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Federal Deficit Talks Could Impact Obama’s Moves On Health Law

President Barack Obama’s victory preserves the federal health overhaul that he championed. The law, which withstood a challenge at the Supreme Court last summer and was bitterly assailed by Republicans during the campaign, is slated to move forward with Democratic control of the White House and Senate.

But some analysts predict the mounting pressures to reduce federal spending will complicate efforts to implement the law, known as the Affordable Care Act (ACA).

In addition, the end of the campaign season may signal the end of the Democrats’ reluctance to work with opponents on tweaking provisions of the law that have raised concerns.

Criticizing the law before the election would not have been “politically smart,” said Dan Mendelson, chief executive of the consulting firm Avalere Health who oversaw health programs at the Clinton administration’s Office of Management and Budget. But with Obama’s victory and Democrats’ ability to hold onto the Senate, “I think that adjustments are on the table” as part of a larger deal to reduce the federal deficit, he said.

Here is a look at some of the issues that may be reconsidered in Obama’s second term, especially as both Democrats and Republicans look for ways to cut federal spending.

Scale Back Subsidies: As part of that effort to reduce federal spending, there could be pressure to scale back the health law’s subsidies that help low-income residents afford coverage. People who earn up to 400 percent of poverty – currently about $92,000 for a family of four – are eligible to get financial help in purchasing coverage.  Another big-ticket item is the expansion of Medicaid coverage to anyone up to 133 percent of the poverty level, or about $30,656 for a family of four.

The ACA is “so vast that by default it has to be impacted if there is a bipartisan, grand bargain debt deal,” said Mike Tuffin, managing director of the consulting firm APCO Worldwide’s Washington, D.C., office and formerly executive vice president of America’s Health Insurance Plans, an insurance industry trade group. “You can imagine the subsidies being impacted, the Medicaid expansion being impacted.”

Changing the law’s implementation schedule is wishful thinking among Republicans, Mendelson said. Any delay in full implementation could risk political backlash from consumers, who have waited years for the major provisions of the ACA to kick in. Delays may also open the law to other changes that Obama and Democrats don’t want.

“My feeling is that it would be a major political liability for the president to encourage delay,” he said, “and that if this is going to be his legacy, I see no indication from the policy makers that they either want or expect there to be a delay.”

The president “is willing to work with anyone with good ideas to improve the Affordable Care Act.  What he is not willing to do is reopen old partisan battles over the central guarantees of Obamacare,” Adam Fetcher, a spokesman for the Obama campaign, said before the election.

Change in Age Rating Bands: The ACA prohibits insurers from charging more than three times as much for a policy sold to an older person than to a younger person. (This does not affect people 65 and older who are covered by Medicare.)  This is a change from current law in most states where there are no limits on how much more insurers can charge older people. America’s Health Insurance Plans is advocating that the law’s rating bands be changed to 5:1 to prevent what the group describes as “rate shock” for younger people and families.

The issue that arises is that the law “makes coverage more affordable for the elderly but more expensive for the young people they want to buy coverage,” said Paul Heldman, senior health policy analyst with Potomac Research Group, a Washington research firm.

Medical Device Tax Cut: Of the many taxes in the health law, one has come under especially withering criticism: a 2.3 percent tax on the sale of any taxable medical device. Medical device manufacturers have loudly opposed the tax and won some key congressional support.

“For some, it could truly be the difference between surviving and having to close their doors,” Michael R. Minogue, CEO and chairman of the board of Abiomed, Inc., which makes cardiac medical devices, told Congress this summer. But other analysts contend that the industry will do better under the law because more people will have coverage for treatments that use medical devices.

Legislation to repeal the tax passed the House in June with 37 Democrats joining Republicans to support the measure, although it is unlikely to receive Senate consideration this year. 

The problem with this – or any change – in the law’s taxes is finding another area to make up the loss of revenue. “It’s easy to hate a tax. It’s harder to find a pay for,” said Mendelson.

Nonetheless, Tuffin says that this and other taxes could raise concerns if the public sees them as making health insurance or medical care more expensive.

“All of those hit simultaneously and overnight in 2014 and they are going to drive up the cost of coverage,” he said. “Consumers are going to feel that, small businesses are going to feel that.”

IPAB: One of the most contentious provisions of the health law is the creation of a 15-member panel charged with making recommendations to reduce Medicare spending if the amount the government spends grows beyond a target rate.  Congress must pass alternative cuts of the same size, or the recommendations of the panel, known as the Independent Payment Advisory Board (IPAB), become law. IPAB members are prohibited from making recommendations that would increase revenues or change benefits, eligibility or Medicare beneficiary cost-sharing. 

The board is disliked by many lawmakers. Some Republicans charge it amounts to health care rationing while members from both parties hate the idea of surrendering the power of the purse.

“IPAB is not a political must-have for the president,” Mendelson said. “It is the kind of thing that could be treated in the context of other legislative adjustments.”

This is an updated version of a story that first ran Nov. 1.

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