardless of what the courts ultimately decide about severability, the law's components are tightly interwoven. Lobbyists for hospitals, physicians and drug companies supported it because they believed that the requirements for individuals to buy insurance and employers to offer it to their workers would increase the number of paying customers for medical services. If the individual mandate is removed, then the groups' support would weaken significantly, if not disappear.

Future Congresses could put in other options to add more people to the insurance rolls, by limiting the amount of time that people would have to enroll , for example, or increasing their costs if they go without coverage. But those types of revisions would probably not happen before the 2012 presidential election.

The most important impact of the debate next year may be that it will frame the upcoming election and shape future legislation.

"Even if 'repeal and replace' legislation only passes the House this year, the provisions included within that legislation will likely form the cornerstone of what will be considered by both the House and Senate in 2013," said Patrick Morrisey, a former congressional aide and co-chairman of King and Spalding's life science, FDA and health care practice. "Congress loves to recycle legislation that has passed during a previous session."

While Congress continues the rhetorical fight, governors and state officials will be making decisions that could actually make a difference in the way that the law is carried out.

"The fireworks may be in Washington, but the real story will be told in the states where the heavy lifting really will occur," said Drew Altman, president and CEO of the Kaiser Family Foundation, a nonpartisan health policy organization.

At least 29 governors will be Republicans starting in January, up from 24 this year. (Votes are still being counted in Minnesota.) Half of the states will have a unified Republican legislature controlling both chambers, an increase from 14.
Action in the States

State officials are charged with designing the new health insurance exchange markets that will open in 2014. They will oversee insurance premium rates in their areas and a required federal expansion of Medicaid. Already, state officials are either operating or allowing the federal government to run a temporary insurance pool for people who have been uninsured in the state for at least six months.

But a major debate looms over the structure of the new insurance marketplaces. Two states serve as models for the exchanges—and each has a distinctly different mission. In Massachusetts, the state government provides subsidies similar to the ones the federal government would give to low- and middle-income Americans under the new health care law. State officials closely regulate the type of insurance that is offered. In Utah, the exchange is little more than a website that shows consumers the options available to them.

Governors have the choice of refusing to create exchanges, but few have shown interest in that option—doing so would allow the federal government to come in and create new systems. Even governors who fiercely opposed the law say they do not want to hand over major decisions about insurance in their states to federal officials. But they might create Utah-like systems that do not have the type of regulatory oversight that the Obama administration prefers.

"Models may emerge that don't look exactly like what was envisioned when the law was passed because GOP governors say they don't want to implement Obamacare," said Kaiser's Altman. "It may still be health reform but slightly different."

Some GOP officials, most vocally in Texas, are threatening to take the draconian and politically risky step of walking away from Medicaid entirely rather than expand the program to cover all adults and children up to 133 percent of the federal poverty limit. Currently, individuals must qualify for Medicaid not only on the basis of their incomes but also on whether they fit into a category of people covered by the program, such as children, parents of children and people with disabilities. Governors are frustrated that the federal government will cover the costs only of those who are gaining coverage under the new law, without considering that more people might realize that they are eligible for Medicaid as a result of outreach campaigns and start signing up for benefits. They are further concerned that Washington will cover all of the costs for the expansion group only for a limited time, with states having to pick up about 10 percent of the costs by 2020.

Even governors who support the law might ask the Department of Health and Human Services for waivers to let them avoid some of its requirements. One of the law's defenders, Maine Insurance Superintendent Mila Kaufman, has already asked HHS to exempt her state from rules that will go into effect Jan. 1 that require insurance companies to spend a certain portion of their premium dollars on medical care. That "medical loss ratio" rule is among the many provisions that have been targeted by opponents of the law.

What follows is a look at that and 13 other provisions, chosen by the editors and reporters on CQ's health team, that could be targeted for repeal or revision in the coming year, as well as the outlook for each of them.

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